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INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2019


	As of December 31,		As of December 31,
	2019		2018
Gross carrying amount	$	154,089	$	154,089
Accumulated amortization		(124,586)		(109,834)
Intangible assets, net	$	29,503	$	44,255


		Gross Carrying Value		Accumulated Amortization		Net Book Value
Intangible Asset, net
Cost basis as of acquisition date	$	515,627	$	—	$	515,627
Amortization expense from acquisition date through Amendment Date		—		(107,662)		(107,662)
Adjustment due to the remeasurement of liability as of Amendment Date		(369,581)		—		(369,581)
Additional costs incurred as of Amendment Date⁽¹⁾		8,043		—		8,043
Amortization expense from Amendment Date through fiscal year end		—		(2,172)		(2,172)
Balance as of December 31, 2018:	$	154,089	$	(109,834)	$	44,255

(1)

Represents fair value of warrant issued in connection with the Amendment to the Nucynta Commercialization Agreement.

Costs accumulated to acquire assets and consideration allocated to assets

The table below represents the costs accumulated during the year ended December 31, 2018 to acquire the sublicense of the Nucynta Products based on the terms of the Nucynta Commercialization Agreement, as amended:


Acquisition consideration:
Upfront cash paid	$	18,877
Minimum royalty payment obligation ⁽¹⁾		112,719
Rebates, incentives, trade allowances and chargebacks assumed		22,660
Warrant issued		8,043
Total acquisition consideration:	$	162,299

(1)

Represents $132,000 of minimum royalty payments owed under the Nucynta Commercialization Agreement discounted for present value adjustments of $19,281.

The Company then allocated the consideration transferred to the individual assets acquired on a relative fair value basis as summarized in the table below:


Assets acquired:
Nucynta Intangible Asset	$	154,089
Inventory		6,223
Prepaid expenses		1,987
Total consideration allocated to assets acquired:	$	162,299

Summary of costs included in acquired asset


Costs included in Nucynta Intangible Asset:
Upfront cash paid	$	10,000
Transaction costs		667
Minimum royalty payment obligation ⁽¹⁾		482,300
Rebates, incentives, trade allowances and chargebacks assumed ⁽²⁾		22,660
Total cost:	$	515,627

(1)

Represents $537,000 of minimum royalty payments owed under the Nucynta Commercialization Agreement discounted for present value adjustments of $54,700.

(2)

Represents $22,660 of liabilities assumed related to sales of Nucynta Products that occurred prior to the closing date of January 9, 2018, for which the Company is liable under the terms of the Nucynta Commercialization Agreement. This assumed liability, representing $22,406 of assumed rebates and incentives and $254 of assumed trade allowances and chargebacks, was recorded as a component of the intangible asset acquired as part of the Nucynta Commercialization Agreement.

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 170,019	$ 146,633
Accounts receivable	72,953	77,946
Inventory	9,643	7,817
Prepaid expenses and other current assets	3,105	5,116
Total current assets	255,720	237,512
Property and equipment, net	11,854	9,274
Operating lease assets	9,047
Intangible assets, net	29,503	44,255
Other noncurrent assets	178	204
Total assets	306,302	291,245
Current liabilities
Accounts payable	6,247	12,150
Accrued expenses	33,480	30,551
Accrued rebates, returns and discounts	157,549	144,783
Current portion of term loan payable	3,833	1,642
Current portion of operating lease liabilities	656
Total current liabilities	201,765	189,126
Term loan payable, net of current portion	7,667	9,858
Operating lease liabilities, net of current portion	9,438
Other noncurrent liabilities		676
Total liabilities	218,870	199,660
Commitments and contingencies (see Note 11)
Shareholders' equity:
Preferred stock, $0.001 par value; authorized shares - 5,000,000 at December 31, 2019 and December 31, 2018; issued and outstanding shares - none at December 31, 2019 and December 31, 2018
Common stock, $0.001 par value; authorized shares - 100,000,000 at December 31, 2019 and December 31, 2018; issued and outstanding shares - 33,678,840 at December 31, 2019 and 33,265,629 at December 31, 2018	34	33
Additional paid-in capital	447,297	428,729
Accumulated deficit	(359,899)	(337,177)
Total shareholders' equity	87,432	91,585
Total liabilities and shareholders' equity	$ 306,302	$ 291,245

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Balance at beginning of year at Dec. 31, 2016	$ 29	$ 358,063	$ (223,184)	$ 134,908
Balance at beginning of year, shares at Dec. 31, 2016	29,364,100
Increase (decrease) in convertible redeemable preferred stock
Exercise of common stock options	$ 1	735		736
Exercise of common stock options, shares	158,801
Issuance for employee stock purchase plan		1,141		1,141
Issuance for employee stock purchase plan, shares	110,841
Vesting of restricted stock units ("RSUs"), shares	14,757
Shares withheld for employee taxes upon vesting of RSUs		(68)		(68)
Shares withheld for employee taxes upon vesting of RSUs, shares	(4,819)
Public offerings of common stock, net of issuance costs	$ 3	34,280		$ 34,283
Public offerings of common stock, net of issuance costs, shares	3,126,998			3,126,998
Stock-based compensation		7,945		$ 7,945
Net loss			(74,865)	(74,865)
Balance at end of year at Dec. 31, 2017	$ 33	402,096	(298,049)	104,080
Balance at end of year, shares at Dec. 31, 2017	32,770,678
Increase (decrease) in convertible redeemable preferred stock
Exercise of common stock options		4,255		4,255
Exercise of common stock options, shares	349,777
Issuance for employee stock purchase plan		1,117		1,117
Issuance for employee stock purchase plan, shares	86,929
Vesting of restricted stock units ("RSUs"), shares	85,119
Shares withheld for employee taxes upon vesting of RSUs		(560)		$ (560)
Shares withheld for employee taxes upon vesting of RSUs, shares	(26,874)
Public offerings of common stock, net of issuance costs, shares				0
Stock-based compensation		13,778		$ 13,778
Issuance of warrant		8,043		8,043
Net loss			(39,128)	(39,128)
Balance at end of year at Dec. 31, 2018	$ 33	428,729	(337,177)	$ 91,585
Balance at end of year, shares at Dec. 31, 2018	33,265,629			33,265,629
Increase (decrease) in convertible redeemable preferred stock
Exercise of common stock options		2,046		$ 2,046
Exercise of common stock options, shares	201,308			201,308
Issuance for employee stock purchase plan	$ 1	816		$ 817
Issuance for employee stock purchase plan, shares	74,142			74,142
Vesting of restricted stock units ("RSUs"), shares	196,139
Shares withheld for employee taxes upon vesting of RSUs		(822)		$ (822)
Shares withheld for employee taxes upon vesting of RSUs, shares	(58,378)
Public offerings of common stock, net of issuance costs, shares				0
Stock-based compensation		16,528		$ 16,528
Net loss			(22,722)	(22,722)
Balance at end of year at Dec. 31, 2019	$ 34	$ 447,297	$ (359,899)	$ 87,432
Balance at end of year, shares at Dec. 31, 2019	33,678,840			33,678,840

LICENSE AGREEMENTS (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	3 Months Ended								12 Months Ended
	Jan. 09, 2018	Nov. 30, 2018	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
License Agreements [Line Items]
License fee			$ 49,088	$ 46,754	$ 48,654	$ 49,164	$ 29,726	$ 46,007	$ 46,838	$ 43,106	$ 193,660	$ 165,677	$ 2,595
Exercise price of warrant		$ 19.20
Nucynta Commercialization Agreement \| Assertio
License Agreements [Line Items]
License fee	$ 10,000
Annual royalty payable	135,000
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio
License Agreements [Line Items]
Payment for inventory	6,223
Reimbursement for prepaid expenses	1,987
Liability relating to sales	22,660
Quarterly royalty payable	33,750
Base annual net sales for variable royalty	$ 233,000
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 1
License Agreements [Line Items]
Royalty payment as percentage of annual net sales on and after January 1, 2022		58.00%
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 2
License Agreements [Line Items]
Royalty payment as percentage of annual net sales on and after January 1, 2022		25.00%
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 3
License Agreements [Line Items]
Royalty payment as percentage of annual net sales on and after January 1, 2022		17.50%
Royalty payment limit on and after January 1, 2022		$ 258,000
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio \| Minimum \| Sales Royalty Structure 2
License Agreements [Line Items]
Royalty payment limit on and after January 1, 2022		233,000
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio \| Maximum \| Sales Royalty Structure 1
License Agreements [Line Items]
Royalty payment limit on and after January 1, 2022		233,000
Nucynta Commercialization Agreement \| Nucynta Products \| Assertio \| Maximum \| Sales Royalty Structure 2
License Agreements [Line Items]
Royalty payment limit on and after January 1, 2022		$ 258,000
Third Amendment to the Commercialization Agreement
License Agreements [Line Items]
License fee							$ 15,494	$ 32,407	$ 32,407	$ 29,526
Third Amendment to the Commercialization Agreement \| Assertio
License Agreements [Line Items]
Number of shares that can be purchased		1,041,667
Exercise price of warrant		$ 19.20
Third Amendment to the Commercialization Agreement \| Nucynta Products
License Agreements [Line Items]
Minimum royalty payment eliminated		$ 135
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Maximum \| Any 12-month period through January 1, 2022
License Agreements [Line Items]
Net sales limit upon which Counterparty can terminate without penalty		180,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Maximum \| Any 12-month period commencing on January 1, 2022
License Agreements [Line Items]
Net sales limit upon which Counterparty can terminate without penalty		170,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio
License Agreements [Line Items]
Termination fee owed if Company terminates		$ 5,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 1
License Agreements [Line Items]
Royalty payment as percentage of annual net sales between January 1, 2019 and December 31, 2021		65.00%
Royalty payment limit between January 1, 2019 and December 31, 2021		$ 180,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 2
License Agreements [Line Items]
Royalty payment as percentage of annual net sales between January 1, 2019 and December 31, 2021		14.00%
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 3
License Agreements [Line Items]
Royalty payment as percentage of annual net sales between January 1, 2019 and December 31, 2021		58.00%
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 4
License Agreements [Line Items]
Royalty payment as percentage of annual net sales between January 1, 2019 and December 31, 2021		20.00%
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Sales Royalty Structure 5
License Agreements [Line Items]
Royalty payment as percentage of annual net sales between January 1, 2019 and December 31, 2021		15.00%
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Minimum \| Sales Royalty Structure 2
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		$ 180,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Minimum \| Sales Royalty Structure 3
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		210,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Minimum \| Sales Royalty Structure 4
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		233,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Minimum \| Sales Royalty Structure 5
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		258,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Minimum \| prior to January 1, 2022
License Agreements [Line Items]
Sales threshold where supplemental royalty payment is due		180,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Maximum \| Sales Royalty Structure 2
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		210,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Maximum \| Sales Royalty Structure 3
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		233,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Maximum \| Sales Royalty Structure 4
License Agreements [Line Items]
Royalty payment limit between January 1, 2019 and December 31, 2021		258,000
Third Amendment to the Commercialization Agreement \| Nucynta Products \| Assertio \| Maximum \| prior to January 1, 2022
License Agreements [Line Items]
Sales threshold where supplemental royalty payment is due		$ 243,000
Percentage of supplemental royalty based on net sales		4.90%

LEASES - Future Minimum Lease Payments - ASC Topic 842 (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Future minimum lease payments
2020	$ 1,252
2021	1,290
2022	1,328
2023	1,366
2024	1,404
After 2024	6,858
Total minimum lease payments	13,498
Less: Present value discount	3,404
Present value of lease liabilities	$ 10,094

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
CONSOLIDATED STATEMENTS OF CASH FLOWS
Issuance costs of common stock from public offerings	$ 30	$ 1,198

TERM LOAN PAYABLE (Details) $ in Thousands	1 Months Ended	12 Months Ended
TERM LOAN PAYABLE (Details) $ in Thousands	Nov. 30, 2018	Dec. 31, 2019 USD ($)	Jan. 31, 2018 USD ($)	Aug. 28, 2012 USD ($)
Existing Term Loan
Loan and Security Agreements
Maximum borrowing capacity				$ 1,000
Consent and Amendment
Loan and Security Agreements
Original principal amount			$ 11,500
Variable interest rate margin (as a percent)		0.75%
Final payment fee		$ 719
Amended Term Loan
Loan and Security Agreements
Minimum liquidity ratio	1.5	1.0
Additional interest rate in event of default		5.0
Prior to first anniversary \| Consent and Amendment
Loan and Security Agreements
Prepayment fee (as a percent)		3.0
Between first anniversary and second anniversary \| Consent and Amendment
Loan and Security Agreements
Prepayment fee (as a percent)		2.0
Following second anniversary \| Consent and Amendment
Loan and Security Agreements
Prepayment fee (as a percent)		1.0

STOCK BASED COMPENSATION - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Stock option activity
Outstanding	3,585,856
Granted	1,095,908
Exercised	(201,308)
Cancelled	(524,569)
Outstanding	3,955,887	3,585,856
Exercisable at end of period	2,094,720
Weighted average exercise price per share
Outstanding	$ 16.20
Granted	15.22
Exercised	10.16
Cancelled	18.00
Outstanding	16.00	$ 16.20
Exercisable at end of period	$ 15.05
Stock option activity, additional information
Outstanding Weighted-Average Remaining Contractual Term	7 years 6 months	8 years
Outstanding Aggregate Intrinsic Value	$ 21,257	$ 11,170
Exercisable at end of period, Weighted-Average Remaining Contractual Term	6 years 7 months 6 days
Exercisable at end of period, Aggregate Intrinsic Value	$ 13,020

REVENUE FROM CONTRACTS WITH CUSTOMERS - Narrative (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Practical expedient incremental cost	true	true
Minimum
Disaggregation of Revenue [Line Items]
Term of payment received	30 days	30 days
Maximum
Disaggregation of Revenue [Line Items]
Term of payment received	90 days	90 days

PREPAID EXPENSES AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 2019

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:


	As of December 31,
	2019		2018
Prepaid regulatory fees	$	1,222	$	3,035
Prepaid development costs		474		78
Prepaid insurance		414		340
Other prepaid expenses		854		655
Other current assets		141		1,008
Prepaid expenses and other current assets	$	3,105	$	5,116

ACCRUED EXPENSES (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
ACCRUED EXPENSES
Accrued royalties	$ 21,893	$ 15,138
Accrued bonuses	4,047	4,286
Accrued incentive compensation	1,650	1,806
Accrued payroll and related benefits	1,154	1,544
Accrued sales and marketing	775	2,193
Accrued interest	473	274
Accrued audit and legal	308	480
Accrued inventory		3,745
Accrued other operating costs	3,180	1,085
Total accrued expenses	$ 33,480	$ 30,551

UNAUDITED QUARTERLY OPERATING RESULTS (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Product revenues, net	$ 74,203	$ 72,942	$ 75,040	$ 74,516	$ 73,427	$ 70,176	$ 73,061	$ 63,749	$ 296,701	$ 280,413	$ 28,476
Cost of product revenues	49,088	46,754	48,654	49,164	29,726	46,007	46,838	43,106	193,660	165,677	2,595
Research and development	2,398	2,491	2,459	2,992	2,249	1,907	2,237	2,268	10,340	8,661	8,572
Selling, general and administrative	25,090	30,072	28,935	32,352	30,451	33,448	31,279	31,582	116,449	126,760	92,756
Total costs and expenses	76,576	79,317	80,048	84,508	62,426	81,362	80,354	76,956	320,449	301,098	103,923
Loss from operations	(2,373)	(6,375)	(5,008)	(9,992)	11,001	(11,186)	(7,293)	(13,207)	(23,748)	(20,685)	(75,447)
Interest expense	(211)	(228)	(236)	(234)	(2,404)	(5,868)	(6,158)	(5,700)	(909)	(20,130)
Interest income	383	494	532	526	489	552	391	255	1,935	1,687	582
Net loss	$ (2,201)	$ (6,109)	$ (4,712)	$ (9,700)	$ 9,086	$ (16,502)	$ (13,060)	$ (18,652)	$ (22,722)	$ (39,128)	$ (74,865)
Weighted-average shares - basic (in shares)					33,250,180	33,012,174	32,967,718	32,903,674
(Loss) earnings per share - basic					$ 0.27	$ (0.50)	$ (0.40)	$ (0.57)
Weighted-average shares - diluted (in shares)					33,769,765	33,012,174	32,967,718	32,903,674
(Loss) earnings per share - diluted					$ 0.27	$ (0.50)	$ (0.40)	$ (0.57)
Weighted-average shares - basic and diluted (in shares)	33,600,566	33,481,923	33,397,709	33,331,917					33,453,844	32,953,808	30,265,262
Loss per share - basic and diluted	$ (0.07)	$ (0.18)	$ (0.14)	$ (0.29)					$ (0.68)	$ (1.19)	$ (2.47)
Third Amendment to the Commercialization Agreement
Cost of product revenues					$ 15,494	$ 32,407	$ 32,407	$ 29,526
Interest expense associated with minimum royalty payments					$ 2,169	$ 5,641	$ 5,943	$ 5,528

INCOME TAXES - Reconciliation of Income Tax Expense (Benefit) Computed at Statutory Federal Rate (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Federal income tax expense at statutory rate (as a percent)	21.00%	21.00%	34.00%
(Increase) decrease income tax (benefit) resulting from:
State income tax, net of federal benefit (as a percent)	5.59%	5.89%	3.93%
Permanent differences (as a percent)	(3.24%)	(2.51%)	(2.49%)
U.S. - TCJA (as a percent)			(43.32%)
Research and development credits (as a percent)	1.83%	0.52%	0.53%
Change in valuation allowance (as a percent)	(25.18%)	(24.90%)	7.35%
Income tax expense (benefit) (as a percent)	0.00%	0.00%	0.00%
Maximum
Federal income tax expense at statutory rate (as a percent)			35.00%

NET LOSS PER COMMON SHARE - Computation of Net Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
NET LOSS PER COMMON SHARE
Net loss	$ (2,201)	$ (6,109)	$ (4,712)	$ (9,700)	$ 9,086	$ (16,502)	$ (13,060)	$ (18,652)	$ (22,722)	$ (39,128)	$ (74,865)
Weighted-average number of common shares used in net loss per share - basic and diluted	33,600,566	33,481,923	33,397,709	33,331,917					33,453,844	32,953,808	30,265,262
Loss per share - basic and diluted	$ (0.07)	$ (0.18)	$ (0.14)	$ (0.29)					$ (0.68)	$ (1.19)	$ (2.47)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

LEASES (Details) $ in Thousands	Dec. 31, 2019 USD ($)
LEASES
Operating lease assets	$ 9,047
Operating lease liabilities	$ 10,094

INCOME TAXES

12 Months Ended

Dec. 31, 2019

INCOME TAXES

INCOME TAXES

16. INCOME TAXES

For the years ended December 31, 2019, 2018, and 2017, the Company did not record a current or deferred income tax expense or (benefit) due to current and historical losses incurred by the Company. The Company's losses before income taxes consist solely of losses from domestic operations.

The enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017, as further described below, resulted in a remeasurement of the Company’s net deferred tax asset due to the reduction in corporate rates from 35% to a 21%, which is included in the Company’s 2017 rate reconciliation. A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the consolidated financial statements is as follows:


	As of December 31,
	2019		2018		2017
Federal income tax expense at statutory rate	21.00	%	21.00	%	34.00	%
(Increase) decrease income tax (benefit) resulting from:
State income tax, net of federal benefit	5.59		5.89		3.93
Permanent differences	(3.24)		(2.51)		(2.49)
U.S. - TCJA	—		—		(43.32)
Research and development credit	1.83		0.52		0.53
Change in valuation allowance	(25.18)		(24.90)		7.35
Effective income tax rate	0.00	%	0.00	%	0.00	%

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are comprised of the following:


	As of December 31,
	2019		2018
Deferred tax assets:
U.S. and state net operating loss carryforwards	$	66,553	$	82,501
Research and development credits		3,768		4,364
Operating lease liabilities		2,630		—
Operating lease assets		(2,357)		—
Accruals and other ₍₁₎		14,286		4,676
Depreciation and amortization		92		269
Total deferred tax assets		84,972		91,810
Valuation allowance		(77,285)		(80,290)
Deferred tax assets after valuation allowance		7,687		11,520
Deferred tax liabilities – intangible assets		(7,687)		(11,520)
Net deferred tax assets	$	—	$	—

(1)

Balance includes $5,796 and $3,137 of accruals related to stock-based compensation expense as of December 31, 2019 and 2018, respectively. Balance also includes $7,204 and $0 of accrued rebates, returns, and discounts as of December 31, 2019 and 2018, respectively.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. As of December 31, 2019, and December 31, 2018, based on the Company's history of operating losses, the Company has concluded that it is not more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2019 and December 31, 2018. The valuation allowance decreased $3,005 during the year ended December 31, 2019 due primarily to the expected utilization of its net operating losses in 2019 as well as limitations caused by ownership changes under the provisions of Internal Revenue Code Section 382.

As of December 31, 2019, 2018, and 2017, the Company had gross U.S. federal net operating loss carryforwards of $292,342, $324,533, and $249,511, respectively, which may be available to offset future income tax liabilities. TCJA will generally allow losses incurred after 2017 to be carried over indefinitely but will generally limit the NOL deduction to the lesser of the NOL carryover or 80% of a corporation’s taxable income (subject to Internal Revenue Code Sections 382 and 383). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s NOL carryover or 100% of a corporation’s taxable income (subject to Internal Revenue Code Section 382 and 383) and be available for twenty years from the period the

loss was generated.

As of December 31, 2019, 2018, and 2017, the Company also had gross U.S. state net operating loss carryforwards of $222,629, $285,181, and $205,074, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2038.

As of December 31, 2019, 2018 and 2017, the Company had federal research and development tax credit carryforwards of approximately $4,044, $3,628, and $3,426, respectively, available to reduce future tax liabilities which expire at various dates through 2038. As of December 31, 2019, 2018 and 2017 the Company had state research and development tax credit carryforwards of approximately $1,112, $885, and $589, respectively, available to reduce future tax liabilities which expire at various dates through 2033.

During 2018 the Company finalized its review of the impact of TCJA on the NOL rules and determined its impact on its NOL carryovers. The impact of TCJA to the Company was primarily attributable to the limitation on the deductions associated with executive compensation under Internal Revenue Code Section 162(m). The Company made adjustments during 2018 to its carryovers associated with its analysis of TCJA so that as of December 31, 2018, the Company’s NOL carryovers have been adjusted to comply with the impact of TCJA’s changes to the tax treatment of executive compensation under Internal Revenue Code Section 162(m). Since a full valuation allowance has been provided against the Company’s net deferred tax asset, the impact of adjustments during 2018 to the net deferred tax asset associated with the impact of TCJA does not result in any financial statement impact.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.

During 2019, the Company completed a study to assess the impact of ownership changes, if any, on the Company’s ability to use its NOL and tax credit carryovers as defined under Section 382 of the Internal Revenue Code (“IRC 382”). As a result of the study, the Company concluded that there were ownership changes that occurred during the years 2006, 2012 and 2015 that could be subject to IRC 382 limitations. Of the total federal NOL carryovers of $292,342 at December 31, 2019, approximately $28,990 are estimated to expire unbenefited due to IRC 382 annual limitations, and approximately $112 of state NOL carryovers are estimated to expire unbenefited due to IRC 382 annual limitations. In addition, of our total federal R&D credit carryover of $4,044 at December 31, 2019, approximately $1,212 are estimated to expire unbenefited due to IRC 382 annual limitations. These IRC 382 annual limitations may limit the Company’s ability to use these pre-ownership change federal and state NOL carryovers and pre-ownership change federal tax credit carryovers, which may potentially increase the Company’s future federal and state income tax liability.

The Company files income tax returns in the United States and in several states. The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2016 through December 31, 2019. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. The Company originally recorded an unrecognized tax benefit of $902 (net rate effected unrecognized tax benefit of $235) during 2017 associated with its IRS examination of its 2015 federal income tax return, and accordingly reduced its NOL deferred tax asset during 2017. The Company settled its IRS audit during 2018, which resulted in a total decrease to its NOL carryover of $36. As a result of the IRS settlement, the Company reversed this unrecognized tax benefit and trued-up its NOL carryover during 2018 to reflect the reduction of the $36 to its NOL as required by the IRS settlement. This is included in the tabular rollforward below of gross unrecognized tax benefits. Since a full valuation allowance has been provided against the Company’s net operating loss carryover, the true up of the NOL carryover and associated deferred tax asset during 2018 does not result in any financial statement impact.

For all years through December 31, 2019, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards. The Company has reduced its deferred tax asset for its estimate of credits that could be reduced, and that is included in the tabular rollforward of uncertain tax positions. Since a full valuation allowance has been provided against the Company’s research and development credits the reduction in the gross deferred tax asset established for the research and development credit carryforwards does not result in any financial statement impact.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows:


	As of December 31,
	2019		2018		2017
Gross UTB Balance at January 1	$	502	$	1,364	$	—
Additions based on tax positions related to the current year		76		64		57
Additions for tax positions of prior years		—		—		1,307
Reductions for tax positions of prior years		—		(24)		—
Settlements		—		(902)		—
Reductions due to lapse of applicable statute of limitations		—		—		—
Gross UTB Balance at December 31	$	578	$	502	$	1,364

Net UTB impacting the effective tax rate at December 31 (included in the change in the valuation allowance in rate reconciliation)	$	549	$	481	$	680

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details)	12 Months Ended
	Dec. 31, 2019 USD ($) customer	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Financial instruments with off balance sheet risk of loss, assets	$ 0
Financial instruments with off balance sheet risk of loss, liabilities	0
Carrying amount of cash equivalents	94,841,000	$ 92,914,000
Restricted cash	0	0	$ 97,000
Inventory	9,643,000	7,817,000
Accrued interest or penalties related to uncertain tax positions	0	0
Accrued interest or penalties recognized related to uncertain tax positions	0	0
Selling, general and administrative expenses
Advertising and product promotion costs	$ 9,527,000	$ 17,497,000	$ 11,019,000
Accounts Receivable \| Customer Concentration Risk
Number of customers	3
Accounts Receivable \| Customer Concentration Risk \| Customer One
Concentration Risk, Percentage	51.00%
Accounts Receivable \| Customer Concentration Risk \| Customer Two
Concentration Risk, Percentage	27.00%
Accounts Receivable \| Customer Concentration Risk \| Customer Three
Concentration Risk, Percentage	19.00%
Revenue \| Customer Concentration Risk
Number of customers \| customer	3
Revenue \| Customer Concentration Risk \| Customer One
Concentration Risk, Percentage	34.00%
Revenue \| Customer Concentration Risk \| Customer Two
Concentration Risk, Percentage	31.00%
Revenue \| Customer Concentration Risk \| Customer Three
Concentration Risk, Percentage	30.00%

COMMITMENTS AND CONTINGENCIES (Details)											1 Months Ended			12 Months Ended
COMMITMENTS AND CONTINGENCIES (Details)	Nov. 06, 2019 lawsuit	Oct. 18, 2019 lawsuit	Oct. 02, 2019	Sep. 11, 2019 item	Nov. 30, 2018 patent	Sep. 26, 2018 lawsuit	Jul. 12, 2018 lawsuit	May 04, 2018 lawsuit	Feb. 22, 2018 patent	Mar. 24, 2015 patent	Jan. 31, 2020 patent	Oct. 31, 2019 lawsuit	Mar. 31, 2019 lawsuit item	Dec. 31, 2019 patent lawsuit	Dec. 31, 2018 patent
Commitments and Contingencies
Period that gives the Company a 30-month stay of FDA approval while the parties have an opportunity to litigate									45 days
Stay period before FDA can issue a final approval unless it is terminated														30 months
Number of lawsuits filed \| lawsuit						2	4	2
Subsequent Events
Commitments and Contingencies
Additional patent listed											2
Subsequent Events \| Xtampza ER
Commitments and Contingencies
Number of total patent											17
Purdue Pharma, L. P. patent infringement suits
Commitments and Contingencies
PTAB duration for issuing decision														1 year
Purdue Pharma, L. P. patent infringement suits \| Maximum
Commitments and Contingencies
PTAB extended duration for issuing decision			6 months
Purdue Pharma, L. P. patent infringement suit, District of Delaware
Commitments and Contingencies
Number of patents allegedly infringed										3				5
Purdue Pharma, L. P. patent infringement suit, District of Massachusetts
Commitments and Contingencies
Number of patents found not infringed														3
Teva Litigation
Commitments and Contingencies
Stay period before FDA can issue a final approval unless it is terminated									30 months
Number of patents allegedly infringed														11
Number of patents found not infringed									11
Number of patents listed in FDA Orange Book									12					17
Number of Orange Book patents asserted to have been infringed					2
Number of terms or sets of terms addressed \| item				2
Number of terms or sets of terms in dispute \| item				6
Additional patent listed															2
Opioid Litigation
Commitments and Contingencies
Number of counties filed lawsuits \| lawsuit		3
Number of lawsuits filed \| lawsuit		3										2
Number of lawsuits currently stayed \| lawsuit														0
Number of lawsuits dismissed \| lawsuit	4
Payor Groups and Warminster Township
Commitments and Contingencies
Number of lawsuits filed \| lawsuit													3
Number of lawsuits currently stayed \| lawsuit														0
Number of payor groups \| item													2

STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2019

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

15. STOCK-BASED COMPENSATION

Stock Options, Restricted Stock Units and Performance Share Units

In May 2015, the Company adopted the Amended and Restated 2014 Stock Incentive Plan (the “Plan”), under which an aggregate of 2,700,000 shares of common stock were authorized for issuance to employees, officers, directors, consultants and advisors of the Company, plus an annual increase to be added on the first day of each fiscal year until the expiration of the Plan equal to 4% of the total number of outstanding shares of common stock on December 31^st of the immediately preceding calendar year (or a lower amount as otherwise determined by the Board of Directors prior to January 1^st). As of December 31, 2019, 1,295,200 shares of common stock were available for issuance pursuant to the Plan. The Plan provides for granting of both Internal Revenue Service qualified incentive stock options and non-qualified options, restricted stock awards, restricted stock units and performance stock units. The Company’s qualified incentive stock options, non-qualified options and restricted stock units generally vest ratably over a four-year period of service. The stock options generally have a ten-year contractual life and, upon termination, vested options are generally exercisable between one and three months following the termination date, while unvested options are forfeited immediately upon termination.

In June 2018, the Company’s board of directors approved a modification to the former President and Chief Executive Officer’s equity-based awards to provide that all of those awards, to the extent unvested as of the Company’s 2020 annual meeting of shareholders, will vest on such date, subject to his continued service on the Company’s board of directors through such date. This modification was effective on June 4, 2018 and affected 116,250 shares of non-vested restricted stock units and 225,625 unvested stock options to purchase the Company’s common stock. The Company accounted for this modification under ASC 718, and, per guidance, determined the modification did not create incremental value as the fair value of these awards was unchanged. The shorter requisite service period will result in the accelerated recognition of stock-based compensation expense through 2020.

In January 2019, the Company granted performance share units (“PSUs”) to certain members of the Company's senior management team. The PSUs will vest following a three-year performance period, subject to the satisfaction of annual and cumulative performance criteria and the executive’s continued employment through the performance period. No shares will be issued if the minimum applicable performance metric is not achieved. The Company recognizes compensation expense ratably over the required service period based on its estimate of the number of shares that will vest based upon the probability of achieving performance metrics. If there is a change in the estimate of the number of shares that are likely to vest, the Company will cumulatively adjust compensation expense in the period that the change in estimate is made. Achievement of the annual and cumulative performance criteria for PSU grants will be determined by the Compensation Committee. For PSUs granted in 2019, the performance criteria relate to Xtampza ER 2019, 2020, 2021 and three-year cumulative revenue goals. The expense for the year ended December 31, 2019 was $136.

A summary of the Company’s performance share units activity for the year ended December 31, 2019 and related information is as follows:


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2018	—	$	—
Granted	99,400		15.90
Outstanding at December 31, 2019	99,400	$	15.90

The weighted-average grant date fair value of PSUs granted for the year ended December 31, 2019 was $15.90. There were no PSUs that vested during the year ended December 31, 2019.

As of December 31, 2019, the unrecognized compensation cost related to performance share units was $272 and is expected to be recognized as expense over approximately 2.1 years.

A summary of the Company’s restricted stock units activity for the year ended December 31, 2019 and related information is as follows:


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2018	514,603	$	20.67
Granted	634,708		15.48
Vested	(196,139)		20.73
Forfeited	(103,493)		18.04
Outstanding at December 31, 2019	849,679	$	17.10

The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2019, 2018, and 2017 was $15.48, $23.41 and $12.45. The total fair value of RSUs vested (measured on the date of vesting) for the years ended December 31, 2019, 2018, and 2017 was $2,683, $1,782 and $210 respectively.

As of December 31, 2019, the unrecognized compensation cost related to restricted stock units was $10,189 and is expected to be recognized as expense over approximately 2.6 years. The fair value of restricted stock units vested during the year ended December 31, 2019 was $4,066.

A summary of the Company’s stock option activity for the year ended December 31, 2019 and related information is as follows:


				Weighted-
			Weighted-	Average
			Average	Remaining		Aggregate
			Exercise Price	Contractual		Intrinsic
	Shares		per Share	Term (in years)		Value
Outstanding at December 31, 2018	3,585,856	$	16.20	8.0	$	11,170
Granted	1,095,908		15.22
Exercised	(201,308)		10.16
Cancelled	(524,569)		18.00
Outstanding at December 31, 2019	3,955,887	$	16.00	7.5	$	21,257
Exercisable at December 31, 2019	2,094,720	$	15.05	6.6	$	13,020

The weighted-average grant date fair value of stock options granted for the years ended December 31, 2019, 2018, and 2017 was $9.07, $14.51, and $7.86 respectively. The total intrinsic value of stock options exercised for the years ended December 31, 2019, 2018, and 2017 was $1,506, $3,970, and $1,100 respectively.

As of December 31, 2019, the unrecognized compensation cost related to outstanding options was $15,603 and is expected to be recognized as expense over approximately 2.5 years.

Employee Stock Purchase Plan

The Company’s 2015 Employee Stock Purchase Plan allows employees as designated by the Company’s Board of Directors to purchase shares of the Company’s common stock. The purchase price is equal to 85% of the lower of the closing price of the Company’s common stock on (1) the first day of the purchase period or (2) the last day of the purchase period. During the year ended December 31, 2019, 74,142 shares of common stock were purchased for total proceeds of $817. The expense for the years ended December 31, 2019, 2018 and 2017 was $358, $493 and $380, respectively.

