UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 001-39294 ASSERTIO HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 85-0598378 (STATE OR OTHER JURISDICTION OF (I ...

Assertio Holdings, Inc. Q4 2022 Financial Results -ASSERTIO= About This Presentation Statements in this communication that are not statements of historical fact are forward-looking statements that reflect Assertio's current expectations, assumptions and estimates of future performance and economic conditions. These forward-looking statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as ...

Financial Reporting and Estimates - The preparation of financial statements requires management to make estimates and assumptions that could lead to material differences in actual results [180]. Drug Development Risks - The development of drug candidates is inherently difficult and uncertain, with significant risks of delays and failures in clinical trials [182]. - Regulatory approval processes are expensive and time-consuming, and delays could impair the ability to commercialize future products [189]. - The company relies on third-party organizations for clinical trials, which may affect the timing and success of obtaining regulatory approvals [185]. - Any significant delays in the governmental approval process could adversely impact the company's financial condition and results of operations [184]. - The company may need to perform additional clinical studies to support changes from approved products, which could further delay commercialization [191]. - The entry of generic competitors could significantly affect the market success of the company's products [193]. Market and Stock Performance - The trading price of the company's common stock has historically been volatile, influenced by various external factors [191]. - The company is currently in compliance with the Nasdaq's Bid Price Rule, which requires a minimum bid price of at least $1.00 per share [198]. - A failure to comply with the Bid Price Rule in the future could lead to delisting from the Nasdaq Capital Market, adversely affecting market liquidity and stock price [199]. - The company has previously required a grace period and implemented a one-for-four reverse stock split to maintain compliance with Nasdaq listing standards [198]. - The company is classified as a "smaller reporting company," which allows it to take advantage of reduced disclosure requirements, potentially making its stock less attractive to investors [200]. Corporate Governance and Shareholder Relations - The company may face significant costs and management distractions from potential proxy contests initiated by activist shareholders [201]. - The company is subject to risks related to unsolicited takeover attempts, which could disrupt business operations and financial results [202]. - The company may encounter difficulties in obtaining shareholder approval for significant corporate actions due to its retail investor base [199]. Legal and Financial Obligations - Legal and regulatory developments, including litigation and investigations, could impact the company's operations and financial performance [195]. - The company must generate sufficient cash flow to fund operations and meet its debt obligations [195]. - Variations in revenues from commercialization agreements and other contract revenues could affect financial metrics and projections [195].

Financial Data and Key Metrics Changes - Net product sales for Q3 2022 were $34.3 million, up from $26 million in the prior year quarter and down from $35.4 million in the previous quarter [20] - Adjusted EBITDA for Q3 2022 was $21.4 million, compared to $22.9 million last quarter and $15.8 million in the prior year quarter [24] - Net income for Q3 2022 was $4.2 million, compared to $7.8 million last quarter and $3.7 million in the prior year quarter [26] - Gross margin for Q3 2022 was 88.3%, with a slight adjustment due to a one-time returns accrual benefit [23] Business Line Data and Key Metrics Changes - INDOCIN family net sales increased by $7.3 million year-over-year, primarily due to higher net pricing [21] - Otrexup net sales for Q3 2022 were $3 million, up from $2.6 million in the prior quarter [21] - CAMBIA net sales decreased by $400,000 compared to the prior year quarter due to lower volume [22] Market Data and Key Metrics Changes - The company exited the Medicaid drug rebate program, which is expected to increase annual net revenue and profit by $6 million [12][14] - The acquisition of Sympazan is projected to add between $4 million to $4.5 million in annual adjusted EBITDA [15] Company Strategy and Development Direction - The company has pivoted towards growth after restructuring and improving profitability [7] - Key priorities include retaining employees, proving the efficacy of the new commercial model, reducing concentration in INDOCIN, and improving the balance sheet [8][10] - The company aims to diversify its business and has a robust M&A pipeline, with a goal of acquiring products that bring an additional $50 million in gross profit by 2024 [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand from the 340B hospital segment despite limited data [36] - The company is confident in its ability to grow and meet its goals, with a favorable M&A environment and capabilities to evaluate multiple transactions simultaneously [60] - The company expects to see a return to normal channel inventory levels, which should positively impact net product sales for INDOCIN [32] Other Important Information - The company raised its guidance for 2022, expecting product net sales to exceed $141 million and adjusted EBITDA to be greater than $86 million [31] - The company has successfully extended its debt maturity and reduced its cost of debt capital from 13% to 6.5% [7][10] Q&A Session Summary Question: Insights into demand from the 340B hospital segment - Management indicated limited insight due to data lag but remains optimistic about future demand [36] Question: Status of Otrexup sampling - Management confirmed that deliveries are on schedule and manufacturing timelines are being met [38] Question: Details on the pre-IND meeting with the FDA - Management stated that a single-arm trial is proposed, with specifics pending FDA feedback [40] Question: Impact of exiting the 340B program on revenues - Management clarified that exiting the program will save costs as previous sales were unprofitable [44] Question: Comfort level with returning to R&D - Management is actively recruiting for a Head of Medical to support clinical programs and is confident in the approach [47] Question: Long-term sales expectations for Otrexup - Management believes reaching a $4 million quarterly run rate is achievable [50] Question: Amortization expense for Sympazan - Management confirmed an amortization of $1.6 million per year over 10 years [52] Question: Expectations for Sympazan's growth - Management plans to integrate existing payer contracts and is optimistic about the asset's performance [66] Question: Overall growth expectations for 2023 - Management aims for growth in 2023 but did not provide specific guidance [68]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited financial statements show cash and equivalents increased to **$64.8 million**, with net income of **$21.1 million** for nine months, and operating cash flow at **$51.9 million** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to **$323.3 million**, while total liabilities reduced to **$188.4 million**, leading to an increase in shareholders' equity to **$134.9 