Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the United States Securities and Exchange Commission, or SEC. We operate and report our financial information in one segment. The following discussion of our financial condition and results of operations should be read in conjunction with the other sections of this Annual Report, including our consolidated financial statements and the notes to those consolidated financial statements appearing in Part IV, Item 15, of this Annual Report. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Part I, Item 1A. of this Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements. Certain defined terms have been brought forward from Part I of this Annual Report.
This section of this Annual Report discusses year-to-year comparisons between 2024 and 2023, as well as other discussions of 2024 and 2023 items. We have omitted discussion of the year ended December 31, 2022 (the earliest of the three years covered by our consolidated financial statements presented in this Annual Report) as permitted by SEC regulations. The complete Management’s Discussion and Analysis of Financial Condition and Results of Operations for year-to-year comparisons between 2023 and 2022 and other discussions of 2022 items can be found within Part II, Item 7, to our Annual Report for the year ended December 31, 2023, filed with the SEC on February 29, 2024, which is available on the SEC’s website at www.sec.gov and our corporate website at www.pacira.com. The foregoing reference to our corporate website is not intended to, nor shall it be deemed to, incorporate information on our corporate website into this Annual Report by reference, and the inclusion of our corporate website address in this Annual Report is an inactive textual reference only and is not intended to be an active link to our corporate website.
Overview
Our stated corporate mission is to deliver innovative, non-opioid pain therapies to transform the lives of patients. We are also developing innovative interventions to address debilitating conditions involving the sympathetic nervous system, such as cardiac electrical storm, chronic pain and spasticity. Our long-acting, local analgesic EXPAREL® (bupivacaine liposome injectable suspension) utilizes our unique pMVL drug delivery technology that encapsulates drugs without altering their molecular structure and releases them over a desired period of time. In the U.S., EXPAREL is a long-acting, non-opioid option proven to manage postsurgical pain. EXPAREL is the only product indicated for local analgesia via infiltration in patients aged six years and older and regional analgesia via interscalene brachial plexus nerve block, sciatic nerve block in the popliteal fossa and adductor canal block in adults. In Europe, EXPAREL is approved as a brachial plexus block or femoral nerve block for treatment of post-operative pain in adults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults and children aged six years and older. We drop-ship EXPAREL directly to end-users based on orders placed to wholesalers or directly to us, and there is no product held by wholesalers. With the acquisition of Flexion Therapeutics, Inc. in November 2021 (the “Flexion Acquisition”), we acquired ZILRETTA® (triamcinolone acetonide extended-release injectable suspension), the first and only extended-release, intra-articular injectable therapy that can provide major relief for OA knee pain for three months and has the potential to become an alternative to hyaluronic acid, or HA, and platelet rich plasma, or PRP, injections or other early intervention treatments. With the acquisition of MyoScience, Inc. in April 2019 (the “MyoScience Acquisition”), we acquired iovera®°, a handheld cryoanalgesia device used to deliver a precise, controlled application of cold temperature to targeted nerves, which we sell directly to end users. EXPAREL, ZILRETTA and the iovera° system are highly complementary products as long-acting, non-opioid therapies that alleviate pain. We are also advancing the development of PCRX-201 (enekinragene inzadenovec), a novel gene therapy vector platform enabling local administration of genetic medicines with the potential to treat large prevalent diseases like OA. In February 2025, we acquired
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GQ Bio Therapeutics GmbH, a privately-held biopharmaceutical company (the “GQ Bio Acquisition”). PCRX-201 is the lead program from this platform.
We expect to continue to pursue the expanded use of EXPAREL, ZILRETTA and iovera° in additional procedures; progress our product candidate pipeline, including the development of PCRX-201; advance regulatory activities for EXPAREL, ZILRETTA, iovera° and our other product candidates; invest in sales and marketing resources for EXPAREL, ZILRETTA and iovera°; expand and enhance our manufacturing capacity for EXPAREL, ZILRETTA and iovera°; invest in products, businesses and technologies; and support legal matters.
Recent Highlights
•In November 2024, we presented two-year safety and efficacy data at the American College of Rheumatology’s annual ACR Convergence meeting in Washington, DC. The new data is derived from an open-label, Phase 1 trial investigating the safety and efficacy of PCRX-201 administered via ultrasound-guided intraarticular injection in 72 patients with moderate to severe osteoarthritis of the knee (OAK) graded at 2, 3, or 4 on the Kellgren-Lawrence scale, a semiquantitative method for evaluating the severity of OA on a scale of 0-4. Participants were broken into two cohorts. The first cohort received one of three doses of PCRX-201. The second cohort received concurrent pretreatment with an IA corticosteroid (methylprednisolone 40 mg), a technique common in gene therapy dosing to improve tolerability and gene transfer. Pain and function benefits were observed at all doses and across both cohorts over the full two years studied, with patients in the second cohort achieving greater pain reduction and fewer AEs. Given these highly encouraging Phase 1 data, we opened enrollment in a randomized, double-blind Phase 2 clinical study in knee OA in February 2025.
•In December 2024, we announced the receipt of U.S. Patent No. 12,156,940 (the ‘940 patent) from the USPTO. The ‘940 patent—entitled “Manufacturing of Bupivacaine Multivesicular Liposomes”—protects the chemical composition of EXPAREL. This patent is the first patent from a new family of patents related to EXPAREL produced by our enhanced larger-scale manufacturing process in San Diego, California, which received approval from the FDA in February 2024. We expect the ‘940 patent to provide protection into July 2044. Additionally, the ‘940 patent is listed in the FDA’s “Approved Drug Products with Therapeutic Equivalence Evaluations” (the “Orange Book”). Patents that are eligible for Orange Book listing are those that have claims covering the active ingredient, the drug product (formulation and composition) or the approved method of use. Additionally, the USPTO recently issued U.S. Patent Nos. 12,151,024 (the ‘024 patent) and 12,144,890 (the ‘890 patent). The ‘024 and ‘890 patents belong to the ‘574 and ‘495 family of patents, respectively, and are listed in the Orange Book with an expiration date of January 21, 2041. We continue to prosecute patent applications and anticipate that additional patents are forthcoming.
•In January 2025, we announced the receipt of clearance from the FDA to market a new Smart Tip designed to access the medial branch nerves to manage chronic low back pain. This new, 25-gauge 180 mm Smart Tip allows for the treatment of deeper nerves, such as the medial branch nerve, and is specifically designed so that it can relieve chronic low back pain associated with facet mediated pain. This longer-needle Smart Tip is uniquely designed for use through a cannula or introducer, providing the ability for ice ball formation at deeper peripheral nerves. This FDA-cleared innovation offers a compelling alternative to conventional treatments such as RFA, which has substantial limitations. With RFA, patients may not get the effects of pain relief until one-to-two weeks after treatment. Further the intense heat can damage surrounding tissue and blood vessels, and tissue damage may lead to painful neuritis (inflammation in the nerves).
•In January 2025, Laura Brege was appointed Chair of the Board, following the retirement of former Chair, Paul J. Hastings, and Andreas Wicki, PhD. These changes align with our ongoing commitment to board refreshment. With these changes, the board is composed of nine directors, eight of whom are independent and five of whom have joined since October 2023. Each director brings expertise in areas important to our business to support our 5x30 growth-oriented plan including executive leadership, mergers and acquisitions, research and development, operations, commercialization, manufacturing and supply chain.
•In February 2025, we announced a definitive purchase agreement to acquire all outstanding equity interests of GQ Bio not already owned by us for approximately $32 million, net of working capital and other transaction adjustments to equity holders other than us. The net purchase price includes $18 million of cash paid at closing, $8 million to be paid over three years pursuant to a key employee holdback agreement and a post-closing indemnity holdback of $6 million. This acquisition adds a novel locally administered gene therapy vector platform and pipeline of preclinical assets with disease-modifying potential for prevalent musculoskeletal diseases and will advance our 5x30 growth strategy to transition into an innovative biopharmaceutical organization. PCRX-201 is the lead program from this platform. It
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provides financial benefits with the elimination of future development and sales-based milestones including a $4.5 million milestone payment due upon initiation of the Phase 2 clinical trial of PCRX-201 that opened enrollment in February 2025. For more information on the GQ Bio Acquisition, see Note 21, Subsequent Events, to our consolidated financial statements included herein.