Stock-Based Compensation Expense

The Company granted stock options to employees for the years ended December 31, 2019, 2018 and 2017. The Company estimates the fair value of stock options as of the date of grant using the Black-Scholes option pricing model and restricted stock awards and restricted stock units based on the fair value of the award.

Stock-based compensation for all stock options, restricted stock awards, restricted stock units and for the employee stock purchase plan are reported within:


	Year Ended December 31,
	2019		2018		2017
Research and development expenses	$	2,126	$	1,468	$	888
Selling, general and administrative expenses		14,402		12,310		7,057
Total stock-based compensation expense	$	16,528	$	13,778	$	7,945

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:


	Year ended December 31,
	2019		2018		2017
Risk-free interest rate	2.4	%	2.6	%	2.0	%
Volatility	63.3	%	64.8	%	71.0	%
Expected term (years)	6.1		6.1		6.0
Expected dividend yield	—	%	—	%	—	%

Risk-free Interest Rate. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock option grants.

Expected Volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption is based on the Company’s volatility as well as the historical volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology and pharmaceutical industries. In evaluating similarity, the Company considers factors such as industry, stage of life cycle and size.

Expected Term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior through December 31, 2019 it determined the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

Expected Dividend Yield. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

REVENUE FROM CONTRACTS WITH CUSTOMERS - Transaction Price and Variable Consideration (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Jan. 09, 2018
Allowance categories
Assumed liability related to product sales			$ 22,660
Rebates and Incentives
Allowance categories
Balance at beginning of the period	$ 129,318	$ 12,647
Provision related to current period sales	263,315	243,158
Liabilities assumed from asset acquisition		22,406
Changes in estimate related to prior period sales	(2,865)	(32)
Credits/payments made	(259,867)	(148,861)
Balance at end of the period	129,901	129,318
Assumed liability related to product sales			22,406
Product Returns
Allowance categories
Balance at beginning of the period	15,465	3,137
Provision related to current period sales	14,991	17,326
Credits/payments made	(2,808)	(4,998)
Balance at end of the period	27,648	15,465
Trade Allowances and Chargebacks
Allowance categories
Balance at beginning of the period	14,841	2,256
Provision related to current period sales	65,155	68,189
Liabilities assumed from asset acquisition		254
Credits/payments made	(65,976)	(55,858)
Balance at end of the period	$ 14,020	$ 14,841
Assumed liability related to product sales			$ 254

INVENTORY (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
INVENTORY
Raw materials	$ 795	$ 496
Work in process	1,427	671
Finished goods	7,421	6,650
Total inventory	$ 9,643	$ 7,817

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid regulatory fees	$ 1,222	$ 3,035
Prepaid development costs	474	78
Prepaid insurance	414	340
Other prepaid expenses	854	655
Other current assets	141	1,008
Prepaid expenses and other current assets	$ 3,105	$ 5,116

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment Useful Lives (Details)	12 Months Ended
	Dec. 31, 2019
Computers and office equipment \| Minimum
Property and Equipment
Estimated Useful Life	3 years
Computers and office equipment \| Maximum
Property and Equipment
Estimated Useful Life	5 years
Laboratory equipment
Property and Equipment
Estimated Useful Life	5 years
Furniture and fixtures
Property and Equipment
Estimated Useful Life	7 years
Manufacturing Equipment \| Minimum
Property and Equipment
Estimated Useful Life	5 years
Manufacturing Equipment \| Maximum
Property and Equipment
Estimated Useful Life	10 years

INTANGIBLE ASSETS - Gross carrying amount, accumulated amortization, and net book value (Details) - USD ($) $ in Thousands	2 Months Ended	10 Months Ended	12 Months Ended
	Dec. 31, 2018	Nov. 07, 2018	Dec. 31, 2019	Dec. 31, 2018	Nov. 08, 2018	Jan. 09, 2018
Amortization expense for Nucynta asset acquisition			$ 14,752	$ 109,834
Nucynta Products
Gross carrying amount	$ 154,089		154,089	154,089		$ 515,627
Amortization expense for Nucynta asset acquisition	2,172	$ 107,662
Accumulated amortization	(109,834)		(124,586)	(109,834)
Adjustment due to remeasurement of liability					$ 369,581
Additional costs incurred					$ 8,043
Intangible assets, net	$ 44,255		$ 29,503	$ 44,255

LEASES - Lease Term and Discount Rate and Other Information (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
LEASES
Weighted-average remaining lease term - operating leases (years)	9 years 7 months 6 days
Weighted-average discount rate - operating leases	6.10%
Cash paid for amounts included in the measurement of operating lease liabilities	$ 1,133

ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2019

ACCRUED EXPENSES

ACCRUED EXPENSES

10. ACCRUED EXPENSES

Accrued expenses consisted of the following:


	As of December 31,		As of December 31,
	2019		2018
Accrued royalties	$	21,893	$	15,138
Accrued bonuses		4,047		4,286
Accrued incentive compensation		1,650		1,806
Accrued payroll and related benefits		1,154		1,544
Accrued sales and marketing		775		2,193
Accrued interest		473		274
Accrued audit and legal		308		480
Accrued inventory		—		3,745
Accrued other operating costs		3,180		1,085
Total accrued expenses	$	33,480	$	30,551

INCOME TAXES - Other (Details) - USD ($) $ in Thousands	12 Months Ended
INCOME TAXES - Other (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Deferred tax assets:
U.S. and state net operating loss carryforwards	$ 66,553	$ 82,501
Research and development credits	3,768	4,364
Operating lease liabilities	2,630
Operating lease assets	(2,357)
Accruals and other	14,286	4,676
Depreciation and amortization	92	269
Total deferred tax assets	84,972	91,810
Valuation allowance	(77,285)	(80,290)
Deferred tax assets after valuation allowance	7,687	11,520
Deferred tax liabilities:
Deferred tax liabilities - intangible assets	(7,687)	(11,520)
Stock-based compensation expense	5,796	3,137
Accrual rebates, returns, and discounts	7,204	$ 0
Valuation allowance
Deferred tax asset valuation allowance decrease	3,005
Net operating loss carryforwards
Research and development tax credit carryforwards	$ 4,044
Federal corporate tax rate (as a percent)	21.00%	21.00%	34.00%
Unrecognized tax benefit associated with IRS examination			$ 902
Net rate effected unrecognized tax benefit			235
Decrease to net operating loss carryforward		$ 36
Reconciliation of gross unrecognized tax benefits - Federal, State and Foreign Tax
Gross UTB Balance at beginning of period	$ 502	1,364
Additions based on tax positions related to the current year	76	64	57
Additions for tax positions of prior years			1,307
Reductions for tax positions of prior years		(24)
Settlements		(902)
Gross UTB Balance at end of period	578	502	1,364
Net UTB impacting the effective tax rate at December 31 (included in the change in the valuation allowance in rate reconciliation)	549	481	680
U.S. federal
Net operating loss carryforwards
Operating loss carryforwards	292,342	324,533	249,511
Research and development tax credit carryforwards	4,044	3,628	3,426
R&D credit carryover estimated to expire unbenefited due to IRC 382 annual limitations	1,212
Operating loss estimated to expire unbenefited due to IRC 382 annual limitations	28,990
State
Net operating loss carryforwards
Operating loss carryforwards	222,629	285,181	205,074
Research and development tax credit carryforwards	1,112	$ 885	$ 589
Operating loss estimated to expire unbenefited due to IRC 382 annual limitations	$ 112

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Adopted and Not Yet Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands		3 Months Ended									12 Months Ended
	Jan. 01, 2019	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2017	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Product revenues, net		$ 74,203	$ 72,942	$ 75,040	$ 74,516	$ 73,427	$ 70,176	$ 73,061	$ 63,749		$ 296,701	$ 280,413	$ 28,476
Practical expedients - package	true
Operating lease assets		9,047									9,047
Operating lease liabilities		$ 10,094									$ 10,094
ASC Topic 606 \| Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Product revenues, net										$ 4,377
ASC Topic 842 \| Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease assets	$ 9,957
Operating lease liabilities	$ 10,691

NET LOSS PER COMMON SHARE

12 Months Ended

Dec. 31, 2019

NET LOSS PER COMMON SHARE

NET LOSS PER COMMON SHARE

5. NET LOSS PER COMMON SHARE

For the years ended December 31, 2019, 2018 and 2017, the following table presents the computations of basic and dilutive net loss per share:


	Years ended December 31,
		2019		2018		2017
Net loss	$	(22,722)	$	(39,128)	$	(74,865)
Weighted-average number of common shares used in net loss per share - basic and diluted		33,453,844		32,953,808		30,265,262
Loss per share - basic and diluted	$	(0.68)	$	(1.19)	$	(2.47)

For the years ended December 31, 2019, 2018 and 2017, the following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares):


	Years ended December 31,
	2019	2018	2017
Stock options	3,955,887	3,585,856	3,037,690
Warrants	1,041,667	1,041,667	2,445
Unvested restricted stock (1)	—	3,018	31,943
Restricted stock units	849,679	514,603	218,872
Performance share units	99,400	—	—

(1) - Includes shares of unvested restricted stock remaining from the early exercise of stock options.

STOCK BASED COMPENSATION - Summary of Valuation Assumptions Used (Details)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants
Risk-free interest rate	2.40%	2.60%	2.00%
Volatility	63.30%	64.80%	71.00%
Expected term (in years)	6 years 1 month 6 days	6 years 1 month 6 days	6 years

LEASES

12 Months Ended

Dec. 31, 2019

LEASES

LEASES

13. LEASES

In accordance with ASC Topic 842, Lease Accounting, the Company records lease assets and liabilities for lease arrangements exceeding a 12-month initial term. For operating leases, the Company records a beginning lease liability equal to the present value of minimum lease payments to be made over the lease term discounted using the Company’s incremental borrowing rate and a corresponding lease asset adjusted for incentives received and indirect costs. After lease commencement, the Company remeasures the operating liability at the present value of the remaining lease payments discounted using the original incremental borrowing rate and corresponding lease asset adjusted for incentives received, indirect costs and uneven lease payments. The Company records operating lease rent expense in the Statements of Operations on a straight-line basis over the lease term. Variable lease costs associated with non-lease components are not included in the measurement of the operating lease liability and are recognized in the period in which they are incurred. Leases with an initial term of 12 months or less, or short-term leases, are not recorded on the balance sheet. Short-term lease expense is recognized on a straight-line basis over the lease term. The Company does not have any financing lease arrangements.

As of December 31, 2019, the Company had operating lease assets of $9,047 and operating lease liabilities of $10,094 primarily related to operating lease agreements for its corporate headquarters.

Operating Lease Arrangements

In March 2018, the Company entered into an operating lease for its new corporate headquarters (the “Stoughton Lease”) pursuant to which the Company leases approximately 50,678 of rentable square feet of space, in Stoughton, Massachusetts. The Stoughton Lease commenced in August 2018 when the Company took possession of the space. After the initial four-month free rent period following possession of the space, the operating lease will continue for a term of 10 years. The Company has the right to extend the term of the Stoughton Lease for two additional five-year terms, provided that written notice is provided to the landlord no later than 12 months prior to the expiration of the then current Stoughton Lease term. The Company does not believe the exercise of the extension to be reasonably certain as of the balance sheet date and therefore did not include the extension as part of its recognized lease asset and lease liability. The annual base rent is $1,214, or $23.95 per rentable square foot, and will increase annually by 2.5% to 3.1% over the subsequent years.

In September 2019, the Company determined it had ceased use of its lease for the remaining 9,660 square feet at its former corporate headquarters in Canton, Massachusetts (“Canton Lease”). The Company impaired the operating lease asset and adjusted the operating lease liability to the fair value of cost that will continue to be incurred under the Canton Lease. In December 2019, the Company terminated the Canton Lease and the operating lease liability was reduced to zero.

In January 2016, the Company entered a non-cancellable contract with the contract manufacturing organization (“CMO”) of Xtampza ER. The initial contract term continues through December 2020 and automatically renews for successive two-year terms unless either party gives written notice of termination two-years in advance. Xtampza ER

production is currently conducted in an area of the manufacturing plant that is shared with other clients. Pursuant to the terms of the agreement, since 2016 the CMO has reserved 3,267 square feet of existing manufacturing space for a dedicated production suite for Xtampza ER, which is currently under construction. Upon adoption of ASC Topic 842, the Company determined that this arrangement has an embedded operating lease arrangement as the Company can direct the use of the dedicated space and obtain substantially all the economic benefits. The Company expects the lease term to continue at least through December 2026 and separated the agreement’s lease and non-lease components in determining the operating lease assets and liabilities. The Company determined its best estimate of stand-alone prices for each of the lease and nonlease components by considering observable information including gross margins expected to be recovered from the Company’s service provider and terms of similar lease contracts.

Short-Term Lease Arrangements

In December 2018, the Company began entering into 12-month, non-cancelable vehicle leases for its field-based employees. Each vehicle lease is executed separately and expires at varying times with automatic renewal options that are cancelable at any time. The rent expense for these leases is therefore recognized on a straight-line basis over the lease term in the period in which it is incurred.

Variable Lease Costs

Variable lease costs associated with non-lease components primarily include utilities, property taxes, and other operating costs that are passed on from the lessor.

The components of lease cost for the year ended December 31, 2019 are as follows:


	Year ended December 31,
	2019
Lease Cost
Operating lease cost	$	1,446
Short-term lease cost		752
Variable lease cost		283
Total lease cost	$	2,481

The lease term and discount rate for operating leases for the year ended December 31, 2019 are as follows:


	As of December 31,
Lease Term and Discount Rate:	2019
Weighted-average remaining lease term — operating leases (years)		9.6
Weighted-average discount rate — operating leases		6.1%

Other information related to operating leases for the year ended December 31, 2019 is as follows:


	Year ended December 31,
Other Information:	2019
Cash paid for amounts included in the measurement of operating leases liabilities	$	1,133
Leased assets obtained in exchange for new operating lease liabilities		—

Under ASC Topic 842, the Company’s aggregate future minimum lease payments for its operating leases, including embedded operating lease arrangements, as of December 31, 2019, are as follows:



2020	$	1,252
2021		1,290
2022		1,328
2023		1,366
2024		1,404
After 2024		6,858
Total minimum lease payments	$	13,498
Less: Present value discount		3,404
Present value of lease liabilities	$	10,094

Under legacy GAAP, the Company’s aggregate future minimum lease payments for its operating leases as of December 31, 2018 were as follows:


2019	$	1,032
2020		1,305
2021		1,261
2022		1,299
2023		1,337
After 2023		8,423
Total minimum lease payments	$	14,657

INVENTORY

12 Months Ended

Dec. 31, 2019

INVENTORY

INVENTORY

6. INVENTORY

Inventory consisted of the following:


	As of December 31,		As of December 31,
	2019		2018
Raw materials	$	795	$	496
Work in process		1,427		671
Finished goods		7,421		6,650
Total inventory	$	9,643	$	7,817

During the years ended December 31, 2019 and 2018, the aggregate charges to date related to excess inventory were immaterial. These expenses were recorded as a component of cost of product revenues.