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $64,826 | $36,810 | | Total current assets | $126,494 | $103,498 | | Intangible assets, net | $191,617 | $216,054 | | **Total assets** | **$323,344** | **$326,547** | | **Liabilities & Equity** | | | | Total current liabilities | $92,296 | $135,019 | | Total liabilities | $188,429 | $224,133 | | Total shareholders' equity | $134,915 | $102,414 | | **Total liabilities and shareholders' equity** | **$323,344** | **$326,547** | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Q3 2022 revenues rose to **$34.2 million** with **$4.2 million** net income, while nine-month revenues reached **$105.9 million**, shifting from a **$5.9 million** net loss to **$21.1 million** net income Statement of Comprehensive Income Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $34,212 | $25,472 | $105,884 | $77,686 | | Income from operations | $6,434 | $5,934 | $28,783 | $1,443 | | Net income (loss) | $4,174 | $3,737 | $21,072 | $(5,887) | | Diluted net income (loss) per share | $0.08 | $0.08 | $0.42 | $(0.14) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine-month operating cash flow significantly increased to **$51.9 million**, with **$16.9 million** used in investing and **$7.0 million** in financing activities Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $51,901 | $1,392 | | Net cash used in investing activities | $(16,889) | $0 | | Net cash (used in) provided by financing activities | $(6,996) | $36,548 | | **Net increase in cash and cash equivalents** | **$28,016** | **$37,940** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the **$45.5 million** Otrexup acquisition, **$70 million** debt restructuring, ongoing legal proceedings, and the subsequent **Sympazan®** license acquisition - Acquired Otrexup from Antares Pharma for a total purchase price of **$45.5 million**, accounted for as an asset acquisition[24](index=24&type=chunk)[25](index=25&type=chunk) - Issued **$70.0 million** of 6.5% Convertible Senior Notes due 2027 and used the proceeds to repurchase outstanding 13% Senior Secured Notes due 2024[52](index=52&type=chunk)[58](index=58&type=chunk) - As of September 30, 2022, the company had a legal contingency accrual of approximately **$3.2 million** related to various lawsuits and investigations[73](index=73&type=chunk) - Subsequent to the quarter end, on October 27, 2022, the company acquired an exclusive license for Sympazan® from Aquestive Therapeutics for an upfront payment of **$9.0 million**[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong nine-month performance to increased **INDOCIN** sales and successful debt restructuring, believing current cash is sufficient for the next twelve months [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q3 2022 revenues grew **34%** to **$34.2 million**, driven by **INDOCIN** sales, while nine-month revenues increased **36%** to **$105.9 million**, with reduced SG&A expenses Net Product Sales Comparison (in millions) | Product | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | INDOCIN products | $21.9 | $14.5 | $66.1 | $42.2 | | CAMBIA | $5.8 | $5.0 | $17.5 | $17.6 | | Otrexup | $3.0 | $0.0 | $8.7 | $0.0 | | Zipsor | $0.3 | $2.0 | $2.7 | $6.8 | - The increase in total product sales was also supported by a decrease in gross-to-net deductions, attributed to a higher concentration of **INDOCIN** sales which have lower allowance levels[131](index=131&type=chunk) - SG&A expenses for the nine months ended Sep 30, 2022 decreased by **$8.3 million** compared to the same period in 2021, primarily because a **$11.3 million** loss contingency provision from 2021 did not repeat[137](index=137&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with **$51.9 million** cash from operations, bolstered by issuing **$70.0 million** in convertible notes to repurchase **$59.0 million** of higher-interest debt - In August 2022, the company issued **$70.0 million** of 6.5% Convertible Senior Notes due 2027 and used the net proceeds to repurchase **$59.0 million** of its 13% Senior Secured Notes due 2024[150](index=150&type=chunk) - The company suspended its at-the-market (ATM) offering program after raising net proceeds of **$7.0 million**[151](index=151&type=chunk) - Cash provided by operating activities increased to **$51.9 million** for the nine months ended Sep 30, 2022, compared to **$1.4 million** in the prior year, driven by higher net income and favorable working capital changes[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable for the current reporting period - Not applicable[159](index=159&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no significant changes in internal controls during Q3 2022 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period[160](index=160&type=chunk) - No significant changes in internal controls over financial reporting were identified during the third quarter of 2022[162](index=162&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including **Glumetza** antitrust and extensive opioid-related litigation, as detailed in Note 13 - The company refers to Note 13 for a description of its material pending legal proceedings[163](index=163&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include lack of patent protection for **INDOCIN**, generic competition for **Zipsor** and **Cambia**, potential Nasdaq delisting, and substantial debt obligations - The company faces competition for **INDOCIN** from a 503B compounder and could face generic competition at any time due to a lack of patent protection[165](index=165&type=chunk)[167](index=167&type=chunk) - Generic competition for **Zipsor** began in 2022, and generic competition for **Cambia** is expected to start in 2023, which will adversely affect revenues[165](index=165&type=chunk)[168](index=168&type=chunk) - The company's common stock may be delisted from Nasdaq if it fails to maintain the minimum **$1.00** bid price requirement, which would trigger a 'fundamental change' under its 2027 Convertible Notes[174](index=174&type=chunk)[177](index=177&type=chunk) - Significant indebtedness under the 2027 Convertible Notes poses a risk to the business, as failure to generate sufficient cash flow could lead to default and limit operational flexibility[179](index=179&type=chunk)[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2022, **12,477** shares were surrendered at an average price of **$2.27** to satisfy tax withholding for employee equity awards Issuer Purchases of Equity Securities (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2022 | 6,190 | $2.65 | | August 2022 | 6,287 | $1.90 | | September 2022 | 0 | — | | **Total** | **12,477** | **$2.27** | - The shares purchased were withheld to pay employees' tax liability in connection with the vesting of equity awards and were not part of a publicly announced repurchase program[186](index=186&type=chunk)[188](index=188&type=chunk) [Item 3. Exhibits](index=43&type=section&id=Item%203.%20Exhibits) This section lists exhibits filed with Form 10-Q, including the Indenture for 6.50% Convertible Senior Notes, officer certifications, and XBRL data

Spectrum Pharmaceuticals, Inc. (SPPI) Q2 2022 Earnings Conference Call August 11, 2022 8:30 AM ET Company Participants Michael Grabow - SVP, Corporate Strategy and Operations Thomas J. Riga - President and CEO Francois J. Lebel - EVP and CMO Nora E. Brennan - EVP and CFO Conference Call Participants Unidentified Analyst - Jefferies Ed White - H.C. Wainwright Reni Benjamin - JMP Securities William Wood - B. Riley Securities Prakhar Agarwal - Cantor Fitzgerald Operator Good day and thank you for standing by. ...