Global Economic Conditions, Inflation and Tariffs
Direct and indirect effects of global economic conditions have in the past, and may continue to, negatively impact our business, financial condition and results of operations. Such impacts may include the effect of prolonged periods of inflation or the imposition of tariffs, which could, among other things, result in higher costs for labor, raw materials, equipment and other goods and services; cause our patients to defer or cancel medical procedures, thereby adversely impacting our revenues; and negatively impact our suppliers which could cause longer lead-times or the inability to secure a sufficient supply of materials. The current macroeconomic environment remains dynamic and subject to rapid and possibly material changes. Additional negative impacts may also arise that we are unable to foresee. The nature and extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
Revenues
Net product sales consist of sales of (i) EXPAREL in the U.S., E.U., and U.K.; (ii) ZILRETTA in the U.S.; (iii) iovera° in the U.S., Canada and the E.U. and (iv) sales of our bupivacaine liposome injectable suspension product for veterinary use. Royalty revenues are related to a collaborative licensing agreement from the sale of our bupivacaine liposome injectable suspension for veterinary use.
The following table provides information regarding our revenues during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Net product sales:
Bupivacaine liposome injectable suspension 7,322 3,342 100%+
EXPAREL revenue increased 2% in 2024 versus 2023. A 4% increase in gross vial volume was partially offset by a shift in vial mix. EXPAREL revenue was also impacted by a 1% increase in selling price per unit related to a price increase, net of increases in sales related allowances as a result of group purchasing organization contracting.
ZILRETTA revenue increased 6% in 2024 versus 2023, primarily due to a 4% increase in net selling price per unit and a 2% increase in kit volume. The increase in net selling price per unit is related to two price increases and favorable sales related allowances.
Net product sales of iovera° increased 16% in 2024 versus 2023 primarily due to a 20% increase in Smart Tip volume, partially offset by increased sales related allowances and accruals.
Bupivacaine liposome injectable suspension revenue increased more than 100% in 2024 versus 2023, and the related royalties increased 38%, primarily due to the sales mix of vial sizes and the timing of orders placed for veterinary use.
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Cost of Goods Sold
Cost of goods sold primarily relates to the costs to produce, package and deliver our products to customers. These expenses include labor, raw materials, manufacturing overhead and occupancy costs, depreciation of facilities, royalty payments, quality control and engineering.
The following table provides information regarding cost of goods sold and gross margin during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Gross margin increased three percentage points in 2024 versus 2023 primarily due to lower EXPAREL product costs as a result of higher production volumes and the absence of a step-up of ZILRETTA fixed assets and inventory to fair value in accordance with purchase accounting that existed in the prior period, partially offset by higher EXPAREL and ZILRETTA inventory reserves.
Research and Development Expense
Research and development expenses primarily consist of costs related to clinical trials and related outside services, product development and other research and development costs, including trials that we are conducting to generate new data for EXPAREL, ZILRETTA and iovera°, clinical trials for PCRX-201 and stock-based compensation expense. Clinical and preclinical development expenses include costs for clinical personnel, clinical trials performed by third-parties, toxicology studies, materials and supplies, database management and other third-party fees. Product development and manufacturing capacity expansion expenses include development costs for our products, which include personnel, research equipment, materials and contractor costs for process development and product candidates, development costs related to significant scale-ups of our manufacturing capacity and facility costs for our research space. Regulatory and other expenses include regulatory activities related to unapproved products and indications, medical information and scientific communication expenses, expenses related to our iGOR registry study and related personnel. Stock-based compensation expense relates to the costs of stock option grants, awards of restricted stock units, or RSUs, and our employee stock purchase plan, or ESPP.
The following table provides a breakout of our research and development expenses during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Product development and manufacturing capacity expansion 30,803 33,365 (8)%
Total research and development expense $ 81,577 $ 76,257 7%
% of total revenue 12% 11%
Total research and development expense increased 7% in 2024 versus 2023.
Clinical and preclinical development expense increased 38% in 2024 versus 2023 due to site start-up and ongoing enrollment in a ZILRETTA shoulder trial, an iovera° spasticity trial and an EXPAREL pediatric trial, as well as start-up expenses related to the PCRX-201 Phase 2 trial for knee OA. These increases were partially offset by the winding down of a PCRX-201 Phase 1 trial for knee OA as two-year follow-up visits of subjects were completed in November 2023. This Phase 1 trial remains on track for completion by November 2026, the last year of the follow-up period for the last patient dosed. In addition, toxicology studies for product candidates were completed in 2023.
Product development and manufacturing capacity expansion expense decreased 8% in 2024 versus 2023, primarily attributable to the completion of pre-commercial scale-up activities of our larger-scale EXPAREL manufacturing capacity at
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our Science Center Campus in San Diego, California, which the FDA approved in February 2024 and was subsequently placed into service in July 2024. The decrease was partially offset by ongoing product development costs related to PCRX-201 and development costs for the iovera° medial branch Smart Tip which received FDA clearance in January 2025.
Regulatory and other research and development expenses remained flat in 2024 versus 2023. Increased enrollment and additional sites related to our iGOR registry study were offset by the reduction of international regulatory activities and headcount vacancies.
Stock-based compensation decreased 15% in 2024 versus 2023 primarily due to fewer equity awards granted to research and development personnel and headcount vacancies as well as the acceleration of stock-based compensation awards related to a terminated executive in 2023.
Selling, General and Administrative Expense
Sales and marketing expenses primarily consist of compensation and benefits for our sales force and personnel that support our sales, marketing, medical and scientific affairs operations, expenses related to communicating the health outcome benefits of our products, investments in provider-level market access and patient reimbursement support and educational programs for our customers. General and administrative expenses consist of compensation and benefits for legal, finance, regulatory activities related to approved products and indications, compliance, information technology, human resources, business development, executive management and other supporting personnel. It also includes professional fees for legal, audit, tax and consulting services. Stock-based compensation expense relates to the costs of stock option grants, RSU awards and our ESPP.
The following table provides information regarding selling, general and administrative expense during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Total selling, general and administrative expense $ 294,099 $ 269,441 9%
% of total revenue 42% 40%
Total selling, general and administrative expense increased 9% in 2024 versus 2023.
Sales and marketing expense increased 12% in 2024 versus 2023, driven by investments in programs to drive awareness and education for our customers and enhance our marketing, market access and reimbursement teams and value creation for the implementation of separate Medicare reimbursement for EXPAREL at average sales price plus 6 percent in HOPD settings and iovera° at up to an additional $255.85 when providers administer iovera° in ASC and HOPD settings beginning in January 2025 as part of the NOPAIN Act. Investments in these programs continued through the end of 2024 as we launched our national campaign—Make the NOPAIN Pact—which targets hospital pharmacists, administrators, clinicians and revenue management teams and is focused on ensuring these audiences are ready for the commencement of the NOPAIN Act which took effect on January 1, 2025. We also expanded the size of our sales force in the second half of 2024 in order to better extend our reach on each of our commercial products. These increases were partially offset by the impact of a February 2024 restructuring plan designed to ensure we are well positioned for long-term growth (for more information, see Note 17, Contingent Consideration Gains, Restructuring Charges and Other, to our consolidated financial statements included herein).
General and administrative expense increased 5% in 2024 versus 2023 primarily driven by third-party management consulting to assess strategic opportunities and market assessments for our products and compensatory costs associated with the transition to our new Chief Executive Officer effective January 2, 2024, which included compensation related to the current Chief Executive Officer and to the former Chief Executive Officer who remains an advisor to the Company in a consulting capacity.
Stock-based compensation increased 4% in 2024 versus 2023 primarily due to greater equity awards granted to personnel, including the initial stock option and restricted stock unit grants to our new Chief Executive Officer, Frank D. Lee, in January 2024 and our new Chief Financial Officer, Shawn M. Cross, in November 2024.
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Amortization of Acquired Intangible Assets
The following table provides a summary of the amortization of acquired intangible assets during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Amortization of acquired intangible assets $ 57,288 $ 57,288 —%
As part of the Flexion Acquisition and the MyoScience Acquisition, we acquired intangible assets consisting of developed technology intangible assets and customer relationships, with estimated useful lives between 9 and 14 years. For more information, see Note 8, Goodwill and Intangible Assets, to our consolidated financial statements included herein.
Goodwill Impairment
The following table provides a summary of goodwill impairments during the periods indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Goodwill impairment $ 163,243 $ — N/A
During the three months ended September 30, 2024, the FDA approved a generic competitor to EXPAREL and a U.S. District Court ruled that one of our patents was not valid (for more information, see Note 19, Commitments and Contingencies, to our consolidated financial statements included herein). Due to these events and a subsequent decrease in our common stock price, it was determined these qualitative factors indicated it was more likely than not that the fair value of goodwill may be less than its carrying value. Accordingly, we performed a quantitative assessment through a discounted cash flow model (or income approach), which resulted in the carrying value of the Company exceeding its fair value by more than the goodwill balance. As a result, the goodwill balance of $163.2 million was recorded as fully impaired during the three months ended September 30, 2024.