STOCK BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	12 Months Ended
	Jun. 04, 2018	Jan. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	May 31, 2015
Stock-based compensation
Shares of common stock authorized for issuance outstanding (in shares)			3,955,887	3,585,856
Employee Stock Purchase Plan, Purchase Price Percentage			85.00%
Issuance for employee stock purchase plan, shares			74,142
Proceeds from issuances of common stock from employee stock purchase plans			$ 817	$ 1,117	$ 1,141
Employee Stock Purchase Plan, Compensation Expense			358	493	380
Share-based Compensation			$ 16,528	$ 13,778	$ 7,945
Weighted-average grant date fair value per share of grants (in dollars per share)			$ 9.07	$ 14.51	$ 7.86
Total intrinsic value of stock options exercised			$ 1,506	$ 3,970	$ 1,100
Stock options
Stock-based compensation
Unrecognized compensation cost related to outstanding options				$ 15,603
Period over which unrecognized compensation cost is expected to be recognized as expense				2 years 6 months
Number of shares affected by modification	225,625
Restricted stock units
Stock-based compensation
Period over which unrecognized compensation cost is expected to be recognized as expense			2 years 7 months 6 days
Total fair value of shares vested			$ 2,683	$ 1,782	$ 210
Number of shares affected by modification	116,250
Unrecognized stock-based compensation expense			$ 10,189
Weighted-average grant date fair value of shares granted			$ 15.48	$ 23.41	$ 12.45
Number of shares vested			196,139
Fair value of restricted stock units vested			$ 4,066
Performance share units
Stock-based compensation
Period over which unrecognized compensation cost is expected to be recognized as expense			2 years 1 month 6 days
Vesting period		3 years
Unrecognized stock-based compensation expense			$ 272
Share-based Compensation			$ 136
Weighted-average grant date fair value of shares granted			$ 15.90
Number of shares vested			0
2014 Stock Incentive Plan
Stock-based compensation
Shares of common stock authorized for issuance (in shares)						2,700,000
Increase in number of authorized shares on the first day of each fiscal year, as a percentage of outstanding common stock (as a percent)			4.00%
Shares of common stock remaining available for future grant			1,295,200
Vesting period			4 years
Contractual life			10 years
2014 Stock Incentive Plan \| Minimum
Stock-based compensation
Period following termination date vested options are exercisable			1 month
2014 Stock Incentive Plan \| Maximum
Stock-based compensation
Period following termination date vested options are exercisable			3 months

NET LOSS PER COMMON SHARE - Summary of Potentially Dilutive Securities (Details) - shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Stock options
Anti-dilutive securities
Potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding	3,955,887	3,585,856	3,037,690
Warrants
Anti-dilutive securities
Potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding	1,041,667	1,041,667	2,445
Unvested restricted stock
Anti-dilutive securities
Potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding		3,018	31,943
Restricted stock units
Anti-dilutive securities
Potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding	849,679	514,603	218,872
Performance share units
Anti-dilutive securities
Potentially dilutive securities excluded from the computations of diluted weighted-average shares outstanding	99,400

EQUITY (Tables)

12 Months Ended

Dec. 31, 2019

EQUITY

Schedule of shares of common stock reserved for future issuance


	As of December 31,
	2019	2018
Options to purchase common stock	5,105,980	4,710,771
Employee stock purchase plan	1,046,568	788,053
Warrants	1,041,667	1,041,667
Total	7,194,215	6,540,491

PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2019

PROPERTY AND EQUIPMENT

Schedule of components of property and equipment


	As of December 31,
	2019		2018
Computers and office equipment	$	1,453	$	1,277
Laboratory equipment		1,220		1,613
Furniture and fixtures		1,066		1,111
Manufacturing equipment		987		—
Leasehold improvements		541		567
Construction-in-process		8,875		6,543
Total property and equipment		14,142		11,111
Less: accumulated deprecation		(2,288)		(1,837)
Property and equipment, net	$	11,854	$	9,274

EMPLOYEE BENEFITS (Details) - USD ($) $ in Thousands	12 Months Ended
EMPLOYEE BENEFITS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
EMPLOYEE BENEFITS
Total expense for contributions made to 401(k) plan	$ 1,170	$ 1,208	$ 969

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2019

INCOME TAXES

Schedule of reconciliation of income tax expense (benefit) at statutory federal income tax rate to income taxes


	As of December 31,
	2019		2018		2017
Federal income tax expense at statutory rate	21.00	%	21.00	%	34.00	%
(Increase) decrease income tax (benefit) resulting from:
State income tax, net of federal benefit	5.59		5.89		3.93
Permanent differences	(3.24)		(2.51)		(2.49)
U.S. - TCJA	—		—		(43.32)
Research and development credit	1.83		0.52		0.53
Change in valuation allowance	(25.18)		(24.90)		7.35
Effective income tax rate	0.00	%	0.00	%	0.00	%

Schedule of significant components of deferred tax assets and liabilities


	As of December 31,
	2019		2018
Deferred tax assets:
U.S. and state net operating loss carryforwards	$	66,553	$	82,501
Research and development credits		3,768		4,364
Operating lease liabilities		2,630		—
Operating lease assets		(2,357)		—
Accruals and other ₍₁₎		14,286		4,676
Depreciation and amortization		92		269
Total deferred tax assets		84,972		91,810
Valuation allowance		(77,285)		(80,290)
Deferred tax assets after valuation allowance		7,687		11,520
Deferred tax liabilities – intangible assets		(7,687)		(11,520)
Net deferred tax assets	$	—	$	—

(1)

Schedule of reconciliation of gross unrecognized tax benefits


	As of December 31,
	2019		2018		2017
Gross UTB Balance at January 1	$	502	$	1,364	$	—
Additions based on tax positions related to the current year		76		64		57
Additions for tax positions of prior years		—		—		1,307
Reductions for tax positions of prior years		—		(24)		—
Settlements		—		(902)		—
Reductions due to lapse of applicable statute of limitations		—		—		—
Gross UTB Balance at December 31	$	578	$	502	$	1,364

Net UTB impacting the effective tax rate at December 31 (included in the change in the valuation allowance in rate reconciliation)	$	549	$	481	$	680

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2019	Jan. 31, 2020	Jun. 30, 2019
Document and Entity Information
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	001-37372
Entity Registrant Name	Collegium Pharmaceutical, Inc
Entity Incorporation, State or Country Code	VA
Entity Tax Identification Number	03-0416362
Entity Address, Address Line One	100 Technology Center Drive
Entity Address, City or Town	Stoughton
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02072
City Area Code	781
Local Phone Number	713-3699
Title of 12(b) Security	Common stock
Trading Symbol	COLL
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 416.0
Entity Common Stock, Shares Outstanding		34,050,862
Entity Central Index Key	0001267565
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Amendment Flag	false

NET LOSS PER COMMON SHARE (Tables)

12 Months Ended

Dec. 31, 2019

NET LOSS PER COMMON SHARE

Schedule of computations of basic and diluted net loss per share


	Years ended December 31,
		2019		2018		2017
Net loss	$	(22,722)	$	(39,128)	$	(74,865)
Weighted-average number of common shares used in net loss per share - basic and diluted		33,453,844		32,953,808		30,265,262
Loss per share - basic and diluted	$	(0.68)	$	(1.19)	$	(2.47)

Schedule of potentially dilutive securities excluded from computations of diluted weighted-average shares outstanding


	Years ended December 31,
	2019	2018	2017
Stock options	3,955,887	3,585,856	3,037,690
Warrants	1,041,667	1,041,667	2,445
Unvested restricted stock (1)	—	3,018	31,943
Restricted stock units	849,679	514,603	218,872
Performance share units	99,400	—	—

(1) - Includes shares of unvested restricted stock remaining from the early exercise of stock options.

TERM LOAN PAYABLE

12 Months Ended

Dec. 31, 2019

TERM LOAN PAYABLE

TERM LOAN PAYABLE

12. TERM LOAN PAYABLE

On August 28, 2012, the Company entered into a loan agreement with Silicon Valley Bank (“SVB”) to borrow up to a maximum amount of $1,000. The loan agreement was subsequently amended in 2014 and 2015 to provide for additional borrowings (as amended, the “Existing Term Loan”).

In January 2018, in connection with, and as a condition to, consummation of the transactions contemplated by the Nucynta Commercialization Agreement with Assertio, the Company entered into a Consent and Amendment to Loan and Security Agreement (the “Consent and Amendment”) with SVB to amend the Existing Term Loan. The Consent and Amendment provided the Company with a new term loan facility in an original principal amount of $11,500, which replaced the Existing Term Loan and the proceeds of which were used by the Company to finance certain payment obligations under the Nucynta Commercialization Agreement and to repay the balance of the Existing Term Loan. The Existing Term Loan also provided SVB’s consent with respect to the Nucynta Commercialization Agreement.

The Consent and Amendment bears interest at a rate per annum of 0.75% above the prime rate (as defined in the Consent and Amendment). The Company will repay the Consent and Amendment in equal consecutive monthly installments of principal plus monthly payments of accrued interest, commencing in January 2020. All outstanding principal and accrued and unpaid interest under the Consent and Amendment, and all other outstanding obligations with respect to the Consent and Amendment, are due and payable in full in December 2022. The Company may prepay the Consent and Amendment, in full but not in part, with a prepayment fee of (i) 3.0% of the outstanding principal balance prior to the first anniversary of the Consent and Amendment, (ii) 2.0% of the outstanding principal balance following the first anniversary of the Consent and Amendment and prior to the second anniversary of the Consent and Amendment and (iii) 1.0% of the outstanding principal balance following the second anniversary of the Consent and Amendment, plus, in each case, a final payment fee of $719.

In November 2018, the Company entered into an amended and restated Loan and Security Agreement (“Amended Term Loan”) with SVB, that supersedes the Company’s original loan agreement and subsequent amendments with SVB. The Amended Term Loan amended and restated the loan documentation between the Company and SVB and modified the minimum liquidity ratio to be at least 1.5 to 1.0 (as defined in the Amended Term Loan), along with other non-material changes. The Amended Term Loan did not modify the Company’s borrowings, interest rates, or repayment terms. Any

amounts outstanding during the continuance of any event of default under the Consent and Amendment will bear additional interest at the per annum rate of 5.0%.

As of December 31, 2019, scheduled principle repayments under the Company’s Amended Term Loan are as follows:


2020	$	3,833
2021		3,833
2022		3,834
Balance	$	11,500

In February 2020, the Company prepaid its outstanding loan balance with SVB in full, including the final prepayment fee. Refer to Note 19 for further detail.

STOCK BASED COMPENSATION - Summary of Restricted Stock and Performance Share Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Performance share units
Restricted stock awards
Granted	99,400
Vested	0
Balance	99,400
Weighted-average purchase price per share
Granted	$ 15.90
Balance	$ 15.90
Restricted stock units
Restricted stock awards
Balance	514,603
Granted	634,708
Vested	(196,139)
Forfeited	(103,493)
Balance	849,679	514,603
Weighted-average purchase price per share
Balance	$ 20.67
Granted	15.48	$ 23.41	$ 12.45
Vested	20.73
Forfeited	18.04
Balance	$ 17.10	$ 20.67

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized shares	5,000,000	5,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized shares	100,000,000	100,000,000
Common stock, issued shares	33,678,840	33,265,629
Common stock, outstanding shares	33,678,840	33,265,629

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Operating activities
Net loss	$ (22,722)	$ (39,128)	$ (74,865)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization expense for Nucynta asset acquisition	14,752	109,834
Depreciation and amortization, excluding Nucynta asset acquisition	731	1,074	594
Non-cash impairment charges			1,845
Lease incentive obligation			(34)
Stock-based compensation expense	16,528	13,778	7,945
Non-cash lease expense	313
Non-cash interest expense for Nucynta asset acquisition		19,281
Changes in operating assets and liabilities:
Accounts receivable	4,993	(68,231)	(7,840)
Inventory	(1,826)	219	(497)
Prepaid expenses and other assets	2,037	(166)	(1,057)
Accounts payable	(5,903)	6,465	(3,422)
Accrued expenses	6,056	18,995	(527)
Accrued rebates, returns and discounts	12,766	106,593	15,784
Operating lease assets and liabilities	734
Deferred revenue			(4,944)
Other long-term liabilities	(676)	676
Net cash provided by (used in) operating activities	27,783	169,390	(67,018)
Investing activities
Upfront cash paid for Nucynta asset acquisition		(18,877)
Purchases of property and equipment	(6,438)	(5,477)	(990)
Net cash used in investing activities	(6,438)	(24,354)	(990)
Financing activities
Proceeds from issuances of common stock from employee stock purchase plans	817	1,117	1,141
Proceeds from the exercise of stock options	2,046	4,255	736
Payments made for employee restricted stock tax withholdings	(822)	(560)	(68)
Proceeds from issuances of common stock from public offerings, net of issuance costs of $-, $30 and $1,198, respectively		(30)	34,338
Proceeds from term loan amendment, net of repayment of amended term loan		10,021
Repayment of term loan			(2,667)
Repayment of asset acquisition obligations		(132,000)
Net cash provided by (used in) financing activities	2,041	(117,197)	33,480
Net increase (decrease) in cash, cash equivalents and restricted cash	23,386	27,839	(34,528)
Cash, cash equivalents and restricted cash at beginning of period	146,633	118,794	153,322
Cash, cash equivalents and restricted cash at end of period	170,019	146,633	118,794
Supplemental disclosure of cash flow information
Cash paid for offering costs		30	1,228
Cash paid for interest	709	582	139
Supplemental disclosure of non-cash activities
Acquisition of property and equipment in accounts payable and accrued expenses	134	3,261	$ 216
Operating lease assets assumed	9,957
Operating lease liabilities assumed	$ 10,691
Liabilities assumed from Nucynta asset acquisition included in accrued rebates, returns and discounts		22,406
Liabilities assumed from Nucynta asset acquisition included as a reduction to accounts receivable		254
Warrant issued in connection with Nucynta asset acquisition		$ 8,043

LEASES (Tables)

12 Months Ended

Dec. 31, 2019

LEASES

Schedule of lease cost


	Year ended December 31,
	2019
Lease Cost
Operating lease cost	$	1,446
Short-term lease cost		752
Variable lease cost		283
Total lease cost	$	2,481

Schedule of lease term and discount rate


	As of December 31,
Lease Term and Discount Rate:	2019
Weighted-average remaining lease term — operating leases (years)		9.6
Weighted-average discount rate — operating leases		6.1%

Schedule of other information


	Year ended December 31,
Other Information:	2019
Cash paid for amounts included in the measurement of operating leases liabilities	$	1,133
Leased assets obtained in exchange for new operating lease liabilities		—

Schedule of future minimum lease payments - ASC Topic 842



2020	$	1,252
2021		1,290
2022		1,328
2023		1,366
2024		1,404
After 2024		6,858
Total minimum lease payments	$	13,498
Less: Present value discount		3,404
Present value of lease liabilities	$	10,094

Schedule of future minimum lease payments - legacy GAAP


2019	$	1,032
2020		1,305
2021		1,261
2022		1,299
2023		1,337
After 2023		8,423
Total minimum lease payments	$	14,657

EMPLOYEE BENEFITS

12 Months Ended

Dec. 31, 2019

EMPLOYEE BENEFITS

EMPLOYEE BENEFITS

17. EMPLOYEE BENEFITS

The Company has a retirement savings plan, which is qualified under section 401(k) of the Code, for its employees. The plan allows eligible employees to defer, at the employee’s discretion, pretax compensation up to the Internal Revenue Service annual limits. Employees become eligible to participate starting on the first day of employment. The Company is not required to contribute to this plan. Total expense for contributions made by the Company for the years ended December 31, 2019, 2018 and 2017 was $1,170, $1,208 and $969 respectively.

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

12 Months Ended

Dec. 31, 2019

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of components of prepaid expenses and other current assets


	As of December 31,
	2019		2018
Prepaid regulatory fees	$	1,222	$	3,035
Prepaid development costs		474		78
Prepaid insurance		414		340
Other prepaid expenses		854		655
Other current assets		141		1,008
Prepaid expenses and other current assets	$	3,105	$	5,116

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2019

INTANGIBLE ASSETS

INTANGIBLE ASSETS

9. INTANGIBLE ASSETS

Nucynta Intangible Asset

As of December 31, 2019 and 2018, the Company’s only intangible asset is related to the Nucynta Commercialization Agreement (“Nucynta Intangible Asset.”) The gross carrying amount and accumulated amortization of the Nucynta Intangible Asset were as follows:


	As of December 31,		As of December 31,
	2019		2018
Gross carrying amount	$	154,089	$	154,089
Accumulated amortization		(124,586)		(109,834)
Intangible assets, net	$	29,503	$	44,255

The Company determined the Nucynta Commercialization Agreement should be accounted for as an asset acquisition in accordance with ASC Topic 805-50, as substantially all of the fair value of the gross assets acquired is concentrated in

the sublicense of the Nucynta Products, which is a single identifiable asset. The Company concluded that the fair value estimates of the assets surrendered, liabilities incurred, and equity interests issued were more clearly evident than the fair value of the assets received, and therefore followed a cost accumulation model to determine the consideration transferred in the asset acquisition.


Acquisition consideration:
Upfront cash paid	$	18,877
Minimum royalty payment obligation ⁽¹⁾		112,719
Rebates, incentives, trade allowances and chargebacks assumed		22,660
Warrant issued		8,043
Total acquisition consideration:	$	162,299

(1)

Represents $132,000 of minimum royalty payments owed under the Nucynta Commercialization Agreement discounted for present value adjustments of $19,281.

The Company then allocated the consideration transferred to the individual assets acquired on a relative fair value basis as summarized in the table below:


Assets acquired:
Nucynta Intangible Asset	$	154,089
Inventory		6,223
Prepaid expenses		1,987
Total consideration allocated to assets acquired:	$	162,299

Under the original terms of the Nucynta Commercialization Agreement, the Company was obligated to make guaranteed annual minimum royalty payments of $537,000 to Assertio, which consisted of scheduled payments of $132,000 in 2018, $135,000 in 2019, $135,000 in 2020, and $135,000 in 2021. Due to the nature of the guaranteed minimum royalty payment obligation and the fact that it was required to be settled in cash, the Company determined that the future minimum royalty payments represented a liability that should be recorded at its fair value as of the Nucynta Commercialization Closing Date. The Company calculated the fair value of the future minimum royalty payments to be $482,300 using a discount rate of 5.7%. The discount rate was determined based on a review of observable market data relating to similar liabilities. The Company determined the $54,700 discount should be recognized as interest expense in the Statement of Operations using the effective interest method and over the repayment period from January 9, 2018 through December 2021. Prior to the Third Amendment to the Nucynta Commercialization Agreement in November 2018, the Company recognized interest expense of $19,281 relating to the minimum royalty payments and amortization expense of $107,662 related to the intangible asset.

A summary of the costs included in the Nucynta Intangible Asset as of the acquisition date of January 9, 2018, is as follows:


Costs included in Nucynta Intangible Asset:
Upfront cash paid	$	10,000
Transaction costs		667
Minimum royalty payment obligation ⁽¹⁾		482,300
Rebates, incentives, trade allowances and chargebacks assumed ⁽²⁾		22,660
Total cost:	$	515,627

(1)

Represents $537,000 of minimum royalty payments owed under the Nucynta Commercialization Agreement discounted for present value adjustments of $54,700.

(2)

Effective November 8, 2018 (the “Third Amendment Date”), the Company entered into the Third Amendment to the Nucynta Commercialization Agreement, which eliminated the guaranteed minimum royalty payment obligations for years 2019, 2020 and 2021. As a result, the Company remeasured the remaining contractual obligation as of the Third Amendment Date and recorded a reduction of the acquired intangible asset and obligation. As of December 31, 2018, the Company had paid all of the $132,000 of minimum royalty payment obligation owed under the Nucynta Commercialization Agreement for 2018.

