Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Form 10-K, including those set forth under “Forward-looking Statements” and “Risk Factors,” as revised and supplemented by those risks described from time to time in other reports which we file with the SEC.
Our discussion and analysis of our financial condition and results of operations for the year ended December 31, 2025 as compared to December 31, 2024 are discussed below. For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.
Overview
Our mission is to build a leading, diversified biopharmaceutical company committed to improving the lives of people living with serious medical conditions. We have developed, licensed, and acquired a portfolio of meaningfully differentiated products for use in the treatment of attention deficit hyperactivity disorder (“ADHD”) and moderate to severe pain. We commercialize our products, consisting of Jornay PM, Belbuca, Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), and Symproic, in the United States.
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Jornay PM is a central nervous system (“CNS”) stimulant prescription medicine that contains methylphenidate HCl, a Schedule II methylphenidate, which was approved by the U.S. Food and Drug Administration (“FDA”) in August 2018 for the treatment of ADHD in people six years of age and older and currently the only FDA-approved stimulant medication that is dosed in the evening. We began recognizing product revenue related to Jornay PM in September 2024 following our acquisition of Ironshore Therapeutics Inc. (“Ironshore”) (the “Ironshore Acquisition”).
Belbuca is a buccal film that contains buprenorphine, a Schedule III opioid, and was approved by the FDA in October 2015 for severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative options are inadequate. We began shipping and recognizing product revenue related to Belbuca in March 2022 following our acquisition of BioDelivery Sciences International, Inc. (“BDSI”).
Xtampza ER, an abuse-deterrent, extended-release, oral formulation of oxycodone, is a Schedule II opioid and was approved by the FDA in April 2016 for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic and for which alternative treatment options are inadequate. We commercially launched Xtampza ER in June 2016.
The Nucynta Products are extended-release (“ER”) and immediate-release (“IR”) oral formulations of tapentadol, a Schedule II opioid. In November 2008, the FDA approved Nucynta ER and Nucynta IR. Nucynta ER is indicated for the management of severe and persistent pain that requires an extended treatment period with a daily opioid analgesic, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate treatment options are inadequate. Nucynta IR is indicated for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate in adults and pediatric patients aged 6 years and older with a body weight of at least 40 kg. We began shipping and recognizing product revenue on the Nucynta Products in January 2018 and began marketing the Nucynta Products in February 2018. In August 2023, the FDA granted New Patient Population exclusivity for Nucynta IR in pediatric patients. This grant extended the period of U.S. exclusivity for Nucynta IR from June 27, 2025 to July 3, 2026. In June 2024, the FDA granted pediatric exclusivity to the Nucynta Products for an additional six months, to January 3, 2027 for Nucynta IR and December 27, 2025 for Nucynta ER.
We have entered into an authorized generic agreement with Hikma Pharmaceuticals USA Inc. (“Hikma”), pursuant to which we granted Hikma rights relating to an authorized generic version of the Nucynta Products in the United States. In January 2026, a generic equivalent of Nucynta IR 50mg, 75mg and 100mg tablets was approved under an abbreviated New Drug Application (“ANDA”) filed by a third party with the FDA, which carves out pediatric use from its label.As a result of the anticipated launch of the third-party generic equivalent of Nucynta IR, Hikma launched a generic version of Nucynta IR on February 25, 2026. Hikma is expected to launch a generic version of Nucynta ER in the first quarter of 2026.
Symproic, an oral formulation of naldemedine, was approved by the FDA in March 2017 for the treatment of opioid-induced constipation (“OIC”) in adult patients with chronic non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent (e.g., weekly) opioid dosage escalation. We began shipping and recognizing product revenue related to Symproic in March 2022 following our acquisition of BDSI.
Financial Operations Overview
Product Revenues
Product revenues through the year ended December 31, 2025 were generated from sales of Jornay PM, Belbuca, Xtampza ER, the Nucynta Products, and Symproic. In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, (“ASC 606”) product sales are recorded upon delivery of products to customers (upon the transfer of control of the product to the customer), net of a provision for estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns.
Cost of Product Revenues
Cost of product revenues include amortization and impairment expense for the intangible assets acquired in connection with business combinations and asset acquisitions, royalty expenses, the cost of active pharmaceutical ingredient, the cost of producing finished goods that correspond with revenue for the reporting period, as well as certain period costs related to freight, packaging, stability and quality testing. Refer to Note 5, License Agreements, and Note 11, Goodwill andIntangible Assets, for further detail around the intangible assets acquired from the Ironshore Acquisition, the BDSI Acquisition, the Nucynta Intangible Asset, and royalty expenses.
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Research and Development Expenses
Research and development expenses have historically consisted of product development expenses incurred in identifying, developing, and testing product candidates including stock-based compensation; costs associated with conducting our clinical and non-clinical activities, including clinical and non-clinical trials that we conduct for post-marketing requirements; and costs for laboratory supplies, depreciation of lab equipment, and other expenses including allocated expenses for rent and maintenance of facilities. These costs have historically been expensed as incurred.
As of April 1, 2022, we focused entirely on commercial products rather than research and development and redirected resources from research and development activities. As such, there were no expenses incurred in research and development after the three months ended March 31, 2022.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation and travel expenses for our employees. Other selling, general and administrative expenses include expenses related to commercial activities, such as sales, marketing, and market access, facility-related costs, professional fees for directors, accounting and legal services, and expenses associated with obtaining and maintaining patents. As we continue to invest in the commercialization of our products, we expect our selling, general and administrative expenses to continue to be substantial for the foreseeable future.
Interest Expense
Interest expense consists primarily of cash and non-cash interest costs related to our debt, including term loans, delayed draw term loans, a revolving credit facility, and convertible notes. Our term loans consist of the term loan issued in December 2025 (the “2025 Term Loan”), which was issued along with a delayed draw term loan and revolving credit facility (collectively, the “2025 Credit Facility”), as well as the term loan issued in July 2024 in connection with the Ironshore Acquisition (the “2024 Term Loan”) and the term loan issued in March 2022 in connection with the BDSI Acquisition (the “2022 Term Loan”). Our convertible notes consist of the convertible notes issued in February 2023 (the “2029 Convertible Notes”) and the convertible notes issued in February 2020 in connection with the Nucynta Acquisition (the “2026 Convertible Notes”).
Interest Income
Interest income consists of interest and amortization of premiums and discounts on investments earned on our cash, cash equivalents, and marketable securities.
Provision for Income Taxes
The provision for income taxes reflects expense or tax benefit for federal and state income taxes, as well as the impact of non-deductible expenses.
Critical Accounting Policies and Estimates
Our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. Estimates include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of our products, estimates related to the fair value of assets acquired and liabilities assumed in business combinations, including acquired intangible assets and the fair value of inventory acquired, estimates utilized in the ongoing valuation of inventory related to potential unsalable product, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, impairment of goodwill and intangible assets, and deferred tax valuation allowances. We base our estimates and assumptions on historical experience when available and on various factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.