Contingent Consideration Gains, Restructuring Charges and Other
The following table provides a summary of the costs (gains) related to contingent consideration, restructuring charges, acquisition-related charges and other activities during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Loss on lease termination 2,165 — N/A
In 2024, we recognized contingent consideration gains of $4.5 million due to adjustments reflecting the probability of achieving the remaining Flexion regulatory milestone by December 31, 2030—the milestone expiration date, partially offset by revisions to our weighted average cost of capital and the latest discount rates. In 2023, we recognized contingent consideration gains of $3.4 million due to a decrease in the fair value of the Flexion contingent consideration. The decrease was primarily due to adjustments in the assumption for the long-term forecasts which reduced the probability of meeting the sales-based contingent consideration milestones by December 31, 2030—the expiration date for achieving the milestones. The impact of this assumption on the fair value was partially offset by a decrease to the assumed discount rate based on a significant improvement in our incremental borrowing rate resulting from the TLA Credit Agreement entered into in March 2023. For more information, see Note 11, Financial Instruments, to our consolidated financial statements included herein.
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In 2024 and 2023, we recognized acquisition-related charges of $1.5 million and $2.0 million, respectively, primarily related to vacant and underutilized Flexion leases that were assumed from the Flexion Acquisition.
In 2024, we initiated a restructuring plan designed to ensure that we are well positioned for long-term growth. The restructuring plan included, among other things: (i) reshaping the Company’s executive team; (ii) reallocating efforts and resources from our ex-U.S. and certain early-stage development programs to our commercial portfolio in the U.S. market and (iii) reprioritizing investments to focus on other commercial initiatives. As a result, in 2024, we recognized restructuring charges of $8.5 million related to employee termination benefits, such as the acceleration of share-based compensation, severance, and, to a lesser extent, other employment-related termination costs, as well as contract termination costs. In 2023, we recognized restructuring charges of $1.1 million that included a restructuring plan in an effort to improve our operational efficiencies and recognized one-time employee termination benefits through a reduction of headcount.
For more information, see Note 17, Contingent Consideration Gains, Restructuring Charges and Other, to our consolidated financial statements included herein.
In 2024, we recognized a loss of $2.2 million associated with exiting a lease to a training center located in Houston, Texas. See Note 7, Leases, to our consolidated financial statements included herein.
Other Income (Expense), Net
The following table provides information regarding other income (expense), net during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
Gain (loss) on early extinguishment of debt 7,518 (16,926) N/A
Total other income (expense), net $ 10,265 $ (25,974) N/A
Total other income, net was $10.3 million in 2024 versus total other expense, net of $26.0 million in 2023.
Interest income increased 72% in 2024 versus 2023 due to higher overall investment balances.
The 18% decrease in interest expense was primarily driven by the lower outstanding principal associated with the TLA Term Loan (as defined below) that was entered into in March 2023 which replaced our then-outstanding TLB Term Loan that had a higher principal balance and interest rate, partially offset by issuing the 2029 Notes (as defined below) in May 2024.
In 2024, we recognized a $7.5 million gain on early extinguishment of debt in conjunction with the repurchase of $200.0 million aggregate principal of our 2025 Notes (as defined below). The partial repurchase of the 2025 Notes was completed with our net proceeds from the issuance of the 2029 Notes (as defined below). In 2023, in conjunction with the entry into the TLA Credit Agreement (as defined below), we incurred a $16.9 million loss on early extinguishment of debt recognized as a result of the retirement of $287.5 million aggregate principal of our TLB Term Loan.
For more information, See Note 10, Debt, to our consolidated financial statements herein.
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Income Tax Expense
The following table provides information regarding our income tax expense during the years indicated, including percent changes (dollar amounts in thousands):
Year Ended December 31, % Increase / (Decrease)
(Loss) income before income taxes $ (63,106) $ 61,701 N/A
Effective tax rate (58)% 32%
We recorded income tax expense of $36.5 million and $19.7 million for the years ended December 31, 2024 and 2023, respectively. The effective tax rate of (58)% for the year ended December 31, 2024 differed from the U.S. statutory tax rate of 21% primarily due to non-deductible goodwill impairment charges during the three months ended September 30, 2024 and costs related to non-deductible executive compensation and stock-based compensation, mainly related to expired stock options. The effective tax rate of 32% for the year ended December 31, 2023 differed from the U.S. statutory tax rate of 21% primarily due to non-deductible stock-based and executive compensation and non-U.S. valuation allowances, partially offset by tax credits.
Liquidity and Capital Resources
Since our inception in 2006, we have devoted most of our cash resources to manufacturing, research and development and selling, general and administrative activities related to the development and commercialization of EXPAREL. In addition, we acquired ZILRETTA as part of the Flexion Acquisition in November 2021 and iovera° as part of the MyoScience Acquisition in April 2019. We are primarily dependent on the commercial success of EXPAREL and ZILRETTA. We have financed our operations primarily with the proceeds from the sale of convertible senior notes and other debt, common stock, product sales and collaborative licensing and milestone revenue. As of December 31, 2024, we had an accumulated deficit of $206.4 million, cash and cash equivalents and available-for-sale investments of $484.6 million and working capital of $435.2 million.
We expect that our cash and cash equivalents and available-for-sale investments on hand will be adequate to cover our short-term liquidity needs, and that we would be able to access other sources of financing should the need arise.
Summary of Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for the years ended December 31, 2024 and 2023 (in thousands):
Year Ended December 31,
Consolidated Statements of Cash Flows Data: 2024 2023
Net cash provided by (used in):
Net increase in cash and cash equivalents $ 123,476 $ 49,159
Operating Activities
In 2024, net cash provided by operating activities was $189.4 million compared to $154.6 million in 2023. The increase of $34.7 million was primarily attributable to increased revenue with favorable gross margins, lower interest paid and the impact of a $13.0 million payment made in the prior year for a termination fee relating to a licensing agreement, partially offset by an increased investment in inventory levels.
Investing Activities
In 2024, net cash used in investing activities was $83.3 million, which reflected $72.6 million of available-for-sale investment purchases (net of sales) and $10.6 million of capital expenditures for manufacturing product fill lines and our EXPAREL capacity expansion project at our Science Center Campus in San Diego, California, partially offset by an increased investment in inventory levels.
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In 2023, net cash provided by investing activities was $77.5 million, which reflected $99.5 million of available-for-sale investment maturities (net of purchases), purchases of fixed assets of $15.2 million for manufacturing product fill lines for our products and equipment for our EXPAREL capacity expansion project at our Science Center Campus in San Diego, California and purchases of debt investments of $6.8 million in external complementary development stage product candidates.
Financing Activities
In 2024, net cash provided by financing activities was $17.4 million, which primarily consisted of $287.5 million in proceeds from the issuance of the 2029 Notes. We used the majority of the proceeds from the 2029 Notes to make a partial repurchase of the 2025 Notes in the amount of $191.0 million, enter into a capped call transaction for $26.7 million, repurchase $25.0 million of treasury stock, and pay debt issuance and financing costs of $9.4 million. Additionally, we made $11.3 million of voluntary prepayments associated with the TLA Term Loan and paid the remaining $8.6 million of 3.375% convertible senior notes due 2024 assumed from the Flexion Acquisition (the “Flexion 2024 Notes”) upon their maturity. See Note 10, Debt, to our condensed consolidated financial statements included herein for further discussion on the Flexion 2024 Notes, 2025 Notes, 2029 Notes, the capped call transaction and the TLA Term Loan. There was also $2.3 million of proceeds from the issuance of common stock through our ESPP.
In 2023, net cash used in financing activities was $183.0 million, which consisted of a $296.9 million repayment of TLB Term Loan principal as well as a $5.8 million prepayment penalty in connection with the retirement of the TLB Term Loan facility and $33.4 million repayments of TLA Term Loan principal, partially offset by the net proceeds from the TLA Term Loan of $149.6 million, $2.8 million from the issuance of common stock through our ESPP and proceeds from the exercise of stock options of $1.9 million.
Equity Financings
From our inception in December 2006 through December 31, 2024, we have raised $344.5 million of net proceeds from the sale of common stock and other equity securities via public offerings.
Stock Repurchase Program
In May 2024, we announced that our board of directors approved a share repurchase program which was effective immediately and authorizes us to repurchase up to an aggregate of $150.0 million of our outstanding common stock. Repurchases under this program may be made at management’s discretion on the open market or through privately negotiated transactions. The share repurchase program may be suspended or discontinued at any time by us and has an expiration date of December 31, 2026.
During the year ended December 31, 2024, concurrently with the pricing of the offering of the 2029 Notes, we entered into separate privately negotiated agreements with certain of the initial purchasers of the 2029 Notes or their respective affiliates and/or certain other financial institutions to repurchase 837,240 shares of our common stock for a total cost of $25.1 million, inclusive of $0.1 million of accrued excise tax. During the year ended December 31, 2023, we did not repurchase any shares of our common stock.