A summary of the gross carrying amount, accumulated amortization, and net book value of the Nucynta Intangible Asset from the acquisition date through December 31, 2018 is as follows:


		Gross Carrying Value		Accumulated Amortization		Net Book Value
Intangible Asset, net
Cost basis as of acquisition date	$	515,627	$	—	$	515,627
Amortization expense from acquisition date through Amendment Date		—		(107,662)		(107,662)
Adjustment due to the remeasurement of liability as of Amendment Date		(369,581)		—		(369,581)
Additional costs incurred as of Amendment Date⁽¹⁾		8,043		—		8,043
Amortization expense from Amendment Date through fiscal year end		—		(2,172)		(2,172)
Balance as of December 31, 2018:	$	154,089	$	(109,834)	$	44,255

(1)

Represents fair value of warrant issued in connection with the Amendment to the Nucynta Commercialization Agreement.

Warrant

In November 2018, in connection with the Third Amendment to the Nucynta Commercialization Agreement, the Company issued a warrant to Assertio to purchase 1,041,667 shares of common stock of the Company at an exercise price of $19.20 per share. The terms of the warrant are fixed, with the exception of customary adjustments for changes in the Company’s capitalization. The warrant may only be settled with the issuance of shares of common stock upon exercise and will expire in November 2022. The Company has recorded the relative fair value of the warrant as a component of equity interest issued by the Company as consideration transferred in the cost accumulation model for the asset acquisition. The Company estimated the fair value of the warrant on the date of issuance to be approximately $8,043 using the Black-Scholes option-pricing model. The Company concluded that the warrant met the definition of an equity instrument and was recorded as a component of additional paid-in capital in the Company’s Consolidated Balance Sheet as of the issuance date.

Amortization

The Company has been amortizing the Nucynta Intangible Asset over its useful life, which is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the Company. The Company determined that the useful life for the intangible asset was approximately 4.0 years from the Nucynta Commercialization Closing Date. The Company recognizes amortization expense as a component of cost of product revenues in the Statement of Operations on a straight-line basis over its useful life as it approximates the period of economic benefits expected to be realized from future cash inflows from sales of the Nucynta Products. Prior to the Third Amendment to the Nucynta Commercialization Agreement, the Company had recognized $107,662 of amortization expense. As the accumulated cost basis of the intangible asset was reduced with the Third Amendment to the Nucynta Commercialization Agreement, the Company will continue to prospectively amortize the residual net intangible asset on a straight-line basis over the remaining useful life. For the years ended December 31, 2019 and 2018, the Company recognized amortization expense of $14,752 and $109,834, respectively. As of December 31, 2019, the remaining amortization period is approximately 2.0 years and estimated amortization for 2020 and 2021 is expected to be $14,752 and $14,751, respectively.

Onsolis Intangible Asset

In May 2016, the Company entered into an agreement with BDSI to license the rights to develop, manufacture, and commercialize Onsolis, in the United States. During the year ended December 31, 2016, the Company made an upfront payment of $2,500 and recorded the payment as a component of intangible assets (the “Onsolis Intangible Asset”). On December 8, 2017, the Company, after a review of its product portfolio, provided written notice to BDSI of termination of the License and Development Agreement. The termination was effective pursuant to the terms of such agreement on March 8, 2018, and the Company’s rights to develop and commercialize Onsolis reverted to BDSI. As a result of this notice of termination, the Company determined that the carrying amount of the intangible asset was not recoverable and that the carrying amount exceeded its fair value. As such, an impairment loss of $1,845 was recognized and included as a component of sales, general and administrative expense during the year ended December 31, 2017 and the net intangible asset is zero as of the years ended December 31, 2019, 2018 and 2017. For the year ended December 31, 2017 the Company recognized amortization expense relating to the Onsolis Intangible Asset of $258.

UNAUDITED QUARTERLY OPERATING RESULTS

12 Months Ended

Dec. 31, 2019

UNAUDITED QUARTERLY OPERATING RESULTS

UNAUDITED QUARTERLY OPERATING RESULTS

18. UNAUDITED QUARTERLY OPERATING RESULTS

The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2019 and 2018:


		First		Second		Third		Fourth
Year ended December 31, 2019		Quarter		Quarter		Quarter		Quarter
Product revenues, net	$	74,516	$	75,040	$	72,942	$	74,203
Costs and expenses
Cost of product revenues		49,164		48,654		46,754		49,088
Research and development		2,992		2,459		2,491		2,398
Selling, general and administrative		32,352		28,935		30,072		25,090
Total costs and expenses		84,508		80,048		79,317		76,576
Loss from operations	$	(9,992)	$	(5,008)	$	(6,375)	$	(2,373)

Interest expense		(234)		(236)		(228)		(211)
Interest income		526		532		494		383
Net income (loss)	$	(9,700)	$	(4,712)	$	(6,109)	$	(2,201)

Weighted-average shares - basic and diluted		33,331,917		33,397,709		33,481,923		33,600,566
Loss per share - basic and diluted	$	(0.29)	$	(0.14)	$	(0.18)	$	(0.07)

		First		Second		Third		Fourth
Year ended December 31, 2018		Quarter		Quarter		Quarter		Quarter (1)
Product revenues, net	$	63,749	$	73,061	$	70,176	$	73,427
Costs and expenses
Cost of product revenues		43,106		46,838		46,007		29,726
Research and development		2,268		2,237		1,907		2,249
Selling, general and administrative		31,582		31,279		33,448		30,451
Total costs and expenses		76,956		80,354		81,362		62,426
Loss from operations	$	(13,207)	$	(7,293)	$	(11,186)	$	11,001

Interest expense		(5,700)		(6,158)		(5,868)		(2,404)
Interest income		255		391		552		489
Net income (loss)	$	(18,652)	$	(13,060)	$	(16,502)	$	9,086

Weighted-average shares - basic		32,903,674		32,967,718		33,012,174		33,250,180
(Loss) earnings per share - basic	$	(0.57)	$	(0.40)	$	(0.50)	$	0.27

Weighted-average shares - diluted		32,903,674		32,967,718		33,012,174		33,769,765
(Loss) earnings per share - diluted	$	(0.57)	$	(0.40)	$	(0.50)	$	0.27

(1)

In the fourth quarter of 2018, the Company executed the Third Amendment to the Nucynta Commercialization Agreement, which eliminated the guaranteed minimum royalty payment obligations after 2018. As a result, the Company remeasured the remaining contractual obligation as of the Amendment Date and reduced the intangible asset. Consequently, amortization expense included within cost of product revenues was $15,494 in the fourth quarter compared to $32,407, $32,407 and $29,526 in the third, second and first quarters, respectively. Similarly, interest expense associated with the minimum royalty payments was $2,169 in the fourth quarter compared to $5,641, $5,943 and $5,528 in the third, second and first quarters, respectively. See Note 9 for further detail.

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2019

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

8. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:


	As of December 31,
	2019		2018
Computers and office equipment	$	1,453	$	1,277
Laboratory equipment		1,220		1,613
Furniture and fixtures		1,066		1,111
Manufacturing equipment		987		—
Leasehold improvements		541		567
Construction-in-process		8,875		6,543
Total property and equipment		14,142		11,111
Less: accumulated deprecation		(2,288)		(1,837)
Property and equipment, net	$	11,854	$	9,274

Depreciation expense related to property and equipment amounted to $731, $1,074 and $336 for the years ended December 31, 2019, 2018 and 2017, respectively. During the years ended December 31, 2019 and 2018, the Company disposed of fully depreciated assets of $280 and $905, respectively. During the year ended December 31, 2017, disposals were immaterial. The Company did not have any gains or losses from the retirement, sale or disposal of property and equipment during the years ended December 31, 2019, 2018, or 2017.

EQUITY

12 Months Ended

Dec. 31, 2019

EQUITY

EQUITY

14. EQUITY

Common Stock

As of December 31, 2019 and 2018, the Company had reserved the following shares of common stock for the issuance of shares upon the exercise of stock options and warrants and the issuance of shares under the 2015 Employee Stock Purchase Plan:


	As of December 31,
	2019	2018
Options to purchase common stock	5,105,980	4,710,771
Employee stock purchase plan	1,046,568	788,053
Warrants	1,041,667	1,041,667
Total	7,194,215	6,540,491

Controlled Equity Offering Sales Agreement

In March 2017, the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM Sales Agreement”), with Cantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which the Company may issue and sell, from time to time, through Cantor Fitzgerald, shares of the Company’s common stock, up to an aggregate offering price of $60,000 (the “ATM Shares”). During the year ended December 31, 2017, the Company sold an aggregate of 3,126,998 shares of common stock under the ATM Sales Agreement at an average gross sales price of $11.36 per share, generating net proceeds of $34,283 after deduction of underwriting discounts and commissions and expenses payable by us. No shares were sold under the ATM Sales Agreement during the years ended December 31, 2019 or 2018. The ATM Sales Agreement expired in October 2019.

Warrants

As of December 31, 2019, the warrant issued to Assertio in November 2018 was the Company’s only outstanding warrant, which is described in greater detail in Note 9.

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Revenues
Product revenues, net	$ 74,203	$ 72,942	$ 75,040	$ 74,516	$ 73,427	$ 70,176	$ 73,061	$ 63,749	$ 296,701	$ 280,413	$ 28,476
Costs and expenses
Cost of product revenues	49,088	46,754	48,654	49,164	29,726	46,007	46,838	43,106	193,660	165,677	2,595
Research and development	2,398	2,491	2,459	2,992	2,249	1,907	2,237	2,268	10,340	8,661	8,572
Selling, general and administrative	25,090	30,072	28,935	32,352	30,451	33,448	31,279	31,582	116,449	126,760	92,756
Total costs and expenses	76,576	79,317	80,048	84,508	62,426	81,362	80,354	76,956	320,449	301,098	103,923
Loss from operations	(2,373)	(6,375)	(5,008)	(9,992)	11,001	(11,186)	(7,293)	(13,207)	(23,748)	(20,685)	(75,447)
Interest expense	(211)	(228)	(236)	(234)	(2,404)	(5,868)	(6,158)	(5,700)	(909)	(20,130)
Interest income	383	494	532	526	489	552	391	255	1,935	1,687	582
Net loss	$ (2,201)	$ (6,109)	$ (4,712)	$ (9,700)	$ 9,086	$ (16,502)	$ (13,060)	$ (18,652)	$ (22,722)	$ (39,128)	$ (74,865)
Loss per share - basic and diluted	$ (0.07)	$ (0.18)	$ (0.14)	$ (0.29)					$ (0.68)	$ (1.19)	$ (2.47)
Weighted-average shares - basic and diluted (in shares)	33,600,566	33,481,923	33,397,709	33,331,917					33,453,844	32,953,808	30,265,262

INTANGIBLE ASSETS - Gross Carrying amount and Accumulated Amortization (Details) - Nucynta Products - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Jan. 09, 2018
Gross carrying amount	$ 154,089	$ 154,089	$ 515,627
Accumulated amortization	(124,586)	(109,834)
Intangible assets, net	$ 29,503	$ 44,255

EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Equity
Common stock reserved for future issuance (in shares)		7,194,215	6,540,491
Aggregate offering price	$ 60,000
Common stock sold (in shares)		0	0	3,126,998
Issue price (in dollars per share)				$ 11.36
Proceeds from the offering, after deducting underwriting discounts and commissions				$ 34,283
Employee stock purchase plan
Equity
Common stock reserved for future issuance (in shares)		1,046,568	788,053
Stock options
Equity
Common stock reserved for future issuance (in shares)		5,105,980	4,710,771
Warrants
Equity
Common stock reserved for future issuance (in shares)		1,041,667	1,041,667

LEASES - Operating Lease Arrangements (Details) $ in Thousands	1 Months Ended
	Mar. 31, 2018 USD ($) ft² item $ / ft²	Jan. 31, 2016 ft²	Dec. 31, 2019 USD ($)	Sep. 30, 2019 ft²	Dec. 31, 2018
Lessee, Lease, Description [Line Items]
Operating lease liabilities \| $			$ 10,094
CMO
Lessee, Lease, Description [Line Items]
Square of feet of space \| ft²		3,267
Term of lease extension option		2 years
Advance written notice termination period		2 years
Vehicle leases
Lessee, Lease, Description [Line Items]
Lease term					12 months
Stoughton, Massachusetts
Lessee, Lease, Description [Line Items]
Square of feet of space \| ft²	50,678
Rent-free term	4 months
Lease term	10 years
Number of renewal periods \| item	2
Term of lease extension option	5 years
Base rent \| $	$ 1,214
Annual base rent per rentable square foot \| $ / ft²	23.95
Canton, Massachusetts
Lessee, Lease, Description [Line Items]
Square of feet of space \| ft²				9,660
Operating lease liabilities \| $			$ 0
Maximum \| Stoughton, Massachusetts
Lessee, Lease, Description [Line Items]
Increase in annual base rent	3.10%
Minimum \| Stoughton, Massachusetts
Lessee, Lease, Description [Line Items]
Increase in annual base rent	2.50%

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2019

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

Xtampza ER Litigation

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

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

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

In November 2015, Purdue filed a follow-on suit asserting infringement of another patent, Patent No. 9,073,933, which was late-listed in the Orange Book and therefore could not trigger any stay of FDA approval. In June 2016, Purdue filed another follow-on suit asserting infringement of another non-Orange Book listed patent, Patent No. 9,155,717. In April 2017, Purdue filed another follow-on suit asserting infringement of another patent, Patent No. 9,522,919, which was late-listed in the Orange Book and therefore could not trigger any stay of FDA approval. Then, in September 2017, Purdue filed another follow-on suit asserting infringement of another non-Orange Book listed patent, Patent No. 9,693,961.

On March 13, 2018, the Company filed a Petition for Post-Grant Review (“PGR”) of the ʼ961 patent with the Patent Trial and Appeal Board (“PTAB”). The PGR argues that the ʼ961 patent is invalid for lack of a written description, for lack of enablement, for indefiniteness, and as being anticipated by prior art. Purdue filed its Patent Owner Preliminary Response on July 10, 2018. The PTAB entered an order to institute post-grant review of all claims of the ’961 patent on October 4, 2018, upon a finding that it is more likely than not that the claims of the ʼ961 patent are unpatentable. Purdue filed its Patent Owner Response on January 30, 2019. The Company filed its reply on April 12, 2019, and Purdue filed a sur-reply on May 10, 2019. The PTAB held oral argument on the proceedings on July 10, 2019 and was scheduled to issue a decision on the patentability of the ʼ961 patent by no later than October 4, 2019. On September 15, 2019, Purdue commenced a voluntary case under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. On September 24, 2019, Purdue gave the PTAB notice of its bankruptcy filing and sought the imposition of an automatic stay of the PGR proceedings. On October 2, 2019, the PTAB extended the one-year period for issuing its decision by up to six months.

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

The suits that remain pending have been consolidated by the District of Massachusetts. The Court issued an order on September 28, 2018 in which it granted in part a motion for summary judgment that the Company filed, in which the Court ruled that the Xtampza ER formulation does not infringe the ‘497 and ʼ717 patents. As a result, only the ʼ933, the ʼ919, and the ʼ961 patents remain in dispute. On October 16, 2018, the Company filed a motion to stay proceedings in the district court on the ‘961 patent pending the PGR. Purdue has made a demand for monetary relief but has not

quantified its alleged damages. Purdue has also requested a judgment of infringement, an adjustment of the effective date of FDA approval, and an injunction on the sale of the Company’s products accused of infringement. The Company has denied all claims and have requested a judgment that the remaining asserted patents are invalid and/or not infringed; the Company is also seeking a judgment that the case is exceptional and have requested an award of the Company’s attorneys’ fees for defending the case.

A claim construction hearing was held on June 1, 2017. On November 21, 2017, the Court issued its claim construction ruling, construing certain claims of the ʼ933, ʼ497, and ʼ717 patents. No trial date has been scheduled. On September 18, 2019, Purdue gave the Court notice of its bankruptcy filing and sought the imposition of an automatic stay of the proceedings. On September 20, the matter was stayed pending further order of the Court.

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

Nucynta Litigation

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

On December 6, 2018, the Company filed an Amended Answer asserting an affirmative defense for patent exhaustion. On December 10, 2018, the Court granted the parties’ stipulation for resolution of the Company’s affirmative defense of patent exhaustion and stayed the action, with the exception of briefing on and resolution of the Company’s Motion for Judgment on the Pleadings related to patent exhaustion and any discovery related to that Motion. Also, on December 10, 2018, the Company filed a Rule 12(c) Motion for Judgment on the Pleadings, arguing that the Purdue’s claims were barred by the doctrine of patent exhaustion. Purdue filed its response on January 11, 2019 and the Company filed a reply on January 25, 2019. On June 18, 2019, the Court heard oral argument on the Company’s Rule 12(c) Motion for Judgment on the Pleadings. On June 19, 2019, the Court issued an order stating that “judgment in Collegium’s favor is warranted under the doctrine of patent exhaustion to the extent Collegium’s alleged infringing activities resulted from sales that fall within the scope of that covenant.” The Court explained, however, that based on the current record, it was not possible “to determine whether title of the Nucynta Products was transferred to Collegium” from sales authorized by Purdue’s covenant not to sue. The Court ordered discovery on this issue and the case remained “stayed with the exception of discovery and briefing on and resolution of the Company’s anticipated motion for summary judgment based on patent exhaustion.”