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We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results. While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements appearing elsewhere in this Form 10-K, we believe the following accounting policies to be most critical to the significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
Our accounting policy for revenue recognition will have a substantial impact on reported results and relies on certain estimates. Estimates are based on historical experience, current conditions and various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amounts of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions.
Product Revenue
Our only source of revenue to date has been generated by sales of our products, which are primarily sold to distributors (“customers”), which in turn sell the product to pharmacies and others for the treatment of patients. Revenue for product sales is recognized 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. This generally occurs upon delivery to our customers when estimated provisions for chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns are reasonably determinable. Therefore, product sales are recorded upon delivery to our customers net of estimated rebates and incentives, product returns, and trade allowances and chargebacks.
Sales Deductions
Sales deductions consist primarily of provisions for: (i) rebates and incentives, including managed care rebates, government rebates, co-pay program incentives, and sales incentives and allowances; (ii) product returns, including return estimates for our products; and (iii) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and chargebacks. We estimate the amount of variable consideration that should be included in revenue 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 our best estimates of the amount of revenue to which we are entitled based on the terms of our contracts.
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 our rebates and incentives are based on products dispensed to patients, we are 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. Our 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, we may need to adjust these estimates, which could have an effect on earnings in the period of the adjustment.
Provisions for product returns, including returns for Jornay PM, Belbuca, Xtampza ER, the Nucynta Products, and Symproic, are based on product-level returns rates, including processed as well as unprocessed return claims, in addition to relevant market events and other factors. Estimates of the future product returns are made at the time of revenue recognition to determine the amount of consideration to which we expect to be entitled (that is, excluding the products expected to be returned). At the end of each reporting period, we analyze trends in returns rates and update our assessment of variable consideration for returns. To the extent we receive amounts in excess of what we expect to be entitled to receive due to a product return, we do not recognize revenue when we transfer products to customers but instead recognize those excess amounts received as a refund liability. We update the measurement of the refund liability at the end of each reporting period for changes in expectations about the amount of refunds with the corresponding adjustments recognized as revenue (or reductions of revenue).
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We provide the right of return to our customers for an 18-month window beginning six months prior to expiration and up until twelve months after expiration. Our customers short-pay an existing invoice upon notice of a product return claim. Adjustments to the preliminary short-paid claims are processed when the return claim is validated and finalized. Our return policy requires that product is returned and that the return is claimed within the 18-month window. Refer to Note 3, Revenue from Contracts with Customers, for more information.
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. Actual results may differ from these estimates under different assumptions or conditions.
Business Combination Accounting and Valuation of Acquired Assets
We completed the Ironshore Acquisition in September 2024, which was accounted for as a business combination. To determine whether the acquisition should be accounted for as a business combination or as an asset acquisition, we make judgments regarding whether the acquired set of activities and assets met the definition of a business. Judgment is required in assessing whether the acquired processes or activities, along with their inputs, would be substantive to constitute a business, as defined by U.S. GAAP.
The acquisition method of accounting requires that we recognize the assets acquired and liabilities assumed at their acquisition date fair values. Goodwill is measured as the excess of consideration transferred over the acquisition date net fair values of the assets acquired and the liabilities assumed. The determination of the fair value of the acquired assets and liabilities assumed is a critical accounting estimate because the estimation of fair values requires significant management judgment and requires various assumptions based on non-observable inputs that are included in valuation models. An income approach, which generally relies upon projected cash flow models, is used in estimating the fair value of the acquired intangible assets and the deferred royalty obligation. The fair value of acquired inventory is based on inventory cost and other assumptions. The cash flow projections are based on management’s estimates of economic and market conditions including the estimated future cash flows from revenues of acquired assets, the timing and projection of costs and expenses and the related profit margins, tax rates, and an appropriate discount rate.
During the measurement period, which occurs before finalization of the purchase price allocation, changes in assumptions and estimates that result in adjustments to the fair values of assets acquired and liabilities assumed, if based on facts and circumstances existing at the acquisition date, are recorded on a retroactive basis as of the acquisition date, with the corresponding offset to goodwill. Any adjustments not based on facts and circumstances existing at the acquisition date, or if subsequent to the conclusion of the measurement period, will be recorded to our consolidated statements of operations.
Income Taxes
We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse.
We provide a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In determining the extent to which a valuation allowance for deferred tax assets is required, we evaluate all available evidence including projections of future taxable income, carryback opportunities, reversal of certain deferred tax liabilities, and other tax planning strategies, all of which are subject to uncertainty. Certain deferred tax assets, such as net operating losses and tax credits, expire at varying dates and are generally subject to annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended (“IRC 382”). Significant judgment is required in making these evaluations, including comparing future annual income projections to the expiration dates and annual limitations of such assets. To the extent our future expectations change, we would have to assess the recoverability of these deferred tax assets at that time.
We have maintained a valuation allowance on the portion of our deferred tax assets that are not more likely than not to be realized due to tax limitation or other conditions of $5.3 million as of December 31, 2025.
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Results of Operations
In this section, we discuss the results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Comparison of the Years Ended December 31, 2025 and 2024
The following table summarizes the results of our operations for the years ended December 31, 2025 and 2024:
Years Ended December 31,
(in thousands)
Cost of product revenues
Cost of product revenues (excluding intangible asset amortization) 95,418 88,801
Operating expenses
Gain on fair value remeasurement of contingent consideration (1,182) (2,914)
Product revenues, net
Product revenues, net were $780.6 million for the year ended December 31, 2025 (“2025”), compared to $631.4 million for the year ended December 31, 2024 (“2024”), representing a $149.2 million increase. The $149.2 million increase was primarily due to increases in revenue for Jornay PM of $111.7 million, the Nucynta Products of $19.8 million, Belbuca of $10.4 million, and Xtampza ER of $8.0 million, partially offset by decreases in revenue for Symproic and other of $0.7 million.
The increase in revenue for Jornay PM of $111.7 million was due to 2025 including a full year of product revenues compared to a partial year in 2024 as the product was acquired from the Ironshore Acquisition in September 2024.
The increase in revenue for the Nucynta Products of $19.8 million was primarily due to lower gross-to-net adjustments related to provisions for rebates and higher gross price, partially offset by lower sales volume.
The increase in revenue for Belbuca of $10.4 million was primarily due to lower gross-to-net adjustments related to provisions for rebates and higher gross price, partially offset by higher gross-to-net adjustments related to provisions for chargebacks and lower sales volume.
The increase in revenue for Xtampza ER of $8.0 million was primarily due to lower gross-to-net adjustments related to provisions for rebates, including the recognition of $3.2 million related to certain rebate settlements during 2025. In addition, revenue increased due to higher gross price partially offset by lower sales volume.