As of December 31, 2024, we had remaining authorization to repurchase approximately $125.0 million of our common stock, subject to restrictions under the TLA Credit Agreement and the Indentures.
Debt
2028 Term Loan A Facility
On March 31, 2023, we entered into a credit agreement (as amended, the “TLA Credit Agreement”) to refinance the indebtedness outstanding under our TLB Credit Agreement. The term loan issued under the TLA Credit Agreement (the “TLA Term Loan”) was issued at a 0.30% discount and provides for a single-advance term loan A facility in the principal amount of $150.0 million, which is secured by substantially all of our and any subsidiary guarantor’s assets and matures on March 31, 2028. We may elect to borrow either (i) alternate base rate borrowings or (ii) term benchmark borrowings or daily simple SOFR (as defined in the TLA Credit Agreement) borrowings. Each term loan borrowing which is an alternate base rate borrowing bears interest at a rate per annum equal to (i) the Alternate Base Rate (as defined in the TLA Credit Agreement), plus (ii) a spread based on our Senior Secured Net Leverage Ratio ranging from 2.00% to 2.75%. Each term loan borrowing which is a term benchmark borrowing or daily simple SOFR borrowing bears interest at a rate per annum equal to (i) the Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR (as each is defined in the TLA Credit Agreement), plus (ii) a spread based on our Senior Secured Net Leverage Ratio ranging from 3.00% to 3.75%. During the year ended December 31, 2024, we made $11.3 million of voluntary principal prepayments. During the year ended December 31, 2023, we made a scheduled principal payment of $2.8 million as well as $30.6 million of voluntary principal prepayments. As of December 31, 2024, borrowings
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under the TLA Term Loan consisted entirely of term benchmark borrowings at a rate of 7.43%. At December 31, 2024, the outstanding principal on the TLA Term Loan was $105.3 million.
The TLA Credit Agreement requires us to, among other things, maintain (i) a Senior Secured Net Leverage Ratio (as defined in the TLA Credit Agreement), determined as of the last day of each fiscal quarter, of no greater than 3.00 to 1.00 and (ii) a Fixed Charge Coverage Ratio (as defined in the TLA Credit Agreement), determined as of the last day of each fiscal quarter, of no less than 1.50 to 1.00. The TLA Credit Agreement requires us to maintain an unrestricted cash and cash equivalents balance of at least $500.0 million less any prepayments of the 2025 Notes at any time from 91 days prior to the maturity date through the earlier of (i) the latest maturity date of the 2025 Notes and (ii) the date on which there is no outstanding principal amount of the 2025 Notes. The TLA Credit Agreement also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. As of December 31, 2024, we were in compliance with all financial covenants under the TLA Credit Agreement. See Note 10, Debt, to our consolidated financial statements included herein for further discussion.
2029 Convertible Senior Notes
In May 2024, we completed a private placement of $287.5 million in aggregate principal amount of our 2.125% convertible senior notes due 2029, or 2029 Notes, and entered into an indenture with respect to the 2029 Notes. The 2029 Notes accrue interest at a fixed rate of 2.125% per annum, payable semiannually in arrears on May 15th and November 15th of each year, and mature on May 15, 2029.
In May 2024, we used part of the net proceeds from the issuance of the 2029 Notes to repurchase $200.0 million aggregate principal amount of the 2025 Notes in privately negotiated transactions at a discount for $191.4 million in cash (including accrued interest). The partial repurchase of the 2025 Notes resulted in a $7.5 million gain on early extinguishment of debt.
At December 31, 2024, all $287.5 million of principal was outstanding on the 2029 Notes. See Note 10, Debt, to our consolidated financial statements included herein for further discussion.
2025 Convertible Senior Notes
In July 2020, we completed a private placement of $402.5 million in aggregate principal amount of our 2025 Notes, and entered into an indenture with respect to the 2025 Notes. The 2025 Notes accrue interest at a fixed rate of 0.750% per annum, payable semiannually in arrears on February 1st and August 1st of each year, and mature on August 1, 2025. At December 31, 2024, the outstanding principal on the 2025 Notes was $202.5 million. See Note 10, Debt, to our consolidated financial statements included herein for further discussion.
Future Capital Requirements
We believe that our existing cash and cash equivalents, available-for-sale investments and cash received from product sales will be sufficient to enable us to fund our operating expenses, capital expenditure requirements and payment of the interest and principal on our TLA Term Loan, 2025 Notes and 2029 Notes through the next 12 months. Our future use of operating cash and capital requirements will depend on many forward-looking factors, including, but not limited to:
•the cost and timing of the potential milestone payments to former Flexion stockholders, which could be up to an aggregate of $372.3 million if certain regulatory and commercial milestones are met. See Note 11, Financial Instruments, to our consolidated financial statements included herein for more information;
•the impact of global economic conditions—including the impact of inflation and tariffs—on our product, material and labor costs, supply chain, longer lead-times, an inability to secure a sufficient supply of materials, our operating expenses and our business strategy;
•the timing of and extent to which the holders of our 2025 Notes and 2029 Notes elect to convert their 2025 Notes and 2029 Notes, the timing of principal and interest payments on our TLA Term Loan and the timing and impact of increases to the variable interest rate on our TLA Term Loan borrowings in accordance with the terms of the TLA Credit Agreement;
•the costs and our ability to successfully continue to expand the commercialization of EXPAREL, ZILRETTA and iovera°;
•the cost and timing of expanding and maintaining our manufacturing facilities;
•the cost and timing of additional strategic investments, including additional investments under existing agreements;
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•the costs related to legal and regulatory matters, including those to develop and defend our intellectual property;
•the costs of performing additional clinical trials for our products, including the additional pediatric trials required by the FDA and EMA as a condition of the approval of EXPAREL;
•the costs for the development and commercialization of other product candidates;
•the costs and timing of future payments under our employee benefit plans, including but not limited to our cash long-term incentive plan and non-qualified deferred compensation plan;
•the timing and the number of shares of our common stock repurchased through our share repurchase program; and
•the extent to which we acquire or invest in products, businesses and technologies.
We may require additional debt or equity financing to meet our future operating and capital requirements. We have no committed external sources of funds, and additional equity or debt financing may not be available on acceptable terms, if at all. In particular, capital market disruptions or negative economic conditions may hinder our access to capital.
Contractual Obligations
We had two convertible senior notes outstanding as of December 31, 2024, for which $202.5 million in aggregate principal amount is due on our 2025 Notes in August 2025 and $287.5 million in aggregate principal amount is due on our 2029 Notes in May 2029. The remaining interest payments on our 2025 Notes is $1.5 million, all of which is due in 2025. The remaining interest payments on our 2029 Notes is $27.3 million, of which $6.1 million is due in 2025. We also have the TLA Term Loan with $105.3 million in outstanding principal. Due to voluntary principal prepayments of $30.6 million made during the year ended December 31, 2023 and $11.3 million made during December 31, 2024, we are not contractually obligated to make principal payments in 2025, although we retain the option to do so. As of December 31, 2024, there are contractually obligated principal payments of $4.1 million in 2026, $15.0 million in 2027 and $86.3 million in 2028. The remaining interest payments of the TLA Term Loan are approximately $25.0 million based on the current interest rate, of which $7.9 million is due in 2025.
In the normal course of business, we enter into various lease agreements for manufacturing, research and development and corporate activities, which are typically classified as operating leases under the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases. As of December 31, 2024, we had net minimum commitments of $64.0 million, of which $12.3 million are due in 2025. For more information, refer to Note 7, Leases, to our consolidated financial statements included herein.
In addition, we have approximately $59.9 million of minimum, non-cancelable contractual commitments for contract manufacturing services as of December 31, 2024, of which $20.3 million is due in each of 2025 and 2026, $17.9 million is due in 2027 and the remaining $1.4 million is due in 2028. We have approximately $6.5 million of minimum, non-cancelable contractual commitments for the purchase of certain raw materials as of December 31, 2024, all of which are due in 2025. We had $1.8 million of other minimum, non-cancelable contractual commitments as of December 31, 2024, of which $1.4 million is due in 2025, and the remaining $0.4 million is due thereafter.
As part of the Flexion Acquisition, there are up to $372.3 million in potential payments if all regulatory and commercial milestones are met. For more information, see Note 11, Financial Instruments, to our consolidated financial statements included herein.
In February 2025, we completed the GQ Bio Acquisition. The net purchase price includes approximately $8 million to be paid over three years pursuant to a key employee holdback agreement as well as a post-closing indemnity holdback of approximately $6 million. For more information on the GQ Bio Acquisition, see Note 21, Subsequent Events, to our consolidated financial statements included herein.