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

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

Teva Litigation

Presently, the Company has seventeen patents listed in the FDA Orange Book as covering the Company’s abuse-deterrent product and methods of using it to treat patients: Patents Nos. 7,399,488; 7,771,707; 8,449,909; 8,557,291; 8,758,813; 8,840,928; 9,044,398; 9,248,195; 9,592,200; 9,682,075; 9,737,530, 9,763,883; 9,968,598; 10,004,729; 10,188,644; 10,525,052; and 10,525,053 (the “Orange Book Patents”).

Teva filed an ANDA seeking FDA approval to market generic extended-release oxycodone capsule products (the “proposed ANDA products”). Teva also filed certifications with the FDA that its proposed ANDA products will not infringe the Orange Book Patents and/or that the Orange Book Patents are invalid. Teva sent the Company a Notice Letter indicating that it had made such certification to the FDA.

On February 22, 2018—within the 45-day period that gives the Company a 30-month stay of FDA approval of Teva’s ANDA while the parties have an opportunity to litigate—the Company sued Teva in the District of Delaware on eleven of the twelve Orange Book Patents that were listed at that time. Teva responded to the complaint on May 14, 2018, denying infringement by Teva’s proposed ANDA products and asserting counterclaims of non-infringement and invalidity of the asserted patents. The Company answered Teva’s counterclaims on June 4, 2018.

The Company listed two additional patents in the Orange Book in 2018 and Teva amended its ANDA to include certifications to the FDA of non-infringement and invalidity with respect to those patents. Teva notified the Company of its certification and the Company filed a second lawsuit in the District of Delaware, asserting those two patents, on November 30, 2018. Teva responded to the complaint on January 11, 2019 denying infringement by Teva’s proposed ANDA products, and asserting counterclaims of non-infringement and invalidity of the asserted patents. The Company answered Teva’s counterclaims on February 1, 2019. The court consolidated the second suit with the first suit, and thus both suits are proceeding on the same schedule.

The parties briefed claim construction and the court heard argument on April 12, 2019. On September 11, 2019, the Court issued a Report and Recommendation construing two of the six terms or sets of terms that are in dispute. The remaining terms will be addressed in one or more forthcoming Report and Recommendations. Fact discovery was scheduled to close on September 20, 2019 and expert discovery was scheduled to close on January 24, 2020.

The Company listed an additional patent in the Orange Book in January 2019 and Teva amended its ANDA to include certifications to the FDA of non-infringement and invalidity with respect to that patent. Teva notified us of its certification and the Company filed a third lawsuit in the District of Delaware, asserting the additional Orange Book Patent, on May 9, 2019. Teva responded to the complaint on June 6, 2019, denying infringement by Teva’s proposed ANDA products, and asserting counterclaims of non-infringement and invalidity of the asserted patent. The Company answered Teva’s counterclaims on June 27, 2019. The parties filed a proposed Scheduling Order, which the Court entered on September 4, 2019. The parties have exchanged initial disclosures pursuant to that Order.

On September 20, 2019, the parties jointly agreed to stay both litigations, which the Court so ordered. Once the district Court lifts the stay, the Company plans to continue pursuing this case vigorously.

The Company listed two additional patents in the Orange Book in January 2020, which brings the total number of Orange Book Patents for Xtampza ER to seventeen.

Opioid Litigation

On March 19, 2018, a lawsuit was filed by multiple local governments in the Circuit Court of Crittenden County, Arkansas, against the Company and other pharmaceutical manufacturers and distributors alleging a variety of claims related to opioid marketing and distribution practices. On January 29, 2019, the Company was dismissed from this litigation without prejudice.

On March 21, 2018, the Company, along with other pharmaceutical manufacturers and distributors, were named in a class-action lawsuit filed in the Eastern District of Kentucky by a family practice clinic, on behalf of other similarly-situated healthcare providers. The action alleges violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) relating to opioid marketing and distribution practices. On April 14, 2018, the lawsuit was conditionally transferred by the Judicial Panel on Multi-District Litigation to the federal Prescription Opiate Multi District Litigation (the “MDL”) in the Southern District of Ohio. On April 10, 2018, the conditional transfer was finalized, and the lawsuit was docketed in the MDL on April 11, 2018. On May 4, 2018, the Company, along with other pharmaceutical manufacturers and distributors, were named in two lawsuits filed in the MDL by the Fiscal Court of Bourbon County, Kentucky and the Fiscal Court of Owen County, Kentucky, relating to opioid marketing and distribution practices. On July 11 and 12, 2018, the Company was named in four lawsuits filed in the MDL by a health system and various member hospitals. On September 26, 2018, the Company was named in two lawsuits filed in the MDL by the Fiscal Court of Lee County, Kentucky and the Fiscal Court of Wolfe County, Kentucky. On March 15, 2019, the plaintiffs in these MDL cases filed amended complaints which no longer name the Company as a defendant, effectively terminating these

lawsuits as to the Company.

On September 6, 2019, Triad Health Systems filed a class action lawsuit in the MDL on behalf of itself and similarly situated health care systems, generally alleging negligence, fraud, and violations of the RICO Act relating to opioid marketing and distribution practices, naming the Company and other pharmaceutical distributors and manufacturers. On October 18, 2019, three counties in Kentucky filed lawsuits in the MDL naming the Company: the Fiscal Court of Casey County Kentucky; the Fiscal Court of Gallatin County Kentucky; and the Fiscal Court of Lewis County Kentucky. These three lawsuits generally allege negligence, fraud, and violations of the RICO Act relating to opioid marketing and distribution practices. The Company was dismissed from these four lawsuits on November 6, 2019.

On January 11, 2019, the City of Portsmouth filed a lawsuit in Virginia Circuit Court against the Company and other pharmaceutical manufacturers and distributors. The lawsuit alleges a variety of claims related to opioid marketing and distribution practices including public nuisance, common law fraud, negligent misrepresentation, negligence, and violations of state consumer protection laws. On October 3, 2019, the City of Portsmouth case was transferred to the MDL.

On March 15, 2019, the Company was named in a lawsuit in the MDL by the City of Paterson, New Jersey. The lawsuit that alleges violations of fraud, public nuisance, negligent misrepresentation, and violations of state consumer protection laws, and seeks, generally, penalties and/or injunctive relief. In April 2019, the City of Norwich, Connecticut and the Town of Enfield, Connecticut filed lawsuits that name the Company in Connecticut Superior Court. The lawsuits allege violations of fraud, public nuisance, negligent misrepresentation, and violations of state consumer protection laws. On June 28, 2019, both cases were transferred to the MDL. In October 2019, the Company was named in two additional Connecticut lawsuits: the City of Middletown and the Town of Wethersfield. These cases were both also transferred to the MDL in July 2019.

On June 14, 2019, the City of Trenton filed a lawsuit in the New Jersey Superior Court against the Company and other pharmaceutical manufacturers and distributors. The lawsuit alleges a variety of claims related to opioid marketing and distribution practices including public nuisance, common law fraud, negligent misrepresentation, negligence, and violations of state consumer protection laws and the New Jersey Drug Dealer Liability Act. On August 23, 2019, the case was removed to the District Court of New Jersey. The plaintiff filed an opposition to coordination and requested remand, but on December 18, 2019, the case was transferred to the MDL. Each of the lawsuits in the MDL naming the Company seeks, generally, penalties and injunctive relief. None of the lawsuits naming the Company are designated as representative cases in the MDL, and therefore, are effectively currently stayed.

On May 29, 2018, a lawsuit was filed by Bucks County, Pennsylvania against the Company and other pharmaceutical manufacturers and on June 12, 2018, a lawsuit was filed by Clinton County, Pennsylvania, against the Company and other pharmaceutical manufacturers and distributors. On June 6, 2018, a lawsuit was filed by Mercer County, Pennsylvania, against the Company and other pharmaceutical manufacturers and distributors. These lawsuits allege claims related to opioid marketing and distribution, including negligence, fraud, unjust enrichment, public nuisance, and violations of state consumer protections laws. These cases have been consolidated for discovery purposes in the Delaware County Court of Common Pleas as part of a consolidated proceeding of similar lawsuits brought by numerous Pennsylvania counties against other pharmaceutical manufacturers and distributors. In March 2019, three additional cases were filed in Pennsylvania by two payor groups and Warminster Township. The Company has been dismissed from both of the payor group cases. In July 2019, the Company learned of additional lawsuits alleging similar claims which were filed by Warrington Township in the Bucks County Court of Common Pleas, and filed by the City of Lock Haven in the Clinton County Court of Common Pleas. The City of Lock Haven and the Warrington Township cases have been coordinated into the consolidated proceeding before the Delaware County Court of Common Pleas. None of these cases have been designated a Track One case in which discovery would commence, and therefore are effectively stayed at present.

On July 30, 2018, a lawsuit was filed by the City of Worcester, Massachusetts against the Company and other pharmaceutical manufacturers and distributors. The action alleges a variety of claims related to opioid marketing and distribution practices including public nuisance, common law fraud, negligent misrepresentation, negligence, violations of Mass Gen. Laws ch. 93A, Section 11, unjust enrichment and civil conspiracy. In February 2019, the City of Worcester

case was transferred to the Business Litigation Session of the Superior Court. Additional lawsuits brought by the following cities and counties Massachusetts were filed between October 2018 and April 2019: City of Salem, City of Framingham, Town of Lynnfield, City of Springfield, City of Haverhill, City of Gloucester, Town of Canton, Town of Wakefield, City of Chicopee; Town of Natick; City of Cambridge, and Town of Randolph. Each of these additional lawsuits has been coordinated before the Business Litigation Session. The case brought by the City of Springfield was selected to advance for the purpose of motion practice, defendants’ motions to dismiss were denied on January 3, 2020. There is currently no schedule for the next stage of the proceedings.

The Company disputes the allegations in these lawsuits and intends to vigorously defend these actions. At this stage, the Company is unable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Opioid-Related Request and Subpoenas

The Company, like a number of other pharmaceutical companies, has received subpoenas or civil investigative demands related to opioid sales and marketing. The Company has received such subpoenas or civil investigative demands from the Offices of the Attorney General of each of Washington, New Hampshire, and Massachusetts. The Company is currently cooperating with each of the foregoing states in their respective investigations.

INTANGIBLE ASSETS - Minimum Royalty Payments - Narrative (Details) - USD ($) $ in Thousands		1 Months Ended
	Jan. 09, 2018	Nov. 30, 2018	Dec. 31, 2017	Dec. 31, 2018
INTANGIBLE ASSETS
Annual minimum royalty payments			$ 537,000
2018	$ 537,000		132,000	$ 132,000
2019			135,000
2020			135,000
2021			135,000
Fair Value of future minimum royalty payments			$ 482,300
Discounted rate			5.70%
Interest expense recognized	$ 54,700		$ 54,700
Interest expense recognized, relating to royalty payments, prior to third amendment		$ 19,281
Amortization expense recognized prior to third amendment		$ 107,662

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

Basis of Accounting

The consolidated financial statements include the accounts of Collegium Pharmaceutical, Inc. as well as the accounts of its subsidiaries Collegium Securities Corp. (a Massachusetts corporation), incorporated in December 2015, and Collegium NF LLC (a Delaware limited liability company), incorporated in December 2017, both wholly owned subsidiaries requiring consolidation. The consolidated financial statements are prepared in conformity with generally

accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, costs and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Estimates in the Company’s consolidated financial statements include revenue recognition, including the estimates of product returns, units prescribed, discounts and allowances related to commercial sales of products, estimates of useful lives with respect to intangible assets, accounting for stock based compensation, contingencies, impairment of intangible assets and tax valuation reserves. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Fair Value Measurements

Fair Value Measurements

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


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

Transfers are calculated on values as of the transfer date. There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2019 and 2018.

The following tables present the Company’s financial instruments carried at fair value using the lowest level input applicable to each financial instrument at December 31, 2019 and 2018.


						Significant
				Quoted Prices		other		Significant
				in active		observable		unobservable
				markets		inputs		inputs
December 31, 2019		Total		(Level 1)		(Level 2)		(Level 3)
Money market funds, included in cash equivalents	$	94,841	$	94,841	$	—	$	—

December 31, 2018
Money market funds, included in cash equivalents	$	92,914	$	92,914	$	—	$	—

As of December 31, 2019, and December 31, 2018, the carrying amounts of the cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, accrued rebates, returns and discount, operating lease liabilities, and term loan payable approximated their estimated fair values.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash deposits primarily with one reputable and nationally recognized financial institution. In addition, as of December 31, 2019, the Company’s cash equivalents were invested in money market funds. The Company has not experienced any material losses in such accounts and management believes that the Company is not exposed to significant credit risk due to the financial position of the financial institutions in which those deposits are held.

Three customers comprised 10% or more of the Company’s accounts receivable balance as of December 31, 2019. These customers comprised 51%, 27% and 19% of the accounts receivable balance, respectively. The same three customers comprised 10% or more of the Company’s revenue during the year ended December 31, 2019. These customers comprised 34%, 31% and 30% of revenue, respectively. To date, the Company has not experienced any losses with respect to the collection of its accounts receivable and believes that its entire accounts receivable balance is collectible as of December 31, 2019. The Company has no financial instruments with off-balance sheet risk of loss.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include cash in readily available checking and savings accounts and money market funds. The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.

The Company’s cash equivalents, which consist of money market funds, are measured at fair value on a recurring basis. As of December 31, 2019 and 2018, the carrying amount of cash equivalents was $94,841 and $92,914, respectively, which approximates fair value and was determined based upon Level 1 inputs. Money market funds are valued using quoted market prices with no valuation adjustments applied. Accordingly, these securities are categorized as Level 1.

Restricted Cash

Restricted Cash

Restricted cash is reported as non-current unless the restrictions are expected to be released in the next twelve months. The Company had no restricted cash as of December 31, 2019 and 2018. As of December 31, 2017, the Company had restricted cash of $97, which represents cash held in a depository account at a financial institution to collateralize a conditional stand by letter of credit for the Company’s former headquarters.

Inventory

Inventory

Inventories are stated at the lower of cost or net realizable value. Inventory costs consist of costs related to the manufacturing of the Company’s products, which are primarily the costs of contract manufacturing. The Company determines the cost of its inventories on a specific identification basis, and removes amounts from inventories on a first-in, first-out basis. If the Company identifies excess, obsolete or unsalable items, inventories are written down to their realizable value in the period in which the impairment is identified. These adjustments are recorded based upon various factors, including the level of product manufactured by the Company, the level of product in the distribution channel, current and projected demand and the expected shelf-life of the inventory components. As of December 31, 2019, cumulative estimates of excess inventory recorded as a component of cost of product revenues were immaterial.

The Company outsources the manufacturing of Xtampza ER to a sole contract manufacturer that produces the finished product. In addition, the Company currently relies on a sole supplier for the active pharmaceutical ingredient in Xtampza ER. The Company’s Nucynta Commercialization Agreement partner also relies on a sole supplier to produce the finished products. Accordingly, the Company has concentration risk associated with its commercial manufacturing of Xtampza ER and the Nucynta Products.

The Company has capitalized $9,643 of inventory as of December 31, 2019. The Company expects sales of the capitalized units to occur during the next twelve months.

Property and Equipment

Property and Equipment

Property and equipment, including leasehold improvements, are recorded at cost. Maintenance and repair costs are expensed as incurred. Costs which materially improve or extend the lives of existing assets are capitalized. Property and equipment are depreciated when placed into service using the straight-line method based on their estimated useful lives as follows:


Asset Category		Estimated Useful Life
Computers and office equipment		3-5 years
Laboratory equipment		5 years
Furniture and fixtures		7 years
Manufacturing equipment		5-10 years
Leasehold improvements		Lesser of remaining lease term and estimated useful life

Costs for capital assets not yet placed into service have been capitalized as construction-in-progress, and will be depreciated in accordance with the above guidelines once placed into service.

Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in the statements of operations.

Intangible Assets

Intangible Assets

The Company records the fair value of finite-lived intangible assets as of the transaction date. 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. The Company tests intangible assets for potential impairment whenever triggering events or circumstances present an indication of impairment. If the sum of expected undiscounted future cash flows of the intangible assets is less than the carrying amount of such assets, the intangible assets would be written down to the estimated fair value, calculated based on the present value of expected future cash flows.

Revenue Recognition

Revenue Recognition

The Company’s revenue to date is from sales of the Company’s products, which are primarily sold to distributors, which in turn sell the product to pharmacies for the treatment of patients. In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Please see Note 3 for further detail.

Research and Development Costs

Research and Development Costs

Research and development costs are charged to expense as incurred and consist of costs incurred to further the Company’s research and development activities, including salaries and employee related costs, costs associated with conducting preclinical and clinical activities, including fees paid to third-party professional consultants and service providers, costs incurred under preclinical and clinical trial agreements, costs for laboratory supplies, costs to acquire, develop and manufacture preclinical study and clinical trial materials, facilities, depreciation and other expenses including allocated expenses for rent and maintenance of facilities.

Patent Costs

Patent Costs

Costs related to filing and pursuing patent applications are recorded as selling, general and administrative expense as incurred since the recoverability of such expenditures is uncertain.

Advertising and Product Promotion Costs

Advertising and Product Promotion Costs

Advertising and product promotion costs are included in selling, general and administrative expenses and were $9,527, $17,497, $11,019 in the years ended December 31, 2019, 2018, and 2017 respectively. Advertising and product promotion costs are expensed as incurred.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for grants of stock options, restricted stock units and performance share units to employees, as well as to the Board of Directors, based on their grant date fair value and recognizes compensation expense over their vesting period, net of actual forfeitures. The Company estimates the fair value of stock options as of the date of grant using the Black-Scholes option pricing model. The Company estimates restricted stock units and performance share units based on the fair value of the underlying common stock as determined by management. For performance share units, the Company estimates the number of shares that will vest based upon the probability of achieving performance metrics.