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Cost of product revenues
Cost of product revenues (excluding intangible asset amortization) was $95.4 million for 2025, compared to $88.8 million for 2024. The $6.6 million increase was primarily due to 2025 including a full year of cost of product revenues for Jornay PM compared to a partial year in 2024 as the product was acquired from the Ironshore Acquisition in September 2024. In addition, cost of product revenues increased due to 2025 including $3.1 million of royalty expense related to the Company’s license agreement with Grünenthal that is subject to future recovery, partially offset by lower current period royalty expense.
Intangible asset amortization was $221.9 million for 2025, compared to $165.3 million for 2024. The $56.6 million increase in intangible asset amortization was primarily related to 2025 including a full year of amortization from the intangible asset acquired in the Ironshore Acquisition in September 2024.
Operating expenses
Selling, general and administrative expenses were $284.8 million for 2025, compared to $210.4 million for 2024. The $74.4 million increase was primarily related to:
•an increase in salaries, wages and benefits of $49.4 million primarily due to additional headcount added in 2025 as a result of the Ironshore Acquisition, including the expansion of the sales force that promotes Jornay PM in 2025, as well as expenses incurred as a result of certain executive transitions announced in 2025, including stock-based compensation expense of $2.6 million related to accelerated equity awards and severance, benefits, and related expenses incurred of $1.4 million;
•an increase in sales and marketing expenses of $37.6 million, primarily due to expenses incurred to support Jornay PM following the Ironshore Acquisition in September 2024; and
•an increase in audit and legal expenses of $4.9 million primarily due to expenses related to litigation; partially offset by:
•a decrease in acquisition related expenses of $20.1 million, as 2024 included transaction costs and other expenses incurred shortly after the Ironshore Acquisition that did not recur at the same level in 2025.
Gain on fair value remeasurement of contingent consideration was $1.2 million for 2025, compared to $2.9 million for 2024. The $1.7 million decrease was due to the revaluation of the contingent consideration associated with the Ironshore Acquisition and reflects the liability being reduced to zero in 2025 after the related milestone was not achieved.
Interest expense and Interest income
Interest expense was $82.3 million for 2025, compared to $74.0 million for 2024. The $8.3 million increase was primarily due to higher interest expense of $8.8 million related to the deferred royalty obligation that was assumed as part of the Ironshore Acquisition in September 2024. Interest expense from term loans was materially consistent in 2025 compared to 2024 due to the refinancing of our term loans in the third quarter of 2024 and the fourth quarter of 2025, which resulted in a lower interest rate offset by a higher principal balance.
Interest income was $11.3 million for 2025, compared to $14.0 million for 2024. The $2.7 million decrease was primarily due to lower interest rates earned on cash equivalents and marketable securities in 2025 compared to 2024.
Loss on extinguishment of debt
Loss on extinguishment of debt was $16.0 million for 2025, compared to $11.3 million for 2024. The $4.7 million increase was due to 2025 including a $16.0 million loss on extinguishment resulting from the repayment of the 2024 Term Loan. In 2024, the remaining $26.4 million of the 2026 Convertible Notes were redeemed, resulting in a $7.2 million loss on extinguishment. In addition, in 2024, assumed debt from the Ironshore Acquisition was extinguished, resulting in a loss on extinguishment of $4.1 million.
Income Taxes
The provision for income taxes was $29.7 million for 2025, compared to $29.4 million for 2024. The $0.3 million increase was primarily due to higher nondeductible items in 2025 compared to 2024, including the impact of nondeductible officer compensation, stock compensation, and provision-to-return adjustments, partially offset by lower earnings before taxes. The effective tax rate was 32.1% and 29.8% for 2025 and 2024, respectively.
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Liquidity and Capital Resources
Sources of Liquidity
Historically, we have funded our operations primarily through public offerings of our common stock, private placements of term debt; convertible notes; and cash inflows from sales of our products. We are primarily dependent on the commercial success of Jornay PM, Belbuca, Xtampza ER, and the Nucynta Products.
In December 2025, we entered into the 2025 Credit Agreement, which consists of the $580.0 million 2025 Term Loan, a $300.0 million of delayed draw term loan commitments, and a $100.0 million revolving credit facility, which is fully available as of December 31, 2025. The 2025 Term Loan was used to repay in full the remaining outstanding obligations under the 2024 Term Loan and to pay fees and expenses relating to the entry into the 2025 Credit Agreement and the remainder for general corporate purposes.
As of December 31, 2025, the outstanding principal balance of the 2025 Term Loan was $580.0 million, of which $29.0 million in principal payments are due within the next 12 months. As of December 31, 2025, the outstanding principal balance of the 2029 Convertible Notes was $241.5 million. As of December 31, 2025, and December 31, 2024, we had $231.3 million and $70.6 million in cash and cash equivalents, respectively.
We believe that our cash, cash equivalents, and marketable securities as of December 31, 2025, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future.
Borrowing Arrangements and Equity Offerings
Our material borrowing arrangements and equity offerings are the 2025 Credit Facility and the 2029 Convertible Notes. Refer to Note 14, Debt, for more information.
Cash flows
In this section, we discuss cash flows for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Years Ended December 31,
(in thousands)
Net cash provided by operating activities $ 329,323 $ 204,980
Net cash used in investing activities (63,532) (287,759)
Net cash used in financing activities (110,245) (60,603)
Operating activities. Cash provided by operating activities was $329.3 million in 2025, compared to $205.0 million in 2024. The $124.3 million increase in cash provided by operating activities was primarily due to the increase in cash flow from operating results after adjustment for non-cash items that are included in net income as well as due to changes in working capital, which were significantly impacted by the payment of assumed liabilities from Ironshore in 2024.
Investing activities. Cash used in investing activities was $63.5 million in 2025, compared to $287.8 million in 2024. The $224.3 milliondecrease in cash used in investing activities was primarily due 2024 including $267.5 million of cash used to acquire Ironshore (net of cash acquired), partially offset by a $43.2 million increase in cash used in investing in marketable securities.
Financing activities. Cash used in financing activities was $110.2 million in 2025, compared to $60.6 million in 2024. The $49.6 million increase in cash used in financing activities was primarily due to:
•an increase in cash used for repayments of term loans of $527.7 million; and
•an increase in deferred purchase price payments related to the Ironshore Acquisition of $7.6 million; partially offset by:
•an increase in cash provided by term note financings of $252.0 million;
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•2024 including the repayment of assumed debt from the Ironshore Acquisition of $164.6 million, which did not recur in 2025;
•a decrease in cash used to repurchase common stock of $34.9 million; and
•2024 including the redemption of $33.2 million of the remaining 2026 Convertible Notes, which did not recur in 2025.
Funding requirements
We believe that our cash, cash equivalents, and marketable securities as of December 31, 2025, together with expected cash inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements under our current business plan for the foreseeable future. However, we are subject to all the risks common to the commercialization and development of new pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.