Spectrum Pharmaceuticals, Inc. (SPPI) Q1 2022 Results Conference Call May 12, 2022 4:30 PM ET Company Participants Michael Grabow - Senior Vice President of Corporate Strategy and Operations Thomas Riga - President and CEO Francois Lebel - Chief Medical Officer Conference Call Participants Maury Raycroft - Jefferies Edward White - H.C. Wainwright Mayank Mamtani - B. Riley Securities Operator Thank you for standing by. And welcome to the Spectrum Pharmaceuticals First Quarter 2022 Earnings Conference Call. A ...

[PART I — FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, acquisitions, revenue recognition, and other financial details for the periods ended March 31, 2022, and December 31, 2021 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates **Condensed Consolidated Balance Sheets (in thousands):** | ASSETS / LIABILITIES AND SHAREHOLDERS' EQUITY | March 31, 2022 | December 31, 2021 | | :-------------------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $61,389 | $36,810 | | Total current assets | $125,115 | $103,498 | | Total assets | $339,135 | $326,547 | | Total current liabilities | $138,527 | $135,019 | | Total liabilities | $227,273 | $224,133 | | Total shareholders' equity | $111,862 | $102,414 | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table outlines the company's financial performance, including revenues, expenses, and net income over specified periods **Condensed Consolidated Statements of Comprehensive Income (in thousands, except per share data):** | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Total revenues | $36,538 | $26,839 | | Total costs and expenses | $24,979 | $19,332 | | Income from operations | $11,559 | $7,507 | | Net income and Comprehensive income | $9,064 | $4,544 | | Basic net income per share | $0.20 | $0.12 | | Diluted net income per share | $0.20 | $0.12 | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section details changes in the company's equity, including common stock issuance, stock-based compensation, and net income **Changes in Shareholders' Equity (in thousands):** | Item | Balances at Dec 31, 2021 | Issuance of common stock (RSUs) | Stock-based compensation | Net income | Balances at Mar 31, 2022 | | :------------------------------------------------------------------------------------------------ | :----------------------- | :------------------------------ | :----------------------- | :--------- | :----------------------- | | Common Shares | 44,640 | 307 | — | — | 45,335 | | Additional Paid-In Capital | $531,636 | $(598) | $982 | — | $532,020 | | Accumulated Earnings (Deficit) | $(429,226) | — | — | $9,064 | $(420,162) | | Shareholders' Equity | $102,414 | $(598) | $982 | $9,064 | $111,862 | - The company's common stock and per-share data have been retrospectively adjusted to reflect a **1-for-4 reverse stock split** effected on May 18, 2021[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods **Condensed Consolidated Statements of Cash Flows (in thousands):** | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income | $9,064 | $4,544 | | Net cash provided by (used in) operating activities | $27,426 | $(4,226) | | Net cash used in investing activities | $(404) | $— | | Net cash (used in) provided by financing activities | $(2,443) | $44,473 | | Net increase in cash and cash equivalents | $24,579 | $40,247 | | Cash and cash equivalents at end of period | $61,389 | $61,033 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations of the significant accounting policies, acquisitions, revenue recognition, and other financial disclosures [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and policies applied in preparing the condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with SEC interim reporting requirements, with certain U.S. GAAP footnotes condensed or omitted[18](index=18&type=chunk) - All common stock share and per-share data have been retrospectively adjusted to reflect a **1-for-4 reverse stock split** effected on May 18, 2021[20](index=20&type=chunk) - Product sales adjustments for previously divested products were reclassified from 'Product sales, net' to 'Other revenue' in Q3 2021, impacting prior period amounts for Q1 2021 by increasing Other revenue and decreasing Product sales by **$0.4 million**[21](index=21&type=chunk) - Fair value adjustments of contingent considerations were reclassified from 'Selling, general, and administrative expenses' to 'Fair value of contingent consideration' in Q1 2022, impacting prior period amounts for Q1 2021 by increasing SG&A and decreasing Fair value of contingent consideration by **$0.6 million**[22](index=22&type=chunk) - The COVID-19 pandemic led to a transformation of the company's commercial approach to a digital sales strategy and caused volatility in prescriptions associated with elective procedures[23](index=23&type=chunk)[24](index=24&type=chunk) [NOTE 2. ACQUISITIONS](index=8&type=section&id=NOTE%202.%20ACQUISITIONS) This note details the acquisition of Otrexup, including its purchase price allocation and accounting treatment - On December 15, 2021, Assertio acquired Otrexup from Antares Pharma, Inc. for a total purchase price of **$45.499 million**[25](index=25&type=chunk)[26](index=26&type=chunk) **Otrexup Acquisition Purchase Price (in thousands):** | Item | Amount | | :--------------------------------------- | :------- | | Cash paid to Antares at closing | $18,000 | | Deferred cash payment due in May and Dec 2022 | $26,021 | | Transaction costs | $1,478 | | Total purchase price of assets acquired | $45,499 | **Fair Value of Assets Acquired in Otrexup Acquisition (in thousands):** | Asset | Fair Value | | :------------------------------------- | :--------- | | Inventories | $1,413 | | Intangible assets (Otrexup product rights) | $44,086 | | Total assets acquired | $45,499 | - The acquisition was accounted for as an asset acquisition, with Otrexup product rights amortized over an **8-year period**[26](index=26&type=chunk)[28](index=28&type=chunk) [NOTE 3. REVENUE](index=8&type=section&id=NOTE%203.