Income Taxes

Income Taxes

The Company accounts for income taxes under the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and the absence of carryback available from results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future, in excess of its net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions on the basis of a two-step process whereby (i) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more likely than not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company will recognize interest and penalties related to uncertain tax positions within income tax expense. Any accrued interest and penalties will be included within the related tax liability. As of December 31, 2019 and December 31, 2018, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations.

Net Loss per Common Share

Net Loss per Common Share

Basic net loss per common share is calculated by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period, as determined in accordance with the treasury stock accounting method. For purposes of the diluted net loss per share calculation, stock options, warrants and unvested restricted stock units are considered potentially dilutive securities. Because the Company has reported a net loss for the years ended December 31, 2019, 2018 and 2017, diluted net loss per common share is the same as basic net loss per common share for those periods.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

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

Adoption of ASC Topic 606, Revenue from Contracts with Customers

The Company adopted ASC Topic 606 on January 1, 2018 using the modified retrospective method. Under this method, prior periods were not retrospectively adjusted and, as a result, the reported results for 2018 reflect the application of ASC Topic 606 guidance while the reported results for 2017 were prepared under the guidance of ASC Topic 605, Revenue Recognition (“legacy GAAP”).

Immediately prior to the adoption date of January 1, 2018, the Company recognized revenue in accordance with legacy GAAP, or when there was persuasive evidence of an arrangement; when title and risk of loss had passed to the customer; when estimated provisions for chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns were reasonably determinable; and when collectability was reasonably assured. The satisfaction of these criteria generally occurred upon delivery of products to customers, or the sell-in method of revenue recognition under legacy GAAP. The Company began recognizing revenue on the sell-in method in the third quarter of 2017.

As a result of the considerations discussed above, the Company concluded that, as of the adoption date, it would record revenue net of a provision for estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns upon delivery of products to customers under either the sell-in method of revenue recognition under legacy GAAP or under ASC Topic 606 as of the adoption date. Therefore, the adoption of ASC Topic 606 did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows as of January 1, 2018.

Prior to the third quarter of 2017, the Company recognized revenue when products were dispensed to end users, or the sell-through method of revenue recognition under legacy GAAP, as the Company did not have sufficient experience with product sales to estimate returns at the time product was sold to customers. In the third quarter of 2017, the Company transitioned to the sell-in method of revenue recognition and the Company recorded a cumulative one-time $4,377 increase to revenues during the three months ended September 30, 2017. Therefore, the adoption of Topic 606 would not have had a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows as of December 31, 2018. For additional information related to revenue from contracts with customers and accounting policies, please see Note 3.

Adoption of ASC Topic 842, Leases

The Company adopted Accounting Standard Updated (“ASU”) 2016-02, Leases (ASC Topic 842), as amended, on January 1, 2019, using the modified retrospective approach by initially applying the new standard at the adoption date and recognizing a cumulative-effect adjustment. This adoption method did not impact prior period financial statements and related disclosures. In addition, the Company utilized the package of practical expedients permitted within the transition guidance, which, among other things, allowed the Company to carryforward the historical lease classification. Upon adoption, the new standard resulted in the Company recording operating lease assets of $9,957 and corresponding operating lease liabilities of $10,691 on its balance sheet, primarily related to the operating lease agreement for its corporate headquarters. In addition, the Company identified an embedded operating lease arrangement that was accounted as a service contract in prior years, as accounting for operating leases and service contracts was similar under legacy GAAP and the accounting for the embedded lease did not result in a material impact to the financial statements. In addition, the Company implemented new accounting policies, processes and controls to identify and account for leases going forward. For additional information related to lease arrangements and accounting policies, please see Note 13.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments, which requires companies to measure credit losses utilizing a methodology that

reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new standard is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2016-13 on January 1, 2020 and the adoption did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 affect a wide variety of income tax accounting standards with the objective of reducing their complexity. The new standard is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the standard’s effect on the Company’s consolidated financial statements.

NATURE OF BUSINESS

12 Months Ended

Dec. 31, 2019

NATURE OF BUSINESS

NATURE OF BUSINESS

1. NATURE OF BUSINESS

Organization

Collegium Pharmaceutical, Inc. (the “Company”) was incorporated in Delaware in April 2002 and then reincorporated in Virginia in July 2014. The Company has its principal operations in Stoughton, Massachusetts. The Company is a specialty pharmaceutical company committed to being the leader in responsible pain management. The Company’s first product, Xtampza ER is an abuse-deterrent, extended-release, oral formulation of oxycodone. In April 2016, the U.S. Food and Drug Administration (“FDA”) approved the Company’s 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. In June 2016, the Company announced the commercial launch of Xtampza ER.

The Company’s product portfolio also includes Nucynta ER and Nucynta IR (the “Nucynta Products”). In December 2017, the Company entered into a Commercialization Agreement (the “Nucynta Commercialization Agreement”) with Assertio Therapeutics, Inc. (formerly known as Depomed) (“Assertio”), pursuant to which the Company acquired the right to commercialize the Nucynta Products in the United States. The Company began shipping and recognizing product sales on the Nucynta Products on January 9, 2018 and began marketing the Nucynta Products in February 2018. Nucynta ER is an extended-release formulation of tapentadol that is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate treatment options are inadequate. Nucynta IR is an immediate-release formulation of tapentadol that is indicated for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate in adults.

The Company’s operations are subject to certain risks and uncertainties. The principal risks include inability to successfully commercialize products, changing market conditions for products and development of competing products, changing regulatory environment and reimbursement landscape, litigation related to opioid marketing and distribution practices, manufacture of adequate commercial inventory, inability to secure adequate supplies of active pharmaceutical ingredients, key personnel retention, protection of intellectual property, patent infringement litigation and the availability of additional capital financing on terms acceptable to the Company.

Liquidity

The Company believes that its cash and cash equivalents at December 31, 2019, together with expected cash inflows from the commercialization of its products, will enable the Company to fund its operating expenses, debt service and capital expenditure requirements under its current business plan for the foreseeable future.

The Company has experienced net losses since its inception, and as of December 31, 2019, had an accumulated deficit of $359,899. A successful transition to profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.

REVENUE FROM CONTRACTS WITH CUSTOMERS

12 Months Ended

Dec. 31, 2019

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERS

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

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

Revenue Recognition

In accordance with ASC Topic 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Performance Obligations

The Company determined that performance obligations are satisfied and revenue is recognized when a customer takes control of the Company’s product, which occurs at a point in time. This generally occurs upon delivery of the products to customers, at which point the Company recognizes revenue and records accounts receivable, which represents the Company’s only contract asset. Payment is typically received 30 to 90 days after satisfaction of the Company’s performance obligations and generally does not have an effect on contract asset and contract liability balances. Under the practical expedients permitted by the rules of the adoption, the Company will expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the assets is one year or less.

Transaction Price and Variable Consideration

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer (“transaction price”). The transaction price for product sales includes variable consideration related to sales deductions, including (1) rebates and incentives, including managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances; (2) product returns, including return estimates for both the Nucynta Products and Xtampza ER; and (3) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and chargebacks. The Company will estimate the amount of variable consideration that should be included in the transaction price under the expected value method for all sales deductions other than trade allowances, which are estimated under the most likely amount method. These provisions reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract.

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

Provisions for product returns are based on product-level historical trends, as well as relevant market events and other factors. For the Nucynta Products, estimates of product returns are primarily based on historical trends as the Nucynta Products have been commercially sold for a number of years. For Xtampza ER, since the product has only been commercially sold since June 2016, estimates of product returns are based on a combination of historical returns processed to date, taking into consideration the expiration date of product upon delivery to customers, as well as forecasted customer buying patterns, shipment and prescription trends, channel inventory levels, and other specifically known market events and trends.

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

The amount of variable consideration that is included in the transaction price may be constrained and is included in net sales only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. In general, performance obligations do not include any estimated amounts of variable consideration that are constrained. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

The following table summarizes activity in each of the Company’s product revenue provision and allowance categories for the year ended December 31, 2019 and 2018:


					Trade
	Rebates and		Product		Allowances and
	Incentives (1)		Returns (2)		Chargebacks (3)
Balance at December 31, 2017	$	12,647	$	3,137	$	2,256
Provision related to current period sales		243,158		17,326		68,189
Liabilities assumed from asset acquisition (4)		22,406		—		254
Changes in estimate related to prior period sales		(32)		—		—
Credits/payments made		(148,861)		(4,998)		(55,858)
Balance at December 31, 2018	$	129,318	$	15,465	$	14,841
Provision related to current period sales		263,315		14,991		65,155
Changes in estimate related to prior period sales		(2,865)		—		—
Credits/payments made		(259,867)		(2,808)		(65,976)
Balance at December 31, 2019	$	129,901	$	27,648	$	14,020

(1)

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

(2)

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

(3)

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

(4)

The Company recorded a liability of $22,660 related to sales of Nucynta Products that occurred prior to the closing date of January 9, 2018, for which the Company is liable under the terms of the Nucynta Commercialization Agreement. This assumed liability, representing $22,406 of assumed rebates and incentives and $254 of assumed trade allowances and chargebacks, was recorded as a component of the intangible asset acquired in the Company’s Consolidated Balance Sheets.

As of December 31, 2019, the Company did not have any transaction price allocated to remaining performance obligations and any costs to obtain contracts with customers, including pre-contract costs and set up costs, were immaterial.

Disaggregation of Revenue

The Company disaggregates its product revenue, net from contracts with customers into the categories included in the table below. These categories depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors:


	Year ended December 31,
	2019		2018		2017
Xtampza ER	$	105,012	$	69,383	$	28,476
Nucynta Products		191,689		211,030		—
Total product revenues, net	$	296,701	$	280,413	$	28,476

For the year ended December 31, 2019, the Company recognized Nucynta IR and Nucynta ER product revenues, net of $117,680 and $74,009, respectively. For the year ended December 31, 2018, the Company recognized Nucynta IR and Nucynta ER product revenues, net of $129,917 and $81,113, respectively.

INTANGIBLE ASSETS - Costs Accumulated to Acquire Intangible Asset and Consideration Transferred (Details) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Jan. 09, 2018	Nov. 30, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Acquisition consideration:
Upfront cash paid	$ 10,000			$ 18,877
Minimum royalty payment obligation	482,300			112,719
Rebates, incentives, trade allowances and chargebacks assumed	22,660			22,660
Warrant issued			$ 8,043	8,043
Total acquisition consideration	515,627			162,299
Minimum royalty payments	$ 537,000			132,000	$ 132,000
Present value adjustments		$ 19,281
Consideration transferred to assets acquired:
Nucynta Intangible Asset				154,089
Inventory				6,223
Prepaid expenses				1,987
Total consideration allocated to assets acquired				$ 162,299

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Measurements (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Transfer of Assets From Level 1 to Level 2	$ 0	$ 0
Transfer of Assets From Level 2 to Level 1	0	0
Transfer of Liabilities From Level 1 to Level 2	0	0
Transfer of Liabilities From Level 2 to Level 1	0	0
Transfer of Assets Into Level 3	0	0
Transfer of Assets Out of Level 3	0	0
Transfer of Liabilities Into Level 3	0	0
Transfer of Liabilities Out of Level 3	0	0
Money market funds \| Recurring
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents	94,841	92,914
Money market funds \| Quoted Prices in active markets (Level 1) \| Recurring
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash equivalents	$ 94,841	$ 92,914

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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


						Significant
				Quoted Prices		other		Significant
				in active		observable		unobservable
				markets		inputs		inputs
December 31, 2019		Total		(Level 1)		(Level 2)		(Level 3)
Money market funds, included in cash equivalents	$	94,841	$	94,841	$	—	$	—

December 31, 2018
Money market funds, included in cash equivalents	$	92,914	$	92,914	$	—	$	—

Schedule of estimated useful lives of property and equipment


Asset Category		Estimated Useful Life
Computers and office equipment		3-5 years
Laboratory equipment		5 years
Furniture and fixtures		7 years
Manufacturing equipment		5-10 years
Leasehold improvements		Lesser of remaining lease term and estimated useful life

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	12 Months Ended
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Property and Equipment
Total property and equipment	$ 14,142	$ 11,111
Less: accumulated deprecation	(2,288)	(1,837)
Property and equipment, net	11,854	9,274
Depreciation expense	731	1,074	$ 336
Disposal of fully depreciated assets	280	905
Computers and office equipment
Property and Equipment
Total property and equipment	1,453	1,277
Laboratory equipment
Property and Equipment
Total property and equipment	1,220	1,613
Furniture and fixtures
Property and Equipment
Total property and equipment	1,066	1,111
Manufacturing Equipment
Property and Equipment
Total property and equipment	987
Leasehold improvements
Property and Equipment
Total property and equipment	541	567
Construction-in-process
Property and Equipment
Total property and equipment	$ 8,875	$ 6,543

SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2019

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

19. SUBSEQUENT EVENTS

Nucynta Purchase Agreement

On February 6, 2020, the Company entered into an asset purchase agreement (“Nucynta Purchase Agreement”) with Assertio, pursuant to which the Company agreed to acquire from Assertio certain assets related to the Nucynta Products for an aggregate purchase price of $375,000 (the “Purchase Price”), subject to certain closing and post-closing adjustments as described in the Nucynta Purchase Agreement. In connection with the Nucynta Purchase Agreement, the Company also agreed to assume certain regulatory and supply chain contracts, liabilities and obligations related to Nucynta Products. The Nucynta Purchase Agreement contains customary representations, warranties and covenants, and indemnification provisions subject to specified limitations.

From and after the closing of the Nucynta Purchase Agreement, the Company will pay royalties directly to Grünenthal GmbH at a rate of 14% of net sales of the Nucynta Products. This royalty payment obligation will replace the Company’s previous obligation to pay a royalty rate of 14% of net sales of the Nucynta Products to Grünenthal, subject to a guaranteed royalty of $34,000 when net sales are between $180,000 and $243,000.

On February 13, 2020, the Company closed the Nucynta Acquisition in accordance with the Nucynta Purchase Agreement. Upon the closing of the transactions contemplated by the Nucynta Purchase Agreement, the Nucynta Commercialization Agreement is terminated with the exception of certain provisions thereof which will survive pursuant to the terms of the Nucynta Purchase Agreement, and the Company’s royalty payment obligations to Assertio thereunder will cease.

2020 Term Loan

On February 6, 2020, in connection with the execution of the Nucynta Purchase Agreement, the Company entered into a Loan Agreement with BioPharma Credit PLC, as collateral agent and lender; and BioPharma Credit Investments V (Master) LP, as lender (the “2020 Loan Agreement”). The 2020 Loan Agreement provides for a $200,000 secured term loan (the “2020 Term Loan”), the proceeds of which were used to finance a portion of the purchase price paid pursuant to the Nucynta Purchase Agreement.

The 2020 Term Loan will mature on the 48-month anniversary of the closing of the Nucynta Acquisition, and is guaranteed by the Company’s material domestic subsidiaries and is also secured by substantially all of the Company’s material domestic assets. The 2020 Term Loan will bear interest at a rate based upon LIBOR (subject to a LIBOR floor of 2.0%), plus a margin of 7.5% per annum. The Company is required to repay the 2020 Term Loan by making equal quarterly payments.

The 2020 Loan Agreement contains certain covenants and obligations of the parties, including, without limitation, covenants that require the Company to maintain $200,000 in annual net sales and covenants that limit the Company’s ability to incur additional indebtedness or liens, make acquisitions or other investments or dispose of assets outside the ordinary course of business. Failure to comply with these covenants would constitute an event of default under the 2020 Loan Agreement, notwithstanding the Company’s ability to meet its debt service obligations. The 2020 Loan Agreement also includes various customary remedies for the lenders following an event of default, including the acceleration of repayment of outstanding amounts under the 2020 Loan Agreement and execution upon the collateral securing obligations under the 2020 Loan Agreement.