We have significant future capital requirements, including:
•expected operating expenses to manufacture and commercialize our products and to operate our organization;
•repayment of outstanding principal amounts and interest in connection with our 2025 Term Loan and 2029 Convertible Notes;
•royalties we pay on sales of certain products within our portfolio;
•payment of income taxes;
•deferred royalty obligation in connection with Jornay PM;
•operating lease obligations;
•minimum purchase obligations in connection with our contract manufacturer; and
•contingent payment upon the achievement of a financial milestone based on net revenues of Jornay PM.
In addition, we have significant potential future capital requirements, including:
•we may enter into business development transactions, including acquisitions, collaborations, licensing arrangements and equity investments, that require additional capital;
•any judgments rendered against us in connection with any of the litigation matters set forth in Note 13, Commitments and Contingencies, to our financial statements; and
•in July 2025, our Board of Directors authorized a new share repurchase program for the repurchase of up to $150.0 million of shares of our common stock through December 31, 2026. As of December 31, 2025, $150.0 million remained available for share repurchases under the 2025-2026 Repurchase Program. Future share repurchases will depend upon, among other factors, our cash balances and potential future capital requirements, our results of operations and financial conditions, the price of our common stock on the Nasdaq Global Select Market, and other factors that we may deem relevant.
Contractual Obligations
Our contractual obligations as of December 31, 2025 that will affect our future liquidity include our term loans, including interest; convertible senior notes, including interest; operating lease obligations; deferred royalty obligation; and purchase obligations. For further detail regarding our term loans and convertible senior notes, refer to Note 14, Debt. For further detail regarding our deferred royalty obligation, refer to Note 15, Deferred Royalty Obligation. For further detail regarding our operating lease obligations, refer to Note 16, Leases.
Our purchase obligations represent the minimum purchase obligations of up to $3.0 million per year with our contract manufacturer which are in effect as of December 31, 2025 and will remain in effect each year until the termination of our manufacturing agreement.
We also have employment agreements with executive officers that would require us to make severance payments to them if we terminate their employment without cause or the executives resign for good reason. These payments are contingent upon the occurrence of various future events, and the amounts payable under these provisions depend upon the level of compensation at the time of termination of employment, and therefore, are not calculable at this time.
Non-GAAP Financial Measures
To supplement our financial results presented on a GAAP basis, we have included information about certain non-GAAP financial measures. We believe the presentation of these non-GAAP financial measures, when viewed with our results under GAAP and the accompanying reconciliations, provide analysts, investors, lenders, and other third parties with insights into how we evaluate normal operational activities, including our ability to generate cash from operations, on a
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comparable year-over-year basis and manage our budgeting and forecasting. In addition, certain non-GAAP financial measures, primarily Adjusted EBITDA, are used to measure performance when determining components of annual compensation for substantially all non-sales force employees, including senior management.
We may discuss the following financial measures that are not calculated in accordance with GAAP in our quarterly and annual reports, earnings press releases and conference calls.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income or loss adjusted to exclude interest expense, interest income, the benefit from or provision for income taxes, depreciation, amortization, stock-based compensation, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations. Adjusted EBITDA, as used by us, may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
There are several limitations related to the use of adjusted EBITDA rather than net income or loss, which is the nearest GAAP equivalent, such as:
•adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;
•adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;
•adjusted EBITDA does not reflect the benefit from or provision for income taxes or the cash requirements to pay taxes;
•adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•we exclude stock-based compensation expense from adjusted EBITDA although: (i) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; and (ii) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;
•we exclude impairment expenses from adjusted EBITDA and, although these are non-cash expenses, the asset(s) being impaired may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;
•we exclude restructuring expenses from adjusted EBITDA. Restructuring expenses primarily include employee severance and contract termination costs that are not related to acquisitions. The amount and/or frequency of these restructuring expenses are not part of our underlying business;
•we exclude litigation settlements and contingencies that are subject to recovery from adjusted EBITDA, as well as any applicable income items, credit adjustments, or recoveries due to subsequent changes in estimates. This does not include our legal fees to defend claims, which are expensed as incurred;
•we exclude acquisition related expenses as the amount and/or frequency of these expenses are not part of our underlying business. Acquisition related expenses include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition, employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, legal defense expenses for specific acquired claims that relate to acts that occurred prior to our acquisition, and miscellaneous other acquisition related expenses incurred;
•we exclude recognition of the step-up basis in inventory from acquisitions (i.e., the adjustment to record inventory from historic cost to fair value at acquisition) as the adjustment does not reflect the ongoing expense associated with sale of our products as part of our underlying business;
•we exclude losses on extinguishments of debt as these expenses are episodic in nature and do not directly correlate to the cost of operating our business on an ongoing basis;
•we exclude executive transition expenses from adjusted EBITDA as the amount and/or frequency of these expenses are episodic in nature and do not directly correlate to the cost of operating our business on an ongoing basis; and
•we exclude other expenses, from time to time, that are episodic in nature and do not directly correlate to the cost of operating our business on an ongoing basis.
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Adjusted EBITDA for the years ended December 31, 2025 and 2024 was as follows:
Years Ended December 31,
(in thousands)
Adjustments:
Litigation settlements and contingencies 3,058 —
Recognition of step-up basis in inventory 5,431 5,269
Gain on fair value remeasurement of contingent consideration (1,182) (2,914)
Adjusted EBITDA was $460.5 million for 2025 compared to $401.2 million for 2024. The $59.3 million increase was primarily due to higher revenues of $149.2 million, partially offset by higher salaries, wages and benefits (excluding stock-based compensation and executive transition expense) of $41.6 million, higher sales and marketing expenses of $37.6 million, and higher audit and legal fees of $4.9 million.
The following is a summary of 2025 quarterly Adjusted EBITDA:
First Quarter Second Quarter Third Quarter Fourth Quarter
(in thousands)
Adjustments:
Loss on extinguishment of debt — — — 15,994
Litigation settlements and contingencies — — 3,058 —
Recognition of step-up basis in inventory 3,477 1,954 — —
Executive transition expense 1,397 — — —
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Adjusted Operating Expenses
Adjusted operating expenses is a non-GAAP financial measure that represents GAAP operating expenses adjusted to exclude stock-based compensation expense, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations.
Adjusted operating expenses for the years ended December 31, 2025 and 2024 were as follows:
Years Ended December 31,
(in thousands)
Adjustments:
Gain on fair value remeasurement of contingent consideration (1,182) (2,914)
Adjusted operating expenses were $237.3 million for 2025 compared to $150.6 million for 2024. The $86.7 million increase was primarily driven by:
•an increase in salaries, wages, and benefits (excluding stock-based compensation and executive transition expense) of $41.6 million, primarily due to additional headcount added as a result of the Ironshore Acquisition;
•an increase in sales and marketing expenses of $37.6 million, primarily due to expenses incurred to support the ongoing commercialization of Jornay PM following the Ironshore Acquisition in September 2024; and
•an increase in audit and legal fees of $4.9 million, primarily due to expenses related to litigation expenses.