%20REVENUE) This note provides a breakdown of total revenues by type and product, highlighting changes and key drivers **Total Revenues (in thousands):** | Revenue Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Product sales, net | $35,546 | $26,027 | | Royalties and milestone revenue | $992 | $434 | | Other revenue | $— | $378 | | Total revenues | $36,538 | $26,839 | **Product Sales, Net by Product (in thousands):** | Product | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | INDOCIN products | $21,357 | $14,597 | | CAMBIA | $5,473 | $6,462 | | Otrexup | $3,078 | $— | | Zipsor | $2,228 | $2,222 | | SPRIX | $1,766 | $1,697 | | Other products | $1,644 | $1,049 | - The company began recognizing product sales for Otrexup in **January 2022** after its acquisition in December 2021[30](index=30&type=chunk) - Royalties from CAMBIA in Canada were **$0.5 million** in Q1 2022, up from **$0.4 million** in Q1 2021, with milestone revenue of **$0.5 million** recognized in Q1 2022[31](index=31&type=chunk)[32](index=32&type=chunk) - Other revenue, primarily from sales adjustments for previously divested products (Gralise, Nucynta, Lazanda), was **$0** in Q1 2022 compared to **$0.4 million** in Q1 2021[33](index=33&type=chunk) [NOTE 4. ACCOUNTS RECEIVABLES, NET](index=9&type=section&id=NOTE%204.%20ACCOUNTS%20RECEIVABLES,%20NET) This note presents the composition of accounts receivables, net, and related allowances at specific reporting dates **Accounts Receivables, Net (in thousands):** | Item | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | Receivables related to product sales, net | $47,112 | $43,753 | | Other | $1,811 | $608 | | Total accounts receivable, net | $48,923 | $44,361 | - Allowances for cash discounts for prompt payment remained at **$0.9 million** for both periods[36](index=36&type=chunk) [NOTE 5. INVENTORIES, NET](index=10&type=section&id=NOTE%205.%20INVENTORIES,%20NET) This note details the components of inventories, net, including raw materials, work-in-process, and finished goods **Inventories, Net (in thousands):** | Component | March 31, 2022 | December 31, 2021 | | :---------------- | :------------- | :---------------- | | Raw materials | $1,358 | $1,242 | | Work-in-process | $1,176 | $823 | | Finished goods | $6,946 | $5,424 | | Total | $9,480 | $7,489 | - Inventory reserves were **$3.7 million** for both March 31, 2022, and December 31, 2021[38](index=38&type=chunk) [NOTE 6. PROPERTY AND EQUIPMENT, NET](index=10&type=section&id=NOTE%206.%20PROPERTY%20AND%20EQUIPMENT,%20NET) This note provides a breakdown of property and equipment, net, and associated depreciation expenses **Property and Equipment, Net (in thousands):** | Item | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | Furniture and office equipment | $2,733 | $2,733 | | Laboratory equipment | $20 | $20 | | Leasehold improvements | $9,787 | $10,523 | | Total gross | $12,540 | $13,276 | | Less: Accumulated depreciation | $(11,211) | $(11,749) | | Property and equipment, net | $1,329 | $1,527 | - Depreciation expense decreased to **$0.2 million** in Q1 2022 from **$0.3 million** in Q1 2021[40](index=40&type=chunk) [NOTE 7. INTANGIBLE ASSETS](index=10&type=section&id=NOTE%207.%20INTANGIBLE%20ASSETS) This note details the company's intangible assets, their remaining useful lives, and amortization expenses **Intangible Assets, Net (in thousands):** | Product Rights | Remaining Useful Life (Years) | Gross Carrying Amount (Mar 31, 2022) | Accumulated Amortization (Mar 31, 2022) | Net Book Value (Mar 31, 2022) | Net Book Value (Dec 31, 2021) | | :------------- | :---------------------------- | :----------------------------------- | :-------------------------------------- | :---------------------------- | :---------------------------- | | INDOCIN | 10.1 | $154,100 | $(23,864) | $130,236 | $133,446 | | Otrexup | 7.7 | $44,086 | $(1,377) | $42,709 | $44,086 | | SPRIX | 5.1 | $39,000 | $(10,354) | $28,646 | $30,040 | | CAMBIA | 0.8 | $51,360 | $(45,397) | $5,963 | $7,950 | | Zipsor | 0.0 | $27,250 | $(27,250) | $— | $532 | | Oxaydo | 0.0 | $300 | $(300) | $— | $— | | Total | | $316,096 | $(108,542) | $207,554 | $216,054 | - Amortization expense increased to **$8.5 million** in Q1 2022 from **$6.5 million** in Q1 2021, primarily due to the acquired Otrexup product rights[44](index=44&type=chunk)[128](index=128&type=chunk) **Estimated Future Amortization Expense (in thousands):** | Year Ending December 31, | Estimated Amortization Expense | | :----------------------- | :----------------------------- | | 2022 (remainder) | $23,906 | | 2023 | $23,924 | | 2024 | $23,924 | | 2025 | $23,924 | | 2026 | $23,924 | | Thereafter | $87,952 | | Total | $207,554 | [NOTE 8. OTHER LONG-TERM ASSETS](index=11&type=section&id=NOTE%208.%20OTHER%20LONG-TERM%20ASSETS) This note outlines the composition of other long-term assets, including investments and operating lease right-of-use assets **Other Long-Term Assets (in thousands):** | Item | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | Investment, net | $1,579 | $1,579 | | Operating lease right-of-use assets | $586 | $735 | | Prepaid asset and deposits | $2,275 | $2,456 | | Other | $697 | $698 | | Total other long-term assets | $5,137 | $5,468 | - The company has an investment in NES Therapeutic, Inc. (NES Note) for **$3.0 million**, accruing **10% annual interest**, with an estimated **$1.9 million** expected credit loss[47](index=47&type=chunk) [NOTE 9. ACCRUED LIABILITIES](index=11&type=section&id=NOTE%209.%20ACCRUED%20LIABILITIES) This note provides a breakdown of accrued liabilities, including compensation, restructuring costs, and interest payable **Accrued Liabilities (in thousands):** | Item | March 31, 2022 | December 31, 2021 | | :---------------------------- | :------------- | :---------------- | | Accrued compensation | $1,985 | $4,122 | | Accrued restructuring costs | $488 | $828 | | Other accrued liabilities | $8,641 | $8,062 | | Interest payable | $3,986 | $1,687 | | Income tax payable | $286 | $— | | Total accrued liabilities | $15,386 | $14,699 | [NOTE 10. DEBT](index=11&type=section&id=NOTE%2010.