Critical Accounting Estimates
We have based our Management’s Discussion and Analysis of our Financial Condition and Results of Operations on our financial statements that have been prepared in accordance with GAAP in the U.S. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, contingent consideration, impairment of intangible assets and goodwill, inventory costs, liabilities and accruals, clinical trial expenses, stock-based compensation and the valuation of deferred tax assets. We base our estimates on historical experience, contract
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terms and on other factors we believe to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are more fully discussed in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included herein. The following accounting policies, which may include significant judgments and estimates, were used in the preparation of our consolidated financial statements.
Revenue Recognition
Revenues from sales of products are recorded net of returns allowances, prompt payment discounts, service fees, government rebates, volume rebates and chargebacks. These reserves are based on estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, except for returns, which is based on the expected value method. We include these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved. The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts, statutory requirements and other related information that may become known in the future. The adequacy of these provisions is reviewed on a quarterly basis. If our assessments, experiences or judgments are not accurate estimates of future results, our results of operations could be affected. The sensitivity of our estimates varies by program. Estimates associated with chargebacks and government programs have the greatest risk of being subject to adjustment because of the time delay between recording the accrual and the final settlement. Historically, adjustments to these estimates to reflect actual results or updated expectations have not been material.
The summary of activity with respect to our sales related allowances and accruals for the years ended December 31, 2024, 2023 and 2022 appears in Note 4, Revenue, to our consolidated financial statements included herein.
Contingent Consideration
Subsequent to an acquisition, we measure contingent consideration arrangements at fair value for each period with changes in fair value recognized in the consolidated statements of operations as contingent consideration gains, restructuring charges and other. Changes in contingent consideration can result from changes in the assumed achievement and timing of estimated sales and regulatory approvals. In the absence of new information, changes in fair value reflect the impact of the passage of time towards the potential achievement of the milestones.
The following table includes the key assumptions used in the valuation of our contingent consideration milestones:
Assumption RangesUtilized as of December 31, 2024
Discount rates 7.8% to 8.1%
Probability of payment for remaining regulatory milestones 0%
The maximum remaining potential payments related to contingent consideration from the Flexion Acquisition is $372.3 million as of December 31, 2024. Changes to assumptions may result in a material impact to the calculated amounts. Additionally, the forecasted revenue annual growth rates are key assumptions in the contingent consideration valuations associated with our commercial milestones. The impact of a hypothetical 10 percent increase in the forecasted annual growth rates would have increased the value of our contingent consideration liability associated with the Flexion Acquisition as of December 31, 2024 by $6.3 million. The impact of a hypothetical 100 basis point increase in the discount rate would have reduced the value of our contingent consideration liability associated with the Flexion Acquisition as of December 31, 2024 by $0.9 million.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination and is subject to impairment testing at least annually or upon the occurrence of a triggering event that could indicate a potential impairment. We have historically tested goodwill for impairment by performing a qualitative assessment in order to determine whether facts and circumstances support a determination that reporting unit fair values are greater than their carrying values. This has historically been performed using readily available market data and company-specific factors.
If we determine that it is more likely than not that the fair value of the Company is less than its carrying value, a quantitative test is required. This is performed by comparing the fair value of the Company with its carrying value. If the
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estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, impairment is indicated, requiring recognition of a goodwill impairment charge up to the carrying value of goodwill. The fair value of the Company would be calculated through an income approach. Under the income approach, we calculate the fair value based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to assume fair value. Our estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans which incorporate estimates for sales growth and future margins. Additional assumptions would include estimated discount rates and the probability of success for our product pipeline candidate products. We believe such assumptions would reflect current and anticipated market conditions and are consistent with those that would be used by other marketplace participants for similar valuation purposes. Such assumptions are subject to change due to changing economic and competitive conditions.
In July 2024, the FDA approved a generic competitor to EXPAREL and in August 2024, a U.S. District Court ruled that one of our EXPAREL patents was not valid. We determined that these events, combined with a subsequent decrease in our common stock price, indicated that it was more likely than not that the fair value of goodwill may be less than its carrying value, which required us to perform a quantitative impairment test. This quantitative impairment test resulted in our carrying value exceeding the fair value of the Company by more than the goodwill balance. As a result, the goodwill balance of $163.2 million was fully impaired during the three months ended September 30, 2024. For more information, see Note 8, Goodwill and Intangible Assets, to our consolidated financial statements included herein.
Recent Accounting Pronouncements
See Note 3, Recent Accounting Pronouncements, to our consolidated financial statements included herein for further discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The primary objective of our cash equivalents and investment activities is to preserve principal while at the same time maximizing the income that we receive from our investments without significantly increasing risk. We invest in corporate bonds, commercial paper, asset-backed securities and U.S. Treasury and other government agency notes for purposes other than trading which are reported at fair value. These securities are subject to interest rate risk and credit risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the interest rate later rises, we expect that the fair value of our investment will decline. A hypothetical 100 basis point increase in interest rates would have reduced the fair value of our available-for-sale securities at December 31, 2024 by approximately $0.8 million.
The fair value of our 2025 Notes is impacted by both the fair value of our common stock and interest rate fluctuations. As of December 31, 2024, the estimated fair value of the 2025 Notes was $971 per $1,000 principal amount. See Note 10, Debt, to our consolidated financial statements included herein for further discussion of our 2025 Notes, which bears interest at a fixed rate. At December 31, 2024, $202.5 million of principal remains outstanding on the 2025 Notes.
The fair value of our 2029 Notes is impacted by both the fair value of our common stock and interest rate fluctuations. As of December 31, 2024, the estimated fair value of the 2029 Notes was $861 per $1,000 principal amount. See Note 10, Debt, to our consolidated financial statements included herein for further discussion of our 2029 Notes, which bears interest at a fixed rate. At December 31, 2024, all $287.5 million of principal remains outstanding on the 2029 Notes.
The TLA Term Loan provides for a single-advance term loan in the principal amount of $150.0 million and is scheduled to mature on March 31, 2028. Each term loan borrowing that is a term benchmark borrowing or daily simple SOFR borrowing bears interest at a rate per annum equal to (i) the Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR (as each is defined in the TLA Credit Agreement), plus (ii) a spread based on our Senior Secured Net Leverage Ratio ranging from 3.00% to 3.75%. At December 31, 2024, the outstanding principal on the TLA Term Loan was $105.3 million. As of December 31, 2024, borrowings under the TLA Term Loan consisted entirely of term benchmark borrowings at a rate of 7.43%. A hypothetical 100 basis point increase in interest rates would increase interest expense over the next 12 months by approximately $1.1 million, based on the balances outstanding for these borrowings as of December 31, 2024.
We have agreements with certain vendors and partners that operate in foreign jurisdictions. The more significant transactions are primarily denominated in the U.S. Dollar, subject to an annual adjustment based on changes in currency exchange rates.
Additionally, our accounts receivable are primarily concentrated with three large wholesalers of pharmaceutical products. In the event of non-performance or non-payment, there may be a material adverse impact on our financial condition, results of operations or net cash flow.
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Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements required by this item, together with the report of our independent registered public accounting firm, begin on page F-1 of this Annual Report.
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
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, which are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on their evaluation as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2024.
Management’s Report on Internal Control over Financial Reporting
Our 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 GAAP. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based upon the results of the evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.
The effectiveness of our internal control over financial reporting as of December 31, 2024 was audited by KPMG LLP, our independent registered public accounting firm, which expressed an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2024.
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2024, there have been no changes in our internal control over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
During the quarter ended December 31, 2024, no director or executive officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this item will be included in the proxy statement for our 2025 annual stockholders’ meeting and is incorporated by reference into this report.
Item 11. Executive Compensation
Information required by this item will be included in the proxy statement for our 2025 annual stockholders’ meeting and is incorporated by reference into this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
Information required by this item will be included in the proxy statement for our 2025 annual stockholders’ meeting and is incorporated by reference into this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item will be included in the proxy statement for our 2025 annual stockholders’ meeting and is incorporated by reference into this report.
Item 14. Principal Accountant Fees and Services
Information required by this item will be included in the proxy statement for our 2025 annual stockholders’ meeting and is incorporated by reference into this report.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)Documents filed as part of this Annual Report on Form 10-K:
(1) Financial Statements
Index to the Consolidated Financial Statements Page #
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Comprehensive (Loss) Income F-6
Consolidated Statements of Stockholders’ Equity F-7
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-10
The report of our independent registered accounting firm, KPMG LLP, with respect to the above-referenced financial statements and on internal control over financial reporting, is included in this Annual Report on Form 10-K. Their consent appears as Exhibit 23.1 of this Annual Report on Form 10-K.