The following is a summary of 2025 quarterly adjusted operating expenses:
First Quarter Second Quarter Third Quarter Fourth Quarter
(in thousands)
Adjustments:
Executive transition expense 1,397 — — —
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Adjusted Net Income and Adjusted Earnings Per Share
Adjusted net income is a non-GAAP financial measure that represents GAAP net income or loss adjusted to exclude significant income and expense items that are non-cash or not indicative of ongoing operations, including consideration of the tax effect of the adjustments. Adjusted earnings per share is a non-GAAP financial measure that represents adjusted net income per share. Adjusted weighted-average shares - diluted is calculated in accordance with the treasury stock, if-converted, or contingently issuable accounting methods, depending on the nature of the security.
Adjusted net income and adjusted earnings per share for the years ended December 31, 2025 and 2024 were as follows:
Years Ended December 31,
(in thousands, except share and per share data)
Adjustments:
Litigation settlements and contingencies 3,058 —
Recognition of step-up basis in inventory 5,431 5,269
Gain on fair value remeasurement of contingent consideration (1,182) (2,914)
Income tax effect of above adjustments (1) (71,599) (62,880)
Adjusted earnings per share (2) $ 7.42 $ 6.45
(1)The income tax effect of the adjustments was calculated by applying our blended federal and state statutory rate to the adjustments that have a tax effect. The blended federal and state statutory rate for the years ended December 31, 2025 and 2024 were 24.8% and 26.5%, respectively. As such, the non-GAAP effective tax rates for the years ended December 31, 2025 and 2024 were 24.0% and 25.3%, respectively.
(2)Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertibles notes in accordance with ASC 260, Earnings per Share. As such, adjusted weighted-average shares – diluted includes shares related to the assumed conversion of our convertible notes and the associated cash interest expense added-back to non-GAAP adjusted net income. For the years ended December 31, 2025 and 2024, adjusted weighted-average shares – diluted includes 6,606,305 attributable to our convertible notes. In addition, adjusted earnings per share includes other potentially dilutive securities to the extent that they are not antidilutive.
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The following is a summary of 2025 quarterly adjusted net income and adjusted earnings per share:
First Quarter Second Quarter Third Quarter Fourth Quarter
(in thousands, except share and per share data)
Adjustments:
Loss on extinguishment of debt — — — 15,994
Litigation settlements and contingencies — — 3,058 —
Recognition of step-up basis in inventory 3,477 1,954 — —
Executive transition expense 1,397 — — —
(1)The income tax effect of the adjustments was calculated by applying our blended federal and state statutory rate to the adjustments that have a tax effect. The blended federal and state statutory rate for the three months ended March 31, June 30, September 30, and December 31, 2025 were 25.8%, 25.7%, 21.8%, and 25.5%, respectively. As such, the non-GAAP effective tax rates for the three months ended March 31, June 30, September 30, and December 31, 2025 were 25.4%, 25.5%, 21.7%, and 23.6%, respectively.
(2)Adjusted weighted-average shares - diluted were calculated using the “if-converted” method for the convertible notes in accordance with ASC 260, Earnings per Share. As such, adjusted weighted-average shares – diluted includes shares related to the assumed conversion of our convertible notes and the associated cash interest expense added-back to non-GAAP adjusted net income. For the three months ended March 31, June 30, September 30, and December 31, 2025, adjusted weighted-average shares – diluted includes 6,606,305 shares attributable to our convertible notes. In addition, adjusted earnings per share includes other potentially dilutive securities to the extent that they are not antidilutive.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
Our primary exposure to market risk is interest rate sensitivity in connection with our investment portfolio and the 2025 Term Loan. None of these market risk sensitive instruments are held for trading purposes.
Investment Portfolio
Our investment portfolio includes financial instruments that are sensitive to interest rate risks. Our investment portfolio is used to preserve capital, maintain liquidity sufficient to meet cash flow requirements, and maximize returns commensurate with our risk appetite. We invest in instruments that meet the credit quality, diversification, liquidity, and maturity standards outlined in our investment policy.
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As of December 31, 2025, our investment portfolio includes $119.4 million of cash equivalents and $155.4 million of marketable securities, which are primarily comprised of money market funds, commercial paper, corporate debt securities, and government-sponsored debt securities. Our money market funds are short-term highly liquid investments, and our marketable securities have active secondary or resale markets to help ensure liquidity. We account for marketable securities as available-for-sale and, thus, no gains or losses are realized due to changes in the fair value of our marketable securities unless we sell our investments prior to maturity or incur a credit loss. Furthermore, our investment policy includes guidelines limiting the term-to-maturity of our investments. Due to the nature of our investments, we do not believe that the fair value of our investments has a material exposure to interest rate risk.
2025 Term Loan
The 2025 Term Loan bears interest at an annual rate equal to Secured Overnight Financing Rate (“SOFR”) plus a spread adjustment ranging from 2.75% to 3.75%. The 2025 Term Loan is subject to quarterly amortization payments of the originally funded amount equal to 1.25% in each quarter of 2026, 1.875% in each quarter of 2027 and 2028, and 2.5% in each quarter of 2029 and 2030, with the remaining principal payable at maturity. Based on the outstanding principal amount of the 2025 Term Loan as of December 31, 2025 of $580.0 million, a hypothetical 1% increase or decrease in interest rates would increase or decrease future annual interest expense by approximately $5.8 million.
Item 8. Consolidated Financial Statements and Supplementary Data
Our Consolidated Financial Statements, together with the reports of our independent registered public accounting firms, begin on page F-1 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2025.
Management’s Report on Internal Control Over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
(1)pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
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Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a 15(f) and 15d 15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to evaluate the effectiveness of our internal control over financial reporting.
Based on our evaluation, and subject to the exclusion above, management has concluded that our internal control over financial reporting was effective as of December 31, 2025.
The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by our independent registered public accounting firm, Deloitte & Touche LLP, as stated in their report which is included herein.
Changes in Internal Control Over Financial Reporting
As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer did not identify any change in our internal control over financial reporting during the fiscal quarter ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Collegium Pharmaceutical, Inc. and subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 26, 2026, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 26, 2026
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Item 9B. Other Information
Rule 10b5-1 Trading Plans
The following table shows the “Rule 10b5-1 trading arrangements” or “non-Rule 10b5-1 trading arrangements” (as each term is defined in Item 408(a) of Regulation S-K) adopted, amended, or terminated by our directors and officers during the three months ended December 31, 2025:
Trading Arrangement
(1) A trading arrangement may expire on an earlier date if all contemplated transactions are completed before such trading arrangement’s expiration date, upon termination by broker or the holder of the trading arrangement, or as otherwise provided in the trading arrangement.