%20DEBT) This note details the company's debt obligations, including senior secured notes and royalty rights, and related interest expenses **Company's Debt (in thousands):** | Item | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | 13% Senior Secured Notes due 2024 | $70,750 | $70,750 | | Royalty rights obligation | $2,771 | $2,743 | | Total principal amount | $73,521 | $73,493 | | Less: current portion of long-term debt | $(12,271) | $(12,174) | | Net, long-term debt | $61,250 | $61,319 | - The **13% Senior Secured Notes due 2024**, assumed from the Zyla Merger, have a principal amount of **$95.0 million**, accrue interest semi-annually at **13% per annum**, and require semi-annual principal payments of **10% per annum**[52](index=52&type=chunk)[53](index=53&type=chunk) - The company was in compliance with its debt covenants as of March 31, 2022, including maintaining a minimum consolidated liquidity[55](index=55&type=chunk) - A Royalty Rights Obligation, assumed from the Zyla Merger, requires a **1.5% royalty** on Net Sales through December 31, 2022, and is accounted for as a debt instrument[57](index=57&type=chunk)[58](index=58&type=chunk) **Interest Expense (in thousands):** | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Stated coupon interest | $2,299 | $2,614 | | Amortization of debt discount and royalty rights | $28 | $70 | | Total interest expense | $2,327 | $2,684 | [NOTE 11. STOCK-BASED COMPENSATION](index=13&type=section&id=NOTE%2011.%20STOCK-BASED%20COMPENSATION) This note outlines the stock-based compensation expenses recognized and the details of RSU grants - Stock-based compensation recognized in Selling, general, and administrative expenses was **$1.0 million** in Q1 2022, up from **$0.8 million** in Q1 2021[60](index=60&type=chunk) - During Q1 2022, the company granted **0.1 million RSUs** at an average fair market value of **$2.59 per share**[60](index=60&type=chunk) [NOTE 12. LEASES](index=13&type=section&id=NOTE%2012.%20LEASES) This note describes the company's operating lease commitments, associated costs, and balance sheet impacts - The company has non-cancelable operating leases for offices and equipment, with the Lake Forest lease renewable for **five years** and the Newark lease terminating in **November 2022**[61](index=61&type=chunk)[62](index=62&type=chunk) - A gain of **$0.6 million** was recognized in Q1 2022 from the early termination and settlement of a Newark facility sublease[62](index=62&type=chunk) **Lease Expense and Income (in thousands):** | Item | Financial Statement Classification | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------- | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Operating lease cost | Selling, general and administrative expenses | $40 | $111 | | Operating lease cost | Other gain | $148 | $148 | | Total lease cost | | $188 | $259 | | Sublease Income | Other gain | $775 | $347 | **Supplemental Balance Sheet Information Related to Leases (in thousands):** | Liabilities | Financial Statement Classification | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :--------------------------------- | :------------- | :---------------- | | Current operating lease liabilities | Other current liabilities | $1,487 | $1,978 | | Noncurrent operating lease liabilities | Other long-term liabilities | $303 | $397 | | Total lease liabilities | | $1,790 | $2,375 | [NOTE 13. COMMITMENTS AND CONTINGENCIES](index=14&type=section&id=NOTE%2013.%20COMMITMENTS%20AND%20CONTINGENCIES) This note details the company's contractual commitments, legal proceedings, and contingent liabilities - The company has supply agreements with Jubilant HollisterStier (SPRIX, **$0.4 million** commitment through July 2022), Cosette Pharmaceuticals (INDOCIN Suppositories, **$6.3 million annually** through July 2028), and Antares (Otrexup, **$2.0 million annually** through December 2031)[68](index=68&type=chunk)[69](index=69&type=chunk)[71](index=71&type=chunk) - Legal contingency accrual was approximately **$4.2 million** as of March 31, 2022, up from **$3.4 million** as of December 31, 2021[72](index=72&type=chunk) - In the Glumetza Antitrust Litigation, the company settled with Retailer Plaintiffs for **$3.15 million** and direct purchaser class plaintiffs for **$3.85 million**, with Humana and HCSC lawsuits ongoing[74](index=74&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - The federal securities class action lawsuit (Huang v. Depomed et al.) was preliminarily approved for settlement on March 21, 2022, with a final hearing scheduled for July 28, 2022, and related shareholder derivative actions were settled and approved in Q4 2021[78](index=78&type=chunk)[79](index=79&type=chunk) - Assertio Therapeutics is cooperating with ongoing opioid-related investigations and subpoenas from the DOJ, state attorneys general, and other governmental authorities regarding historical sales and marketing of opioid products[80](index=80&type=chunk)[81](index=81&type=chunk) - The company is involved in Multidistrict Opioid Litigation and State Opioid Litigation, defending itself vigorously against claims related to manufacturing, distributing, marketing, and promoting opioid drugs[82](index=82&type=chunk)[83](index=83&type=chunk) - In insurance litigation, Assertio Therapeutics settled a declaratory judgment action with Navigators in Q1 2021 and received **$5.0 million** in insurance reimbursement, with ongoing litigation with Lloyd's of London Newline Syndicate 1218 and its former insurance broker, Woodruff-Sawyer & Co[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [NOTE 14. RESTRUCTURING CHARGES](index=18&type=section&id=NOTE%2014.%20RESTRUCTURING%20CHARGES) This note reports on restructuring charges incurred, primarily related to workforce reductions - No restructuring charges were incurred in Q1 2022, compared to **$1.1 million** in Q1 2021, as the December 2020 Plan for workforce reduction was substantially completed in Q1 2021[89](index=89&type=chunk)[90](index=90&type=chunk) **Restructuring Costs (in thousands):** | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Employee compensation costs | $— | $876 | | Other exit costs | $— | $213 | | Total restructuring costs | $— | $1,089 | [NOTE 15. SHAREHOLDERS EQUITY](index=19&type=section&id=NOTE%2015.%20SHAREHOLDERS%20EQUITY) This note describes changes in shareholders' equity, including equity offerings and warrant exercises - In February 2021, the company completed two registered direct offerings, raising approximately **$14.0 million** and **$34.3 million** in gross proceeds, with net proceeds of **$13.1 million** and **$32.2 million**, respectively, for general corporate purposes[92](index=92&type=chunk) - During Q1 2022, **0.4 million warrants** were exercised, resulting in the issuance of **0.4 million common shares**, with no outstanding warrants remaining as of March 31, 2022[93](index=93&type=chunk)[94](index=94&type=chunk) [NOTE 16. NET INCOME PER SHARE](index=19&type=section&id=NOTE%2016.