Report of Independent Registered Public Accounting Firm
(2) Schedules
All financial statement schedules have been omitted because they are not required, are not applicable or the information is included in the consolidated financial statements or related notes thereto.
(3) Exhibits
The following exhibits are filed with, or incorporated by reference in this Annual Report on Form 10-K.
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EXHIBIT INDEX
Incorporation By Reference From
ExhibitNumber Description Form Exhibit DateFiled
3.1 Amended and Restated Certificate of Incorporation. 8-K 3.1 2/11/2011
3.3 Second Amended and Restated Bylaws. 8-K 3.2 4/9/2019
4.1 Specimen Certificate Evidencing Shares of Common Stock.*
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Incorporation By Reference From
ExhibitNumber Description Form Exhibit DateFiled
10.28 Pacira BioSciences, Inc. Deferred Compensation Plan.*** 8-K 10.1 6/11/2020
10.31 Pacira BioSciences, Inc. Long-Term Incentive Plan.* ***
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Incorporation By Reference From
ExhibitNumber Description Form Exhibit DateFiled
19 Pacira BioSciences, Inc. Insider Trading Policy.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of KPMG LLP.*
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Incorporation By Reference From
ExhibitNumber Description Form Exhibit DateFiled
101.INS* Inline XBRL Instance Document.*
101.SCH* Inline XBRL Taxonomy Schema Document.*
101.CAL* Inline XBRL Taxonomy Calculation Linkbase Document.*
101.LAB* Inline XBRL Taxonomy Label Linkbase Document.*
101.PRE* Inline XBRL Taxonomy Presentation Linkbase Document.*
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document.*
* Filed herewith.
** Furnished herewith.
*** Denotes management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
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SIGNATURES
PACIRA BIOSCIENCES, INC./s/ FRANK D. LEE
Date: February 27, 2025 By: Frank D. LeeChief Executive Officer and Director
Principal Executive Officer Directors
/s/ FRANK D. LEE /s/ MARCELO BIGAL /s/ ABRAHAM CEESAY
Frank D. Lee Marcelo Bigal Abraham Ceesay
Chief Executive Officer and Director
/s/ CHRISTOPHER J. CHRISTIE /s/ MARK FROIMSON
Principal Financial Officer Christopher J. Christie Mark Froimson
/s/ SHAWN M. CROSS /s/ MARK KRONENFELD /s/ MICHAEL YANG
Shawn M. Cross Mark Kronenfeld Michael Yang
Chief Financial Officer
/s/ ALETHIA YOUNG /s/ LAURA BREGE
Principal Accounting Officer Alethia Young Laura Brege
Chair of the Board of Directors
/s/ LAUREN RIKER
Lauren Riker
Senior Vice President, Finance
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PACIRA BIOSCIENCES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2024
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page #
Report of Independent Registered Public Accounting Firm F-2
Auditor Name: KPMG LLP
Auditor Location: Short Hills, NJ
Auditor Firm ID: 185
Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4
Notes to Consolidated Financial Statements F-10
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Pacira BioSciences, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Pacira BioSciences, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, 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 consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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.
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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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated 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 consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Fair value measurement of the contingent consideration liability associated with the acquisition of Flexion
As discussed in Notes 2 and 11 to the consolidated financial statements, the Company recognized a contingent consideration liability at its estimated fair value on the acquisition date, in connection with the acquisition of Flexion Therapeutics, Inc. (Flexion). Subsequent changes to the fair value of the contingent consideration liability are recorded in the consolidated statement of operations in the period of change. The Company estimates the fair value using a Monte Carlo simulation. The fair value of the Flexion contingent consideration as of December 31, 2024 was $20.2 million.
We identified the evaluation of the fair value measurement of the contingent consideration liability related to achieving commercial milestones associated with the acquisition of Flexion as a critical audit matter. Evaluating the fair value measurement of the contingent consideration liability required significant auditor judgment, due to the high degree of subjectivity inherent in certain assumptions with unobservable inputs that were used in the model. In particular, the fair value measurement was sensitive to management’s forecasts of revenues, volatility, and discount rates. In addition, the audit effort associated with the evaluation of the Company’s volatility and discount rates involved the use of valuation professionals with specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s fair value measurement process for the contingent consideration liability related to achieving commercial milestones. This included controls related to the development of the assumptions for forecasted revenues, volatility, and discount rates. We evaluated the forecasted revenues and certain commercial milestone assumptions used in the Company’s models by comparing them to historical data, industry benchmarks and other third-party market data that were assessed to be relevant and reliable. We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independent estimate of the discount rates and volatility assumptions using inputs from publicly available market data and comparing the results to the Company’s discount rates and volatility assumptions.
Impairment of Goodwill
As discussed in Notes 2 and 8 to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis or upon the occurrence of a triggering event that could indicate a potential impairment. During the three months ended September 30, 2024, the Company determined that certain triggering events, combined with a subsequent decrease in common stock price, indicated that it was more likely than not that the fair value of goodwill may be less than its carrying value, which required the Company to perform a quantitative impairment test. The fair value of the Company’s reporting unit was calculated through a discounted cash flow model (or income approach), based on the present value of estimated future cash flows including assumptions around forecasted revenue growth rates and estimated discount rate. As a result of the quantitative impairment test, the goodwill balance of $163.2 million was fully impaired during the three months ended September 30, 2024.
We identified the evaluation of the fair value of the Company’s reporting unit as a critical audit matter. Evaluating the fair value of the reporting unit was complex and required significant auditor judgment due to the high degree of subjectivity in evaluating certain assumptions used to estimate the fair value of the reporting unit. In particular, the fair value measurement was sensitive to management’s forecast of revenue growth rates and the discount rate assumptions. Changes in these assumptions could have a significant impact on the fair value of the reporting unit. In addition, the audit effort associated with the evaluation of the Company’s revenue growth rates and discount rate required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s calculation of the fair value of its reporting unit. This included controls related to the development of assumptions for forecasted revenue growth rates and discount rate. We evaluated the Company’s forecasted revenue growth rates by comparing them to historical actual growth rates and industry
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data that was assessed to be relevant and reliable. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the projected revenue growth rates by comparing them to guideline public companies and developing an independent estimate of the discount rate using inputs from publicly available market data and comparing the results to the Company's discount rate assumption.
/s/ KPMG LLP
We have served as the Company’s auditor since 2015.
Short Hills, New Jersey
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PACIRA BIOSCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
ASSETS
Current assets:
Prepaid expenses and other current assets 21,929 21,504
Noncurrent available-for-sale investments — 2,410
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of convertible senior notes, net 201,776 8,641
Commitments and contingencies (Note 19)
Stockholders’ equity:
Accumulated other comprehensive income 343 247
See accompanying notes to consolidated financial statements.
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PACIRA BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended December 31,
Revenues:
Operating expenses:
Goodwill impairment 163,243 — —
Other income (expense):
Gain (loss) on early extinguishment of debt 7,518 (16,926) —
Net (loss) income per share:
Basic net (loss) income per common share $ (2.15) $ 0.91 $ 0.35
Diluted net (loss) income per common share $ (2.15) $ 0.89 $ 0.34
Weighted average common shares outstanding:
See accompanying notes to consolidated financial statements.
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PACIRA BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
Year Ended December 31,
Other comprehensive income (loss):
Net unrealized gain (loss) on investments, net of tax 66 647 (662)
Foreign currency translation adjustments 30 (20) 115
Total other comprehensive income (loss) 96 627 (547)
See accompanying notes to consolidated financial statements
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PACIRA BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022
(In thousands)
Common Shares Treasury Shares Common Stock Treasury Stock
Vested restricted stock units 331 — — — — — — —
Common stock issued under employee stock purchase plan 71 — — — 2,954 — — 2,954
Other comprehensive loss (Note 12) — — — — — — (547) (547)
Vested restricted stock units 404 — — — (1) — — (1)
Common stock issued under employee stock purchase plan 90 — — — 2,811 — — 2,811
Other comprehensive income (Note 12) — — — — — — 627 627
Vested restricted stock units 501 — 1 — — — — 1
Common stock issued under employee stock purchase plan 115 — — — 2,298 — — 2,298
Purchase of capped call transaction, net of tax — — — — (20,176) — — (20,176)
Other comprehensive income (Note 12) — — — — — — 96 96
See accompanying notes to consolidated financial statements.