2026 Convertible Notes

On February 13, 2020, the Company issued 2.625% convertible senior notes due 2026 (the “convertible notes”), in the aggregate principal amount of $143,750, in a public offering registered under the Securities Act of 1933, as amended. The convertible notes are senior, unsecured obligations and will accrue interest at a rate of 2.625% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The notes will mature on February 15, 2026, unless earlier repurchased, redeemed or converted. Before August 15, 2025, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after August 15, 2025, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The initial conversion rate is 34.2618 shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of approximately $29.19 per share of common stock. The initial conversion price represents a premium of approximately 35% over the last reported sale of $21.62 per share of the Company’s common stock on February 10, 2020. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

SVB Term Loan

On January 23, 2020, the Company paid off the outstanding principal and accrued interest on our term loan with SVB with cash on hand.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Public offerings of common stock, issuance costs	$ 1,253

STOCK BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2019

STOCK BASED COMPENSATION

Summary of performance share units activity


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2018	—	$	—
Granted	99,400		15.90
Outstanding at December 31, 2019	99,400	$	15.90

Summary of restricted stock units activity


		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2018	514,603	$	20.67
Granted	634,708		15.48
Vested	(196,139)		20.73
Forfeited	(103,493)		18.04
Outstanding at December 31, 2019	849,679	$	17.10

Summary of stock option activity


				Weighted-
			Weighted-	Average
			Average	Remaining		Aggregate
			Exercise Price	Contractual		Intrinsic
	Shares		per Share	Term (in years)		Value
Outstanding at December 31, 2018	3,585,856	$	16.20	8.0	$	11,170
Granted	1,095,908		15.22
Exercised	(201,308)		10.16
Cancelled	(524,569)		18.00
Outstanding at December 31, 2019	3,955,887	$	16.00	7.5	$	21,257
Exercisable at December 31, 2019	2,094,720	$	15.05	6.6	$	13,020

Summary of stock-based compensation


	Year Ended December 31,
	2019		2018		2017
Research and development expenses	$	2,126	$	1,468	$	888
Selling, general and administrative expenses		14,402		12,310		7,057
Total stock-based compensation expense	$	16,528	$	13,778	$	7,945

Schedule of fair value assumption using Black-Scholes option-pricing model


	Year ended December 31,
	2019		2018		2017
Risk-free interest rate	2.4	%	2.6	%	2.0	%
Volatility	63.3	%	64.8	%	71.0	%
Expected term (years)	6.1		6.1		6.0
Expected dividend yield	—	%	—	%	—	%

INVENTORY (Tables)

12 Months Ended

Dec. 31, 2019

INVENTORY

Schedule of Inventory


	As of December 31,		As of December 31,
	2019		2018
Raw materials	$	795	$	496
Work in process		1,427		671
Finished goods		7,421		6,650
Total inventory	$	9,643	$	7,817

SUBSEQUENT EVENTS (Details) - Subsequent Events $ / shares in Units, $ in Thousands	Feb. 13, 2020 USD ($) $ / shares	Feb. 06, 2020 USD ($)
2020 Term Loan
SUBSEQUENT EVENTS
Aggregate principal amount		$ 200,000
Maturity anniversary		48 months
Minimum annual net sales		$ 200,000
2020 Term Loan \| LIBOR
SUBSEQUENT EVENTS
Interest floor rate (as a percent)		2.00%
Variable interest rate margin (as a percent)		7.50%
2.625% Convertible notes
SUBSEQUENT EVENTS
Aggregate principal amount	$ 143,750
Interest rate (as a percent)	2.625%
Initial conversion rate	0.0342618
Initial conversion price (in dollars per share) \| $ / shares	$ 29.19
Initial conversion price, premium (as a percent)	35.00%
Last reported sale price (in dollars per share) \| $ / shares	$ 21.62
Nucynta Purchase Agreement \| Assertio \| Nucynta Products
SUBSEQUENT EVENTS
Aggregate purchase price		$ 375,000
Royalty payment as percentage of annual net sales between January 1, 2019 and December 31, 2021		14.00%
Guaranteed royalty		$ 34,000
Nucynta Purchase Agreement \| Assertio \| Nucynta Products \| Minimum
SUBSEQUENT EVENTS
Net sales		180,000
Nucynta Purchase Agreement \| Assertio \| Nucynta Products \| Maximum
SUBSEQUENT EVENTS
Net sales		$ 243,000

UNAUDITED QUARTERLY OPERATING RESULTS (Tables)

12 Months Ended

Dec. 31, 2019

UNAUDITED QUARTERLY OPERATING RESULTS

Summary of unaudited quarterly results of operations


		First		Second		Third		Fourth
Year ended December 31, 2019		Quarter		Quarter		Quarter		Quarter
Product revenues, net	$	74,516	$	75,040	$	72,942	$	74,203
Costs and expenses
Cost of product revenues		49,164		48,654		46,754		49,088
Research and development		2,992		2,459		2,491		2,398
Selling, general and administrative		32,352		28,935		30,072		25,090
Total costs and expenses		84,508		80,048		79,317		76,576
Loss from operations	$	(9,992)	$	(5,008)	$	(6,375)	$	(2,373)

Interest expense		(234)		(236)		(228)		(211)
Interest income		526		532		494		383
Net income (loss)	$	(9,700)	$	(4,712)	$	(6,109)	$	(2,201)

Weighted-average shares - basic and diluted		33,331,917		33,397,709		33,481,923		33,600,566
Loss per share - basic and diluted	$	(0.29)	$	(0.14)	$	(0.18)	$	(0.07)

		First		Second		Third		Fourth
Year ended December 31, 2018		Quarter		Quarter		Quarter		Quarter (1)
Product revenues, net	$	63,749	$	73,061	$	70,176	$	73,427
Costs and expenses
Cost of product revenues		43,106		46,838		46,007		29,726
Research and development		2,268		2,237		1,907		2,249
Selling, general and administrative		31,582		31,279		33,448		30,451
Total costs and expenses		76,956		80,354		81,362		62,426
Loss from operations	$	(13,207)	$	(7,293)	$	(11,186)	$	11,001

Interest expense		(5,700)		(6,158)		(5,868)		(2,404)
Interest income		255		391		552		489
Net income (loss)	$	(18,652)	$	(13,060)	$	(16,502)	$	9,086

Weighted-average shares - basic		32,903,674		32,967,718		33,012,174		33,250,180
(Loss) earnings per share - basic	$	(0.57)	$	(0.40)	$	(0.50)	$	0.27

Weighted-average shares - diluted		32,903,674		32,967,718		33,012,174		33,769,765
(Loss) earnings per share - diluted	$	(0.57)	$	(0.40)	$	(0.50)	$	0.27

(1)

STOCK BASED COMPENSATION - Summary of Stock-Based Compensation Included in Statement of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Stock-based compensation
Total stock-based compensation expense	$ 16,528	$ 13,778	$ 7,945
Research and development expenses
Stock-based compensation
Total stock-based compensation expense	2,126	1,468	888
Selling, general and administrative expenses
Stock-based compensation
Total stock-based compensation expense	$ 14,402	$ 12,310	$ 7,057

INTANGIBLE ASSETS - Onsolis Intangible Asset - Narrative (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	May 31, 2016	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Finite-Lived Intangible Assets [Line Items]
Amortization expense		$ 14,752	$ 109,834
Onsolis
Finite-Lived Intangible Assets [Line Items]
Upfront cash payment	$ 2,500
Intangible asset balance post-impairment		$ 0	$ 0	$ 0
Amortization expense				258
Selling, general and administrative expenses \| Onsolis
Finite-Lived Intangible Assets [Line Items]
Impairment loss				$ 1,845

ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2019

ACCRUED EXPENSES

Schedule of components of accrued expenses


	As of December 31,		As of December 31,
	2019		2018
Accrued royalties	$	21,893	$	15,138
Accrued bonuses		4,047		4,286
Accrued incentive compensation		1,650		1,806
Accrued payroll and related benefits		1,154		1,544
Accrued sales and marketing		775		2,193
Accrued interest		473		274
Accrued audit and legal		308		480
Accrued inventory		—		3,745
Accrued other operating costs		3,180		1,085
Total accrued expenses	$	33,480	$	30,551

REVENUE FROM CONTRACTS WITH CUSTOMERS - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Disaggregation of Revenue
Product revenues, net	$ 74,203	$ 72,942	$ 75,040	$ 74,516	$ 73,427	$ 70,176	$ 73,061	$ 63,749	$ 296,701	$ 280,413	$ 28,476
Xtampza ER
Disaggregation of Revenue
Product revenues, net									105,012	69,383	$ 28,476
Nucynta Products
Disaggregation of Revenue
Product revenues, net									191,689	211,030
Nucynta IR
Disaggregation of Revenue
Product revenues, net									117,680	129,917
Nucynta ER
Disaggregation of Revenue
Product revenues, net									$ 74,009	$ 81,113

INTANGIBLE ASSETS - Summary of Costs Included in Intangible Asset (Details) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Jan. 09, 2018	Dec. 31, 2017	Dec. 31, 2018
Acquisition consideration:
Upfront cash paid	$ 10,000		$ 18,877
Transaction costs	667
Minimum royalty payment obligation	482,300		112,719
Rebates, incentives, trade allowances and chargebacks assumed	22,660		22,660
Total acquisition consideration	515,627		162,299
Minimum royalty payments	537,000	$ 132,000	$ 132,000
Present value adjustments	54,700	$ 54,700
Rebates and incentives assumed	22,406
Trade allowances and chargebacks assumed	$ 254

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

accepted accounting principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Fair Value Measurements


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

Transfers are calculated on values as of the transfer date. There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2019 and 2018.

The following tables present the Company’s financial instruments carried at fair value using the lowest level input applicable to each financial instrument at December 31, 2019 and 2018.


						Significant
				Quoted Prices		other		Significant
				in active		observable		unobservable
				markets		inputs		inputs
December 31, 2019		Total		(Level 1)		(Level 2)		(Level 3)
Money market funds, included in cash equivalents	$	94,841	$	94,841	$	—	$	—

December 31, 2018
Money market funds, included in cash equivalents	$	92,914	$	92,914	$	—	$	—

Concentration of Credit Risk

Cash and Cash Equivalents

Restricted Cash

Inventory

The Company has capitalized $9,643 of inventory as of December 31, 2019. The Company expects sales of the capitalized units to occur during the next twelve months.

Property and Equipment


Asset Category		Estimated Useful Life
Computers and office equipment		3-5 years
Laboratory equipment		5 years
Furniture and fixtures		7 years
Manufacturing equipment		5-10 years
Leasehold improvements		Lesser of remaining lease term and estimated useful life

Costs for capital assets not yet placed into service have been capitalized as construction-in-progress, and will be depreciated in accordance with the above guidelines once placed into service.

Upon retirement or sale, the cost of assets disposed and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in the statements of operations.

Intangible Assets

Revenue Recognition

Research and Development Costs

Patent Costs

Costs related to filing and pursuing patent applications are recorded as selling, general and administrative expense as incurred since the recoverability of such expenditures is uncertain.

Advertising and Product Promotion Costs

Stock-Based Compensation

Income Taxes

Net Loss per Common Share

Recently Adopted Accounting Pronouncements

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

Adoption of ASC Topic 606, Revenue from Contracts with Customers

Adoption of ASC Topic 842, Leases

Recently Issued Accounting Pronouncements Not Yet Adopted

TERM LOAN PAYABLE (Tables)

12 Months Ended

Dec. 31, 2019

TERM LOAN PAYABLE

Schedule of future payments under debt agreements


2020	$	3,833
2021		3,833
2022		3,834
Balance	$	11,500

TERM LOAN PAYABLE - Future Payments (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Future payments under term loan
2020	$ 3,833
2021	3,833
2022	3,834
Balance	$ 11,500

INTANGIBLE ASSETS - Warrant and Amortization - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Jan. 09, 2018	Dec. 31, 2019	Dec. 31, 2018	Nov. 30, 2018
INTANGIBLE ASSETS
Common stock that may be purchased upon exercise of warrant (in shares)				1,041,667
Exercise price of warrant (in dollars per share)				$ 19.20
Warrant issued		$ 8,043	$ 8,043
Useful life	4 years	2 years
Amortization expense recognized prior to third amendment		$ 107,662
Amortization expense for Nucynta asset acquisition		14,752	$ 109,834
2020		14,752
2021		$ 14,751

REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

12 Months Ended

Dec. 31, 2019

REVENUE FROM CONTRACTS WITH CUSTOMERS

Summary of product revenue provision and allowance


					Trade
	Rebates and		Product		Allowances and
	Incentives (1)		Returns (2)		Chargebacks (3)
Balance at December 31, 2017	$	12,647	$	3,137	$	2,256
Provision related to current period sales		243,158		17,326		68,189
Liabilities assumed from asset acquisition (4)		22,406		—		254
Changes in estimate related to prior period sales		(32)		—		—
Credits/payments made		(148,861)		(4,998)		(55,858)
Balance at December 31, 2018	$	129,318	$	15,465	$	14,841
Provision related to current period sales		263,315		14,991		65,155
Changes in estimate related to prior period sales		(2,865)		—		—
Credits/payments made		(259,867)		(2,808)		(65,976)
Balance at December 31, 2019	$	129,901	$	27,648	$	14,020

(1)

(2)

(3)

(4)

Schedule of disaggregation of revenue


	Year ended December 31,
	2019		2018		2017
Xtampza ER	$	105,012	$	69,383	$	28,476
Nucynta Products		191,689		211,030		—
Total product revenues, net	$	296,701	$	280,413	$	28,476

LICENSE AGREEMENTS

12 Months Ended

Dec. 31, 2019

LICENSE AGREEMENTS

LICENSE AGREEMENTS

4. LICENSE AGREEMENTS

The Company periodically enters into license agreements to develop and commercialize its products. As of December 31, 2019 and 2018, the Company’s only license agreement was the Nucynta Commercialization Agreement.

On January 9, 2018 (the “Nucynta Commercialization Closing Date”), the Company consummated the transactions contemplated by the Nucynta Commercialization Agreement, pursuant to which Assertio agreed to grant a sublicense of certain of its intellectual property related to the Nucynta Products for commercialization in the United States. The Company began recording revenues from sales of the Nucynta Products on the Nucynta Commercialization Closing Date and began commercial promotion of the Nucynta Products in February 2018. Pursuant to the Nucynta Commercialization Agreement, the Company paid a one-time, non-refundable license fee of $10,000 to Assertio on the Nucynta Commercialization Closing Date, $6,223 for transferred inventory and $1,987 as reimbursement for prepaid expenses. The Company also assumed the existing liabilities of the Nucynta Products, including $22,660 related to sales of Nucynta Products that occurred prior to the Nucynta Commercialization Closing Date. The Nucynta Commercialization Agreement initially required the Company to pay a guaranteed minimum royalty of $135,000 per year through December 2021, payable in quarterly payments of $33,750, prorated in 2018 for the Nucynta Commercialization Closing Date, as well as a variable royalty based on annual net sales over $233,000. Beginning January 2022 and for each year of the Nucynta Commercialization Agreement term thereafter, the Company was required to pay a variable royalty on annual net sales of the Nucynta Products, but without a guaranteed minimum.

Effective August 2018, the Company entered into a Second Amendment to the Nucynta Commercialization Agreement to clarify the mechanism for transferring title of products to be sold by the Company pursuant to the agreement and various related matters. The Second Amendment did not have an impact on the Company’s financial statements.

Effective November 2018, the Company entered into the Third Amendment to the Nucynta Commercialization Agreement to adjust the royalty structure and termination clauses. Pursuant to the amended Nucynta Commercialization Agreement, the $135,000 guaranteed minimum annual royalties were eliminated, and the Company was no longer required to secure its royalty payment obligations with a standby letter of credit. Beginning on January 1, 2019 and thereafter, the Company will be conditionally obligated to make royalty payments to Assertio conditional upon net sales and based on the following royalty structure for the period between January 1, 2019 and December 31, 2021:

(i)65% of annual net sales of the Nucynta Products up to $180,000, plus

(ii)14% of annual net sales of the Nucynta Products between $180,000 and $210,000, plus

(iii)58% of annual net sales of the Nucynta Products between $210,000 and $233,000, plus

(iv)20% of annual net sales of the Nucynta Products between $233,000 and $258,000, plus

(v)15% of annual net sales of the Nucynta Products in excess of $258,000.

The Third Amendment does not modify the royalties payable on sales of the Nucynta Products on and after January 1, 2022, which will remain as contemplated by the Nucynta Commercialization Agreement as in effect on January 9, 2018, based on the following royalty structure:

(i)58% of annual net sales of the Nucynta Products up to $233,000, plus

(ii)25% of annual net sales of the Nucynta Products between $233,000 and $258,000, plus

(iii)17.5% of annual net sales of the Nucynta Products in excess of $258,000.

In addition, prior to January 1, 2022, if the annual net sales of the Nucynta Products are in the range of $180,000 to $243,000, the Company will be required to pay a supplemental royalty to Assertio, for ultimate payment to Grünenthal GmbH, not to exceed a maximum of 4.9% of net sales of the Nucynta Products. If annual net sales of Products are less than $180,000 in any 12-month period through January 1, 2022, or if they are less than $170,000 in any 12-month period commencing on January 1, 2022, then Assertio will have the right to terminate the Nucynta Commercialization Agreement without penalty. The Amendment further provides that the Company does not have a right to terminate the Nucynta Commercialization Agreement prior to December 31, 2021. The Company will be required to pay a $5,000 termination fee to Assertio in connection with any termination by the Company with an effective date between

December 31, 2021 and December 31, 2022. In connection with execution of the Third Amendment to the Nucynta Commercialization Agreement, the Company issued a warrant to Assertio to purchase 1,041,667 shares of common stock of the Company (the “Warrant”) at an exercise price of $19.20 per share. The Warrant will expire in November 2022 and includes customary adjustments for changes in the Company’s capitalization.

The assets acquired, liabilities assumed, and equity interests issued by the Company in connection with the Nucynta Commercialization Agreement are further described in Note 9.

NATURE OF BUSINESS (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
NATURE OF BUSINESS
Accumulated deficit	$ 359,899	$ 337,177

LEASES - Future Minimum Lease Payments - Legacy GAAP (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Future minimum lease payments
2019	$ 1,032
2020	1,305
2021	1,261
2022	1,299
2023	1,337
After 2023	8,423
Total minimum lease payments	$ 14,657

LEASES - Components of Lease Cost (Details) $ in Thousands	12 Months Ended
LEASES - Components of Lease Cost (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Lease Cost
Operating lease cost	$ 1,446
Short-term lease cost	752
Variable lease cost	283
Total lease cost	$ 2,481