%20NET%20INCOME%20PER%20SHARE) This note provides the calculation of basic and diluted net income per share, including the impact of dilutive securities **Basic and Diluted Net Income Per Share (in thousands, except per share amounts):** | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $9,064 | $4,544 | | Weighted average common shares and warrants outstanding (Basic) | 45,204 | 37,824 | | Basic net income per share | $0.20 | $0.12 | | Weighted average common shares and share equivalents outstanding (Diluted) | 45,204 | 37,824 | | Add: effect of dilutive stock options, awards, and equivalents | 923 | 656 | | Diluted net income per share | $0.20 | $0.12 | - Warrants are included in basic EPS calculation as they are exercisable at a nominal price, and the treasury-stock method is used for stock options and equivalents, and the if-converted method for convertible debt in diluted EPS[94](index=94&type=chunk)[95](index=95&type=chunk) [NOTE 17. FAIR VALUE](index=20&type=section&id=NOTE%2017.%20FAIR%20VALUE) This note details the fair value measurements of financial liabilities, particularly contingent consideration **Fair Value Hierarchy for Financial Liabilities (in thousands):** | Item | Financial Statement Classification | March 31, 2022 (Level 3) | December 31, 2021 (Level 3) | | :---------------------------------- | :---------------------------------------- | :----------------------- | :-------------------------- | | Short-term contingent consideration | Contingent consideration, current portion | $14,600 | $14,500 | | Long-term contingent consideration | Contingent consideration | $22,859 | $23,159 | | Total | | $37,459 | $37,659 | - Contingent consideration obligations, primarily for future royalties on INDOCIN Product net sales, are classified as **Level 3** due to unobservable inputs and valued using an option pricing model[100](index=100&type=chunk)[101](index=101&type=chunk) - The change in fair value of contingent consideration resulted in an expense of **$1.6 million** in Q1 2022, compared to a benefit of **$0.6 million** in Q1 2021[101](index=101&type=chunk)[103](index=103&type=chunk) [NOTE 18. INCOME TAXES](index=21&type=section&id=NOTE%2018.%20INCOME%20TAXES) This note explains the company's income tax expense, effective tax rate, and tax refunds received - The company recorded an income tax expense of **$0.7 million** in Q1 2022, representing an effective tax rate of **7.3%**, primarily due to the partial release of a valuation allowance[105](index=105&type=chunk)[106](index=106&type=chunk) - A tax refund of **$8.4 million** was received during Q1 2022 for the carryback of net operating losses under the CARES Act[107](index=107&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and results of operations, including forward-looking statements, an overview of the business, critical accounting policies, detailed analysis of revenues and expenses, and a discussion of liquidity and capital resources for the three months ended March 31, 2022 [FORWARD-LOOKING INFORMATION](index=22&type=section&id=FORWARD-LOOKING%20INFORMATION) This section highlights the inherent uncertainties in forward-looking statements and factors that could cause actual results to differ - The report contains forward-looking statements based on current expectations about future events, which may differ materially from actual results due to various factors[109](index=109&type=chunk) - Key factors that could cause actual results to differ include: * Commercial success and market acceptance of products * Ability to execute sales, marketing, and digital promotion strategies * Entry of generics or other competitive products * Ability to execute business development and strategic partnerships * Expected financial performance from Otrexup acquisition and integration challenges * Impacts of the COVID-19 pandemic on liquidity, capital resources, and operations * Supply chain maintenance and reliance on single-source suppliers * Outcome of opioid-related investigations and litigation, and related insurance claims * Ability to generate sufficient cash flow and manage indebtedness[109](index=109&type=chunk)[110](index=110&type=chunk) [COMPANY OVERVIEW](index=25&type=section&id=COMPANY%20OVERVIEW) This section provides an overview of the company's commercial pharmaceutical business, product portfolio, and strategic focus - Assertio Holdings, Inc. is a commercial pharmaceutical company focused on neurology, hospital, and pain and inflammation, with a portfolio built through existing products and acquisitions[113](index=113&type=chunk) - Primary marketed products include: * **INDOCIN® (indomethacin) Suppositories & Oral Suspension**: NSAID for rheumatoid arthritis, ankylosing spondylitis, osteoarthritis, acute painful shoulder, and acute gouty arthritis * **CAMBIA® (diclofenac potassium for oral solution)**: Prescription NSAID for acute treatment of migraine attacks * **Otrexup® (methotrexate) injection**: Once-weekly auto-injector for severe, active rheumatoid arthritis, polyarticular juvenile idiopathic arthritis, and severe, resistant psoriasis * **SPRIX® (ketorolac tromethamine) Nasal Spray**: Prescription NSAID for short-term management of moderate to moderately severe pain at the opioid level * **Zipsor® (diclofenac potassium) Liquid filled capsules**: Prescription NSAID for relief of mild-to-moderate pain[114](index=114&type=chunk) - The company acquired Otrexup in December 2021 for **$45.499 million**, including cash paid at closing and deferred payments[115](index=115&type=chunk) - COVID-19 led to a shift to a digital sales strategy and caused volatility in prescriptions for elective procedures, with potential ongoing impacts on liquidity and operations[116](index=116&type=chunk)[117](index=117&type=chunk) - The company manages its business within one reportable segment, with substantially all product sales revenues from the U.S[118](index=118&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=26&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section identifies the company's critical accounting