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PACIRA BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
Operating activities:
Goodwill impairment 163,243 — —
Loss on lease terminations 2,165 — —
(Gain) loss on early extinguishment of debt (7,518) 16,926 —
Impairment of indefinite-lived intangible asset — — 26,134
Impairment of investment — — 10,000
Changes in operating assets and liabilities:
Investing activities:
Payment of contingent consideration — — (32,000)
Purchases of debt and equity investments — (6,758) (13,000)
Financing activities:
Proceeds from exercises of stock options — 1,939 24,387
Proceeds from shares issued under employee stock purchase plan 2,298 2,811 2,954
Purchase of treasury stock (25,000) — —
Proceeds from 2029 convertible senior notes 287,500 — —
Proceeds from Term loan A facility — 149,550 —
Repayment of 2022 convertible senior notes — — (156,960)
Repayment of 2025 convertible senior notes (190,994) — —
Repayment of Term loan A facility (11,250) (33,437) —
Purchase of capped call transactions (26,709) — —
Debt extinguishment costs — (5,750) —
Payment of debt issuance and financing costs (9,350) (1,163) (1,175)
See accompanying notes to consolidated financial statements.
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Year Ended December 31,
Supplemental cash flow information:
Cash paid for income taxes, net of refunds $ 11,021 $ 4,366 $ 7,398
Non-cash investing and financing activities:
Excise tax on share repurchases included in accrued liabilities $ 121 $ — $ —
See accompanying notes to consolidated financial statements.
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—DESCRIPTION OF BUSINESS
Pacira BioSciences, Inc. and its subsidiaries (collectively, the “Company” or “Pacira”) delivers innovative, non-opioid pain therapies to transform the lives of patients. The Company’s long-acting, local analgesic, EXPAREL® (bupivacaine liposome injectable suspension), was commercially launched in the United States, or U.S., in April 2012 and approved in select European countries and the United Kingdom, or U.K., in November 2021. EXPAREL utilizes the Company’s proprietary multivesicular liposome, or pMVL, drug delivery technology that encapsulates drugs without altering their molecular structure and releases them over a desired period of time. EXPAREL is currently indicated to produce postsurgical local analgesia via infiltration in patients aged 6 years and older, and postsurgical regional analgesia via an interscalene brachial plexus block in adults, a sciatic nerve block in the popliteal fossa in adults, and an adductor canal block in adults for postsurgical pain management (the safety and effectiveness of EXPAREL have not been established to produce postsurgical regional analgesia via other nerve blocks besides an interscalene brachial plexus nerve block, a sciatic nerve block in the popliteal fossa, or an adductor canal block). In November 2021, the Company acquired Flexion Therapeutics, Inc., or Flexion (the “Flexion Acquisition”), and added ZILRETTA® (triamcinolone acetonide extended-release injectable suspension) to its product portfolio. ZILRETTA is the first and only extended-release, intra-articular (meaning in the joint) injection indicated for the management of osteoarthritis, or OA, knee pain. In April 2019, the Company added iovera®°to its commercial offering with the acquisition of MyoScience, Inc., or MyoScience (the “MyoScience Acquisition”). The iovera° system is a handheld cryoanalgesia device that delivers immediate, long-acting, drug-free pain control using precise, controlled doses of cold temperature to a targeted nerve. The Company is also advancing the development of PCRX-201 (enekinragene inzadenovec), a novel gene therapy vector platform enabling local administration of genetic medicines with the potential to treat large prevalent diseases like OA. In February 2025, the Company acquired the remaining equity interest in GQ Bio Therapeutics GmbH, or GQ Bio (the “GQ Bio Acquisition”) a privately-held biopharmaceutical company with a novel, high-capacity, local-delivery platform that makes genetic medicines more efficient and enables the use of large and multiple gene constructs. PCRX-201 is the lead program from this platform. For more information on the GQ Bio Acquisition, see Note 21, Subsequent Events.
Pacira is subject to risks common to companies in similar industries and stages, including, but not limited to, competition from larger companies and potential generic entrants, reliance on revenue from three products, reliance on a limited number of wholesalers, reliance on a limited number of manufacturing sites, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology, compliance with government regulations and risks related to cybersecurity.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. The accounts of the Company’s wholly owned subsidiaries are included in these consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications from previously issued financial statements have been made to conform to the current presentation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and contingent liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for, among other things, revenue recognition, valuation of acquired assets and liabilities, stock-based compensation, inventory costs, impairments of equity investments, long-lived assets, goodwill and other intangible assets, liabilities and accruals, including contingent consideration, and the valuation of deferred tax assets. Because of the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial statements, actual results could differ from these estimates.
Revenue From Contracts With Customers
The Company’s net product sales consist of (i) EXPAREL in the U.S., European Union, or E.U., and the U.K.; (ii) ZILRETTA in the U.S.; (iii) iovera° in the U.S., Canada and Europe and (iv) sales of its bupivacaine liposome injectable suspension for veterinary use. Royalty revenues are related to a collaborative licensing agreement from the sale of the Company’s bupivacaine liposome injectable suspension product for veterinary use. See Note 4, Revenue, for further information on the Company’s accounting policies related to revenue from contracts with customers.
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Royalty Revenue
Royalties are estimated and recognized as revenue when sales to the Company’s commercial partners occur, unless some constraint exists, as the royalties predominately relate to a supply agreement. Royalties are based on sales of the Company’s bupivacaine liposome injectable suspension product for veterinary use.
Concentration of Major Customers
The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers (including AmerisourceBergen Health Corporation, Cardinal Health, Inc. and McKesson Drug Company), but shipments of the product are sent directly to individual accounts, such as hospitals, ambulatory surgery centers and individual physicians. The Company also sells EXPAREL directly to ambulatory surgery centers and individual physicians. The Company sells ZILRETTA primarily to specialty distributors and specialty pharmacies, who then subsequently resell ZILRETTA to physicians, clinics and certain medical centers or hospitals. The Company also contracts directly with healthcare providers and intermediaries such as Group Purchasing Organizations, or GPOs. The Company sells iovera° directly to end users and its bupivacaine liposome injectable suspension product for veterinary use to a third-party licensee in the U.S.
The table below includes the percentage of revenues comprised by the Company’s three largest wholesalers in each period presented:
Year Ended December 31,
Largest wholesaler 34 % 33 % 31 %
Second largest wholesaler 23 % 24 % 23 %
Third largest wholesaler 20 % 20 % 22 %
Revenue from outside the U.S. accounted for less than 1% of the Company’s total revenue for each of the years ended December 31, 2024, 2023 and 2022.
Research and Development Expenses
Research and development expenditures are expensed as incurred. These include both internal and external costs, of which a significant portion of development activities are outsourced to third parties, including contract research organizations, or CROs. Clinical trial costs are accrued over the service periods specified in contracts and adjusted as necessary based on an ongoing review of the level of effort and actual costs incurred by the CROs. Research and development costs are presented net of any reimbursements from commercial partners.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to basis differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company accrues interest and penalties on underpayments of income taxes, including those related to unrecognized tax benefits, as a component of income tax expense in its consolidated statements of operations.
Stock-Based Compensation
The Company’s stock-based compensation consists of grants of stock options and restricted stock units, or RSUs, to employees, consultants and non-employee directors, in addition to the opportunity for employees to participate in an employee stock purchase plan. The expense associated with these programs is recognized in the Company’s consolidated statements of operations based on their fair values as they are earned under their applicable vesting terms or the length of an offering period.
In calculating the estimated fair value of stock options and employee stock purchase plan share options granted, the Company uses the Black-Scholes option valuation model, or Black-Scholes model, which requires the consideration of the
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
following variables for purposes of estimating fair value in addition to the closing price of the Company’s common stock on the date of grant:
•Expected term of the option
•Expected volatility
•Expected dividends
•Risk-free interest rate
The Company utilizes its historical volatility data to determine expected volatility over the expected term of the option. The Company uses an expected term based on its historical stock option activity data for stock option grants and the length of an offering period for employee stock purchase plan share option grants. The risk-free interest rate is based on the implied yield on U.S. Department of the Treasury zero-coupon bonds for periods commensurate with the expected term of the options. The dividend yield on the Company’s common stock is estimated to be zero as the Company has not declared or paid any dividends since inception, nor does it have any intention to do so in the foreseeable future. Additionally, the Company’s ability to declare and pay a dividend in the future could be limited per the agreements governing its indebtedness. The Company records forfeitures of grants as they occur rather than estimating forfeitures during each reporting period.
Cash and Cash Equivalents
All highly liquid investments with maturities of 90 days or less when purchased are considered cash equivalents. Cash equivalents include money market funds. As of December 31, 2024, the carrying value of the Company’s money market funds was $269.4 million. As of December 31, 2023, the carrying value of money market funds was $26.1 million. The carrying values approximate fair value as of December 31, 2024 and 2023.