Each Rule 10b5-1 trading arrangement described above was adopted in compliance with Rule 10b5-1(c) under the Exchange Act.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Other than the information regarding our executive officers provided in Part I of this report under the heading “Business — Our Executive Officers,” the information required to be furnished pursuant to this item is incorporated herein by reference to our definitive proxy statement for the 2026 Annual Meeting of the Shareholders.
Our Board of Directors has adopted a Code of Ethics applicable to all of our employees, executive officers and directors. The Code of Ethics is available on our website at www.collegiumpharma.com. Our Board of Directors is responsible for overseeing compliance with the Code of Ethics, and our Board of Directors or an appropriate committee thereof must approve any waivers of the Code of Ethics for employees, executive officers or directors. Disclosure regarding any amendments to the Code of Ethics, or any waivers of its requirements, will be made on our website.
Insider Trading Policies
Our Board of Directors has adopted an Insider Trading Policy which governs the purchase, sales, and/or other dispositions of our securities by directors, officers, and employees. Our Insider Trading Policy is attached hereto as Exhibit 19 and incorporated herein.
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Item 11. Executive Compensation
The information required by this Item 11 is incorporated herein by reference from our definitive proxy statement for the 2026 Annual Meeting of Shareholders under the captions “Compensation Discussion and Analysis,” “Executive Compensation” (excluding the information under the heading “Pay Versus Performance”), “Director Compensation” and “Compensation Committee Report.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 is incorporated herein by reference from our definitive proxy statement for the 2026 Annual Meeting of Shareholders under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is incorporated herein by reference from our definitive proxy statement for the 2026 Annual Meeting of Shareholders under the captions “Certain Relationships and Related Party Transactions” and “Election of Directors – Director Independence.”
Item 14. Principal Accountant Fees and Services
The information required by this Item 14 is incorporated herein by reference from our definitive proxy statement for the 2026 Annual Meeting of Shareholders under the captions “Ratification of Appointment of Independent Registered Public Accounting Firm - Independent Registered Public Accountants’ Fees” and “Ratification of Appointment of Independent Registered Public Accounting Firm – Pre-Approval Policies and Procedures.”
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PART IV
Item 15. Exhibits and Financial Statement Schedules
Consolidated Financial Statements
Refer to Part II, Item 8 for the Consolidated Financial Statements required to be included in this Form 10-K.
Consolidated Financial Statement Schedules
All financial statement schedules are omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or notes thereto.
Exhibits
Exhibit Number Exhibit Description
3.2 † Amended and Restated Bylaws of Collegium Pharmaceutical, Inc. (4)
10.2 +† 2015 Employee Stock Purchase Plan. (9)
10.3 +† Performance Bonus Plan. (10)
10.5 † Form of Indemnification Agreement. (10)
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19 † Insider Trading Policy (11)
21.1 Subsidiaries of Collegium Pharmaceutical, Inc.
97 † Compensation Recovery Policy (11)
____________________________________________________
†Previously filed.
+Indicates management contract or compensatory plan.
*Certain portions of the exhibits that are not material and would be competitively harmful if publicly disclosed have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Copies of the unredacted exhibits will be furnished to the Securities and Exchange Commission (“SEC”) upon request.
(1)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022.
(2)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2024.
(3)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 filed with the SEC on August 5, 2020.
(4)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on December 4, 2017.
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(5)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2020.
(6)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2023.
(7)Previously filed as an exhibit to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023.
(8)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 filed with the SEC on May 9, 2018.
(9)Previously filed as an exhibit to the registrant’s Registration Statement on Form S-8 (File No. 333-207744) filed with the SEC on November 2, 2015.
(10)Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1/A (File No. 333-203208) filed with the SEC on April 27, 2015.
(11)Previously filed as an exhibit to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 22, 2024.
(12)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on December 30, 2020.
(13)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed with the SEC on May 7, 2020.
(14)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on September 30, 2020.
(15)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 filed with the SEC August 5, 2021.
(16)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 filed with the SEC on August 8, 2024.
(17)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the SEC May 10, 2022.
(18)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025 filed with the SEC May 8, 2025.
(19)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on May 19, 2025.
(20)Previously filed as an exhibit to the registrant’s Registration Statement on Form S-8 (File No. 333-287838) filed with the SEC on June 6, 2025.
(21)Previously filed as an exhibit to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 27, 2025.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COLLEGIUM PHARMACEUTICAL, INC.
By: /s/ Vikram Karnani
Vikram Karnani
Chief Executive Officer
Signature Title Date
Vikram Karnani
Colleen Tupper
/s/ Gino Santini Chairman of the Board February 26, 2026
Gino Santini
/s/ Rita Balice-Gordon, Ph.D. Director February 26, 2026
Rita Balice-Gordon, Ph.D.
/s/ Garen G. Bohlin Director February 26, 2026
Garen G. Bohlin
/s/ John A. Fallon, M.D. Director February 26, 2026
John A. Fallon, M.D.
/s/ John G. Freund, M.D. Director February 26, 2026
John G. Freund, M.D.
/s/ Nancy Lurker Director February 26, 2026
Nancy Lurker
/s/ Gwen Melincoff Director February 26, 2026
Gwen Melincoff
/s/ Carlos Paya Director February 26, 2026
Carlos Paya
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.
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COLLEGIUM PHARMACEUTICAL, INC.
Index to Consolidated Financial Statements
Audited Consolidated Financial Statements Pages
Report of Independent Registered Public Accounting Firm (PCAOB ID 34) F-2
Consolidated Balance Sheets as of December 31, 2025 and 2024 F-4
Notes to Consolidated Financial Statements F-9
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Collegium Pharmaceutical, Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Product Return Liability– Refer to Note 3 to the Financial Statements
Critical Audit Matter Description
Revenue is recognized when control is transferred to the customer, which occurs upon delivery, and revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer (“transaction price”). The transaction price for product sales includes variable consideration related to sales deductions and a refund liability is established for estimated product returns. At the end of each reporting period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration should be constrained). Variable consideration, including the risk of customer concessions, is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when
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the uncertainty is subsequently resolved. The Company updates the measurement of the returns and the refund liability (the “return provision”) at the end of each reporting period for changes in expectations about the amount of returns and refunds with the corresponding adjustments recognized as revenue (or reductions of revenue).
Estimating the variable consideration and return provision requires significant judgment by management. Given the complexity and significant level of estimation uncertainty involved in calculating the return provision, our audit procedures in this area required a high degree of auditor judgment and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the return provision included the following, among others:
•We tested the effectiveness of controls over the measurement and recognition of the return provision.
•We evaluated the Company's methodology and significant assumptions made in developing the return provision.
•We tested the completeness and accuracy of the data underlying the measurement of the return provision.
•We tested the mathematical accuracy of management's underlying calculation of the return provision.
•We performed a retrospective review, comparing prior period product return estimates to actual product returns.