policies, including revenue recognition and accrued liabilities - Critical accounting policies include revenue recognition, accrued liabilities, and the use of estimates, with no significant changes reported since the 2021 Form 10-K[119](index=119&type=chunk) [RESULTS OF OPERATIONS](index=26&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, detailing changes in revenues, costs, and expenses [Revenues](index=26&type=section&id=Revenues) This section analyzes the company's total revenues, breaking down product sales, royalties, and other revenue streams **Total Revenues (in thousands):** | Revenue Type | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Product sales, net | $35,546 | $26,027 | | Royalties and milestone revenue | $992 | $434 | | Other revenue | $— | $378 | | Total revenues | $36,538 | $26,839 | - Product Sales, Net: * **INDOCIN products**: Increased by **$6.8 million** to **$21.4 million** (YoY), primarily due to higher price, partially offset by lower volume and unfavorable payor mix * **CAMBIA**: Decreased by **$1.0 million** to **$5.5 million** (YoY), primarily due to lower volume, partially offset by favorable payor mix * **Otrexup**: Generated **$3.1 million** in sales in Q1 2022, as it was acquired in December 2021 * **Zipsor**: Unchanged at **$2.2 million** (YoY); generic versions are expected to enter the market in 2022 * **SPRIX**: Increased by **$0.1 million** to **$1.8 million** (YoY), primarily due to lower volume partially offset by favorable payor mix * **Other products**: Increased to **$1.6 million** from **$1.0 million** (YoY)[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - Royalties and milestone revenue increased to **$0.992 million** in Q1 2022 from **$0.434 million** in Q1 2021, including **$0.5 million** in Milestone revenue from service milestones[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Other revenue was **$0** in Q1 2022, down from **$0.4 million** in Q1 2021, as it consists of sales adjustments for previously divested products[121](index=121&type=chunk)[123](index=123&type=chunk) [Cost of Sales (excluding amortization of intangible assets)](index=27&type=section&id=Cost%20of%20Sales%20(excluding%20amortization%20of%20intangible%20assets)) This section discusses the cost of sales, excluding intangible asset amortization, and its drivers - Cost of sales increased by **$0.2 million** to **$4.2 million** in Q1 2022 (YoY), driven by higher net sales and inventory step-up amortization, partially offset by favorable product mix[124](index=124&type=chunk) - Inventory step-up amortization expense was **$0.4 million** in Q1 2022, up from **$0.2 million** in Q1 2021[124](index=124&type=chunk) [Selling, General and Administrative Expenses](index=27&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section analyzes changes in selling, general, and administrative expenses, including the impact of insurance reimbursements - Selling, general, and administrative expenses increased by **$2.3 million** to **$10.6 million** in Q1 2022 (YoY), primarily due to the non-recurrence of a **$5.0 million** insurance reimbursement received in Q1 2021, partially offset by lower expenses from prior restructuring plans[125](index=125&type=chunk) [Fair value of contingent consideration](index=27&type=section&id=Fair%20value%20of%20contingent%20consideration) This section explains the changes in the fair value of contingent consideration and its impact on expenses - Fair value of contingent consideration shifted from a **$0.6 million benefit** in Q1 2021 to a **$1.6 million expense** in Q1 2022, a **$2.2 million increase in expense**, due to remeasurement using an option pricing model based on estimated INDOCIN product revenues[126](index=126&type=chunk) [Intangible Assets](index=27&type=section&id=Intangible%20Assets) This section details the amortization of intangible assets, highlighting the impact of acquired product rights **Amortization of Intangible Assets (in thousands):** | Product | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | INDOCIN | $3,210 | $3,210 | | SPRIX | $1,394 | $1,393 | | CAMBIA | $1,988 | $1,284 | | Otrexup | $1,377 | $— | | Zipsor | $532 | $584 | | Oxaydo | $— | $76 | | Total | $8,501 | $6,547 | - Amortization expense increased by **$2.0 million** to **$8.5 million** in Q1 2022 (YoY), primarily due to the acquired Otrexup product rights[128](index=128&type=chunk) [Restructuring Charges](index=28&type=section&id=Restructuring%20Charges) This section reports on the company's restructuring charges, noting the completion of workforce reduction plans - Restructuring charges were **zero** in Q1 2022, down from **$1.1 million** in Q1 2021, following the substantial completion of the December 2020 Plan workforce reduction[129](index=129&type=chunk) [Other Expense](index=28&type=section&id=Other%20Expense) This section analyzes other expenses, including interest expense and gains from sublease terminations **Other Expense (in thousands):** | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | Interest expense | $(2,327) | $(2,684) | | Other gain | $545 | $269 | | Total other expense | $(1,782) | $(2,415) | - Total other expense decreased by **$0.6 million** to **$1.8 million** in Q1 2022 (YoY), primarily due to lower interest expense and a **$0.6 million gain** from the early termination and settlement of a Newark facility sublease[131](index=131&type=chunk) - Interest expense decreased by **$0.4 million** in Q1 2022 (YoY) due to principal payments on the 13% Senior Secured Notes[133](index=133&type=chunk) [Income Tax Provision](index=28&type=section&id=Income%20Tax%20Provision) This section discusses the company's income tax expense and effective tax rate, including the impact of valuation allowance releases - Income tax expense was **$0.7 million** in Q1 2022 (effective tax rate of **7.3%**) and **$0.5 million** in Q1 2021 (effective tax rate of **10.8%**), with the difference from the statutory rate primarily due to the partial release of valuation allowance[135](index=135&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=29&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's financial resources, cash flow activities, and ability to fund operations and debt obligations - The company finances operations through product sales, equity sales, secured borrowings, and license fees[136](index=136&type=chunk) - In February 2021, the company completed two registered direct offerings, generating net proceeds of approximately **$45.3 million** for general corporate purposes[137](index=137&type=chunk) - Management believes existing cash will be sufficient to fund operations and debt payments for the next twelve months[138](index=138&type=chunk) - Cash needs may vary due to factors such as: * Acquisitions or licenses of businesses/products * Sales of marketed products * Commercialization expenditures * Milestone and royalty revenue * Interest and principal payments on debt * Litigation expenses (e.g., opioid-related, Glumetza) * Effects of the COVID-19 pandemic[138](index=138&type=chunk) **Summarized Cash Flow Activities (in thousands):** | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $27,426 | $(4,226) | | Net cash used in investing activities | $(404) | $— | | Net cash (used in) provided by financing activities | $(2,443) | $44,473 | | Net increase in cash and cash equivalents | $24,579 | $40,247 | [Cash Flows from Operating Activities](index=30&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section analyzes cash generated or used by the company's primary business operations - Cash provided by operating activities significantly increased to **$27.4 million** in Q1 2022 from cash used of **$4.2 million** in Q1 2021, driven by higher net income and favorable working capital, including an **$8.4 million tax refund**[141](index=141&type=chunk) [Cash Flows from Investing Activities](index=30&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets - Cash used in investing activities was **$0.4 million** in Q1 2022, primarily for the purchase of Otrexup, with no activity in Q1 2021[142](index=142&type=chunk) [Cash Flows from Financing Activities](index=30&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section outlines cash flows from debt, equity, and dividend transactions - Cash used in financing activities was **$2.4 million** in Q1 2022, mainly for contingent consideration payments and employee withholding tax liability, contrasting with **$44.5 million** provided in Q1 2021 from registered direct offerings[143](index=143&type=chunk) [Off-Balance Sheet Arrangement](index=30&type=section&id=Off-Balance%20Sheet%20Arrangement) This section confirms the absence of off-balance sheet arrangements during the reporting period - There were no off-balance sheet arrangements during the quarter ended March 31, 2022[144](index=144&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=30&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that quantitative and qualitative disclosures about market risk are not applicable to the company for the reported period - This item is not applicable[145](index=145&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=30&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal controls over financial reporting [Evaluation of Disclosure Controls and Procedures](index=30&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2022[146](index=146&type=chunk) [Changes in Internal Controls over Financial Reporting](index=30&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) This section confirms whether any significant changes in internal controls over financial reporting occurred - There were no significant changes in internal controls over financial reporting during the three months ended March 31, 2022[148](index=148&type=chunk) [PART II — OTHER INFORMATION](index=31&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity security sales, and required exhibits [ITEM 1. LEGAL PROCEEDING](index=31&type=section&id=ITEM%201.%20LEGAL%20PROCEEDING) This section refers to the detailed discussion of material pending legal proceedings found in the Notes to the Condensed Consolidated Financial Statements - For a description of material pending legal proceedings, refer to Note 13. Commitments and Contingencies - Legal Matters in Part I, Item 1[149](index=149&type=chunk) [ITEM 1A. RISK FACTORS](index=31&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section states that there have been no material changes to the company's risk factors since its last annual report and directs readers to the 2021 Form 10-K for a comprehensive list - No material changes to risk factors have occurred since the Annual Report on Form 10-K for the year ended December 31, 2021[150](index=150&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=31&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports on the company's equity security transactions, specifically noting no common stock repurchases during the period, except for shares withheld to cover tax withholding obligations related to equity awards - The company did not repurchase any shares of common stock during the period, except for **315,912 shares** withheld to satisfy tax withholding obligations in connection with the vesting of equity awards[151](index=151&type=chunk)[152](index=152&type=chunk) **Shares Withheld for Tax Withholding Obligations (January 1, 2022 - March 31, 2022):** | Period | Total Number of Shares Withheld | Average Price Paid per Share | | :--------------------------- | :------------------------------ | :--------------------------- | | January 1, 2022 - January 31, 2022 | 2,827 | $2.18 | | February 1, 2022 - February 28, 2022 | 304,828 | $1.92 | | March 1, 2022 - March 31, 2022 | 8,257 | $0.74 | | Total | 315,912 | $1.89 | [ITEM 6. EXHIBITS](index=32&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including various certifications and XBRL-related documents - Exhibits include: * Certifications pursuant to Rule 13a-14(a) and 15d-14(a) under the Exchange Act (31.1, 31.2) * Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (32.1*, 32.2*) * Inline XBRL Instance Document and Taxonomy Extension Documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) * Cover Page Interactive Data File (104)[154](index=154&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) This section contains the required signatures of the company's authorized officers, affirming the submission of the report - The report is signed by Daniel A. Peisert (President and CEO), Paul Schwichtenberg (Senior VP and CFO), and Ajay Patel (Senior VP and Chief Accounting Officer) on May 9, 2022[155](index=155&type=chunk)