•We developed independent estimates of the return provision using historical sales and returns activity, product dating and expiration dates, and other information.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 26, 2026
We have served as the Company's auditor since 2016.
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COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
Assets
Current assets
Prepaid expenses and other current assets 32,642 30,394
Operating lease right-of-use assets 4,187 5,822
Liabilities and shareholders' equity
Current liabilities
Current portion of term notes payable 29,000 64,583
Current portion of operating lease liabilities 1,407 1,271
Business combination consideration payable 17,565 28,956
Deferred revenue 667 —
Operating lease liabilities, net of current portion 4,132 5,539
Deferred revenue, net of current portion 9,111 10,000
Contingent consideration — 1,182
Commitments and contingencies (refer to Note 13)
Shareholders’ equity:
Preferred stock, $0.001 par value; authorized shares - 5,000,000 — —
Accumulated other comprehensive income 319 55
The accompanying notes are an integral part of these consolidated financial statements.
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COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Years Ended December 31,
Cost of product revenues
Operating expenses
Gain on fair value remeasurement of contingent consideration (1,182) (2,914) —
Earnings per share — basic $ 1.98 $ 2.14 $ 1.43
Earnings per share — diluted $ 1.73 $ 1.86 $ 1.29
The accompanying notes are an integral part of these consolidated financial statements.
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COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Years Ended December 31,
Other comprehensive income:
Unrealized gains on marketable securities, net of tax 264 41 14
Total other comprehensive income 264 41 14
The accompanying notes are an integral part of these consolidated financial statements.
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COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
Shares Amount Shares Amount
Issuance for employee stock purchase plan 26,505 — 460 — — — — 460
Vesting of RSUs and PSUs 898,817 1 — — — — — 1
Stock-based compensation — — — — — — 14 14
Issuance for employee stock purchase plan 35,664 — 827 — — — — 827
Vesting of RSUs and PSUs 1,481,823 1 — — — — — 1
Other comprehensive income, net of tax — — — — — — 41 41
Issuance for employee stock purchase plan 50,187 — 1,363 — — — — 1,363
Vesting of RSUs and PSUs 1,205,901 1 — — — — — 1
Other comprehensive income, net of tax — — — — — — 264 264
The accompanying notes are an integral part of these consolidated financial statements.
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COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
Operating activities
Non-cash lease expense (benefit) 339 (94) (280)
Non-cash interest expense for deferred royalty obligation 950 3,713 —
Non-cash change in fair value of contingent consideration (1,182) (2,914) —
Changes in operating assets and liabilities:
Accrued rebates, returns and discounts 2,851 387 (3,160)
Operating lease assets and liabilities 25 — —
Deferred revenue (222) — —
Investing activities
Acquisition of Ironshore (net of cash acquired) — (267,538) —
Purchases of property and equipment (1,740) (1,652) (461)
Financing activities
Payments made for employee stock tax withholdings (12,846) (19,170) (8,361)
Payments made for deferred purchase price for acquisition (7,555) — —
Proceeds from term note modification, net of fees paid to lender — 313,175 —
Repurchase of 2026 Convertible Notes, including premium — — (138,638)
Repayment of assumed debt from Ironshore Acquisition — (164,598) —
Supplemental disclosure of cash flow information
Supplemental disclosure of non-cash activities
Note issuance costs in accounts payable and accrued expenses $ 271 $ — $ —
Excise tax on share repurchases in accrued liabilities $ — $ 99 $ 457
Acquisition date fair value of contingent consideration — 4,096 —
Business combination consideration payable — 28,956 —
The accompanying notes are an integral part of these consolidated financial statements.
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COLLEGIUM PHARMACEUTICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)
1. Nature of Business
Organization
Collegium Pharmaceutical, Inc. (the “Company” or “Collegium”) was incorporated in Delaware in April 2002 and then reincorporated in Virginia in July 2014. The Company has its principal operations in Stoughton, Massachusetts. The Company’s mission is to build a leading, diversified biopharmaceutical company committed to improving the lives of people living with serious medical conditions. The Company’s product portfolio includes Jornay PM, Belbuca, Xtampza ER, Nucynta ER and Nucynta IR (collectively the “Nucynta Products”), and Symproic.
On September 3, 2024, (the “Acquisition Date”), the Company closed its acquisition of Ironshore Therapeutics Inc. (“Ironshore”) (the “Ironshore Acquisition” or “Merger”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), with Ironshore surviving the Merger as a wholly owned subsidiary of the Company. Ironshore had developed and obtained commercial approval to market Jornay PM in the United States. Upon closing the Ironshore Acquisition, the Company acquired the Jornay PM product.
The Company’s operations are subject to certain risks and uncertainties. The principal risks include inability to continue successfully commercializing products, changing market conditions for products and development of competing products, changing regulatory environment and reimbursement landscape, product-related litigation, manufacture of adequate commercial inventory, inability to secure adequate supplies of active pharmaceutical ingredients, key personnel retention, protection of intellectual property, and patent infringement litigation.
2. Summary of Significant Accounting Policies
Basis of Accounting
The consolidated financial statements include the accounts of Collegium Pharmaceutical, Inc. as well as the accounts of its subsidiaries. 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
The preparation of the consolidated financial statements in accordance with GAAP requires the Company to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenues, costs and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Estimates in the Company’s consolidated financial statements include revenue recognition, including the estimates of product returns, discounts and allowances related to commercial sales of products, estimates related to the fair value of assets acquired and liabilities assumed in business combinations, including acquired intangible assets and the fair value of inventory acquired, estimates utilized in the ongoing valuation of inventory related to potential unsalable product, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation, contingencies, impairment of goodwill and intangible assets, future payments under the deferred royalty obligation, and deferred tax valuation allowances. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates under different assumptions or conditions.
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Fair Value Measurements
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:
The Company’s approach to fair value measurement is aligned with its investment policy focused on capital preservation. The Company invests in instruments within defined credit parameters to minimize credit risk while ensuring liquidity.
There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2025 and 2024.
The following table presents the Company’s financial instruments carried at fair value using the lowest level input applicable to each financial instrument as of December 31, 2025 and 2024.
Assets
Cash equivalents:
Marketable securities:
Government-sponsored securities 5,000 — 5,000 —
Assets
Cash equivalents:
Marketable securities:
Government-sponsored securities 6,560 — 6,560 —
Liabilities
Total liabilities measured at fair value $ 1,182 $ — $ — $ 1,182
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Contingent Consideration
The Company’s contingent consideration liability is related to the Ironshore Acquisition in 2024. The Ironshore Acquisition included a contingent payment of $25,000 related to the achievement of a financial milestone based on net revenues of Jornay PM for the year ended December 31, 2025. The financial milestone was not met and no liability was recorded as of December 31, 2025.
The contingent consideration liability is measured at fair value using an option pricing model. The Company classifies its contingent consideration liability as a Level 3 fair value measurement based on the significant unobservable inputs used to estimate fair value. The key assumptions considered in estimating the fair value include the estimated probability and timing of milestone achievement, such as the probability and timing of projected revenues.
Change in the Fair Value of Contingent Consideration
The following table provide a reconciliation of the beginning and ending balances related to the contingent consideration for the Ironshore Acquisition:
Ironshore AcquisitionContingent Consideration
Balance as of December 31, 2023 $ —
Acquisition date fair value 4,096
Gain on fair value remeasurement of contingent consideration (2,914)
Gain on fair value remeasurement of contingent consideration (1,182)
Balance as of December 31, 2025 $ —
Assets and Liabilities Not Carried at Fair Value
Convertible Senior Notes
The Company’s convertible senior notes fall into the Level 2 category within the fair value level hierarchy. The fair value was determined based on data points using quoted prices that are observable, either directly or indirectly, such as broker quotes in a non-active market.
As of December 31, 2025, the fair value of the Company’s convertible senior notes was $340,968 and the net carrying value was $238,213. As of December 31, 2024, the fair value of the Company’s convertible senior notes was approximately $266,184 and the net carrying value was $237,172.
Term Notes Payable
The Company’s term notes fall into the Level 2 category within the fair value level hierarchy and the fair value was determined using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability (other than quoted prices), such as interest rates that are observable at commonly quoted intervals. As of December 31, 2025 and 2024, the carrying amount of the term notes reasonably approximated the estimated fair value.
Deferred Royalty Obligation
The Company’s deferred royalty obligation was assumed as part of the Ironshore Acquisition in 2024. Refer to Note 15, Deferred Royalty Obligation, for more information.
As of December 31, 2025, the fair value of the deferred royalty obligation was approximately $137,634 and the net carrying value was $121,563. As of December 31, 2024, the carrying amount of the deferred royalty obligation reasonably approximated the estimated fair value. The deferred royalty obligation is considered a level 3 fair value measurement.
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Other Assets and Liabilities
As of December 31, 2025, and 2024, the carrying amounts of the cash and cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities, and accrued rebates, returns and discounts, approximated the estimated fair values.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains its cash deposits with a limited number of reputable and nationally recognized financial institutions. In addition, as of December 31, 2025, 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, 2025 and 2024. These customers comprised 35%, 32%, and 29% of the accounts receivable balance as of December 31, 2025 and 37%, 33%, and 28% as of December 31, 2024.
These same three customers comprised 34%, 34%, and 29% of revenue during the year ended December 31, 2025; 33%, 33%, and 31% during the year ended December 31, 2024; and 33%, 32%, and 32% during the year ended December 31, 2023.
To date, the Company has not experienced any material credit losses with respect to the collection of its accounts receivable and has not recorded a material allowance for credit losses as of December 31, 2025 or 2024. The Company has no financial instruments with off balance sheet risk of loss.
Cash and Cash Equivalents
Cash and cash equivalents include cash in readily available checking and savings accounts, including bank deposits, investments in money market funds, and commercial paper. 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.
Restricted Cash
Restricted cash is reported as non-current unless the restrictions are expected to be released in the next twelve months. Restricted cash as of December 31, 2025 and 2024 includes $19,850 and $25,000, respectively, of deposits into escrow at the closing of the Ironshore Acquisition, to be released (i) in part, after, and subject to, determination of any adjustments related to finalization of working capital and cash at closing; and (ii) in part, and subject to, the lapse of certain indemnification obligations 12 months from the Acquisition Date. The remaining amounts in restricted cash represent cash held in a depository account at a financial institution to collateralize conditional standby letters of credit for the Company’s lease of its corporate headquarters and its leases of vehicles for its field-based employees.
Marketable Securities
As of December 31, 2025 and 2024, the Company’s marketable securities consisted of investments in available-for-sale corporate debt, commercial paper, U.S. Treasury, and government-sponsored securities with readily determinable fair values. The Company classifies available-for-sale marketable securities as current assets on its consolidated balance sheets.
The Company records interest earned and net amortization of premiums and discounts on investments within interest income on its consolidated statements of operations. The Company records unrealized gains (losses) on available-for-sale debt securities as a component of “Accumulated other comprehensive income,” which is a separate component of shareholders’ equity on its consolidated balance sheets, until such gains and losses are realized. Realized gains and losses are determined using the specific identification method.
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For available-for-sale debt securities with unrealized losses, the Company assesses whether a credit loss allowance is required using an expected loss model. This process involves evaluating whether the fair value of an investment is recoverable when compared to its amortized cost. If an increase in fair value is observed, the Company may reduce any previously recognized credit losses. In determining whether impairments are other-than-temporary, the Company considers its ability and intention to hold the investment until market price recovery, as well as issuer-specific credit ratings, historical losses, and current economic conditions. The Company generally intends to retain investments until their amortized cost is recovered and did not identify any investments with other-than-temporary impairment as of December 31, 2025 and 2024.
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 and active pharmaceutical ingredients. 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.
The Company outsources the manufacturing of its products to contract manufacturers. In addition, the Company currently relies on a sole supplier or a limited number of suppliers for the active pharmaceutical ingredients in its products. Accordingly, the Company has concentration risk associated with its commercial manufacturing.
The Company expects to use the inventory that is classified within current assets on its consolidated balance sheet over its operating cycle. Inventory that is not expected to be used over the Company’s operating cycle is classified as a non-current asset. Refer to Note 8, Inventory, for further information.
Business Combination Accounting and Valuation of Acquired Assets
To determine whether acquisitions should be accounted for as a business combination or as an asset acquisition, the Company makes certain judgments regarding whether the acquired set of activities and assets meets the definition of a business. Judgment is required in assessing whether the acquired processes or activities, along with their inputs, would be substantive to constitute a business, as defined by U.S. GAAP.
The acquisition method of accounting requires the recognition of assets acquired and liabilities assumed at their acquisition date fair values. The determination of the fair value may require the estimation of fair values based on non-observable inputs that are included in valuation models. An income approach, which generally relies upon projected cash flow models, is used in estimating the fair value of the acquired intangible assets and the deferred royalty obligation. The fair value of acquired inventory is based on inventory cost and other assumptions. The cash flow projections are based on management's estimates of economic and market conditions including the estimated future cash flows from revenues of acquired assets, the timing and projection of costs and expenses and the related profit margins, tax rates, and an appropriate discount rate.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. Goodwill is not amortized but is subject to impairment testing at least annually as of October 1 or when a triggering event occurs that could indicate a potential impairment. In performing the goodwill impairment test, the Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying value. Alternatively, the Company may elect to proceed directly to the quantitative impairment test. In performing the quantitative analysis, the Company compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the Company’s reporting unit exceeds its fair value, the Company would recognize an impairment charge for the amount by which the carrying amount of the reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit.
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
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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.
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 5-13 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.
Leases