Short-Term and Noncurrent Available-For-Sale Investments
Available-for-sale investments may consist of asset-backed securities collateralized by credit card receivables, investment grade commercial paper, corporate bonds, federal agency bonds, government and Yankee bonds, and other bonds issued in the U.S. (and denominated in the U.S. dollar) by foreign entities. Current available-for-sale investments are those with maturities of greater than three months, but less than one year. Noncurrent available-for-sale investments hold maturities greater than one year. The Company evaluates the classification of its investments at the time of purchase and re-evaluates such determination at each balance sheet date, which includes an assessment of the intent to hold the available-for-sale securities. The Company’s investment policy sets minimum credit quality criteria and maximum maturity limits on its investments to provide for preservation of capital, liquidity and a reasonable rate of return. The Company classifies its investments as available-for-sale. Available-for-sale securities are recorded at fair value, based on current market valuations. Unrealized holding gains and losses on available-for-sale securities (except for credit losses) are excluded from net (loss) income and are reported as a separate component of accumulated other comprehensive income until realized. Realized gains and losses are included in interest income in the consolidated statements of operations and are derived using the specific identification method for determining the cost of the securities sold. The Company evaluates whether a credit loss exists, and in the event a credit loss does exist, the credit loss is recognized in the consolidated statements of operations based on the amount that the fair value is less than the amortized cost.
Inventories
Inventories consist of finished goods held for sale and distribution, raw materials and work in process. Inventories are stated at the lower of cost, which includes amounts related to material, labor and overhead, or net realizable value, and is determined using the first-in, first-out method. The Company periodically reviews its inventory to identify obsolete, slow-moving, or otherwise unsalable inventories, and establishes allowances for situations in which the cost of the inventory is not expected to be recovered.
Fixed Assets
Fixed assets are recorded at cost, net of accumulated depreciation and amortization. The Company reviews its property, plant and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Depreciation of fixed assets is provided over their estimated useful lives on a straight-line basis. The Company periodically reviews these useful lives relative to physical factors, economic factors and industry trends. If there are changes in the planned use of property or equipment, the useful lives assigned to these assets may need to be shortened, resulting in the
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recognition of accelerated depreciation expense in future periods. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the related remaining lease terms. Useful lives by asset category are as follows:
Asset Category Useful Life
Computer equipment and software 1 to 3 years
Office furniture and equipment 5 years
Manufacturing and laboratory equipment 5 to 15 years
Asset Retirement Obligations
The Company has contractual obligations stemming from certain of its lease agreements to return leased space to its original condition upon termination of such lease agreements. The Company records its asset retirement obligations, or ARO, along with a corresponding capital asset in an amount equal to the estimated fair value of the ARO, based on the present value of expected future cash flows. In subsequent periods, the Company records expense to accrete the ARO to its full value. Each ARO capital asset is depreciated over the depreciable term of the associated fixed asset.
Leases
The Company recognizes right-of-use, or ROU, assets and lease liabilities at the commencement of its lease agreements. The leases are evaluated at commencement to determine whether they should be classified as operating or financing leases. Lease costs associated with operating leases are recognized on a straight-line basis, while lease costs for financing leases are recognized over the lease term using the effective interest method. The Company does not currently have any financing leases. The amount of ROU assets and lease liabilities to be recognized is impacted by the type of lease payments, the lease term and the incremental borrowing rate. Variable lease payments are not included at commencement and are recognized in the period in which they are incurred.
The Company has elected to net the amortization of its ROU assets and the reduction of the lease liability principal in other liabilities in the consolidated statement of cash flows.
The lease term is based on the contractual term and is adjusted for any renewal options or termination rights that are reasonably certain to be exercised. The incremental borrowing rate is based on the rate the Company estimates it would pay on a collateralized basis over a similar term in a similar economic environment.
Acquisitions
In a business combination, the acquisition method of accounting requires that the assets acquired and liabilities assumed be recorded as of the date of the acquisition at their respective fair values, with some exceptions. Assets acquired and liabilities assumed in a business combination that arise from contingencies are generally recognized at fair value. If fair value can be determined, the asset or liability is recognized; if fair value is not determinable, then no asset or liability is recognized. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Acquired in-process research and development, or IPR&D, is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use. If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired IPR&D with no alternative future use is recorded as an expense at the acquisition date.
Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs and costs to restructure the acquired company are expensed as incurred. The operating results of the acquired business are reflected in the Company’s consolidated financial statements after the closing date of the acquisition.
Contingent Consideration
Subsequent to an acquisition, the Company measures contingent consideration arrangements at fair value at each reporting period, with changes in fair value recognized in the consolidated statements of operations. Changes in contingent consideration
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
can result from changes in the assumed achievement and timing of estimated sales and regulatory approvals. In the absence of new information, changes in fair value reflect the passage of time towards achievement or expiration of the milestones, and are accreted to the period in which payments are expected to be made.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination and is subject to impairment testing at least annually or upon the occurrence of a triggering event that could indicate a potential impairment. The Company has historically tested goodwill for impairment by performing a qualitative assessment in order to determine whether facts and circumstances support a determination that reporting unit fair values are greater than their carrying values. This has historically been performed using readily available market data and company-specific factors.
If the Company determines that it is more likely than not that the fair value of the Company is less than its carrying value, a quantitative test is required. This is performed by comparing the fair value of the Company with its carrying value. If the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, impairment is indicated, requiring recognition of a goodwill impairment charge up to the carrying value of goodwill. The fair value of the Company would be calculated through an income approach. Under the income approach, the Company calculates the fair value based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes and to estimate the future cash flows used to assume fair value. The Company’s estimates of future cash flows consider past performance, current and anticipated market conditions and internal projections and operating plans which incorporate estimates for sales growth and future margins. Additional assumptions would include forecasted growth rates, estimated discount rates and the probability of success for the Company’s product pipeline candidate products. The Company believes such assumptions would reflect current and anticipated market conditions and are consistent with those that would be used by other marketplace participants for similar valuation purposes. Such assumptions are subject to change due to changing economic and competitive conditions.
Intangible Assets
Intangible assets with definite useful lives are amortized on a straight-line basis over their estimated useful lives and are recorded at cost, net of accumulated amortization. Indefinite-lived intangible assets are tested for impairment at least annually or when a triggering event occurs that could indicate a potential impairment exists. Impairment charges are recognized to the extent the carrying value exceeds its fair value.
Equity Investments
The Company holds investments in equity securities without a readily determinable fair value which are recognized at cost less any impairments, plus or minus any changes resulting from observable price changes in orderly transactions for a similar investment.
Impairments of Long-Lived Assets
Management reviews long-lived assets, including fixed assets and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Per Share Data
Basic net (loss) income per common share is computed by dividing net (loss) income available (attributable) to common stockholders by the weighted average number of shares of common stock outstanding during the period.
Diluted net (loss) income per common share is calculated by dividing net (loss) income available (attributable) to common stockholders as adjusted for the effect of dilutive securities, if any, by the weighted average number of shares of common stock and dilutive common stock outstanding during the period.
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Potential common shares include the shares of common stock issuable upon the exercise of outstanding stock options, the vesting of RSUs and the purchase of shares from the Company’s employee stock purchase plan (using the treasury stock method), if applicable. Potential common shares associated with convertible senior notes are treated under the if-converted method and adjustments are made to the diluted net (loss) income per common share calculation as if the Company had converted the convertible senior notes on the first day of each period presented. Adjustments to the numerator are made to add back the interest expense associated with the convertible senior notes on a post-tax basis. Adjustments to the denominator reflect the number of shares assumed to be convertible at the beginning of the period.
Treasury Stock
Repurchases of the Company’s common stock are accounted for at cost and recorded as treasury stock. The excise tax on repurchases of the Company’s common stock is recorded as a cost of acquiring treasury stock. Any reissued treasury stock is accounted for at average cost. Gains or losses on reissued treasury stock arising from the difference between the average cost and the fair value of the award is recorded in additional paid-in capital in the consolidated balance sheets.
Foreign Currencies
The balance sheet accounts of the Company’s foreign subsidiaries with functional currencies other than the U.S. Dollar are translated using the exchange rate at each respective balance sheet date. Revenues and expenses are translated using the average exchange rates for each calendar month during the year. Translation adjustments are recorded as a component of accumulated other comprehensive income in the consolidated financial statements. Gains or losses from foreign currency exchanges are recorded in other, net in the consolidated statements of operations.
NOTE 3—RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The ASU amendment improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis. The new segment disclosure requirements apply for entities with a single reportable segment. The Company adopted the standard for its annual reporting which was applied retrospectively for all prior years presented. The ASU's amendment is effective for interim periods in fiscal years beginning after December 15, 2024. Refer to Note 20, Segment Information, for more information.
Recently Issued Accounting Pronouncements Not Adopted as of December 31, 2024
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The ASU amendment addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU’s amendments are effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The ASU amendment improves financial reporting by requiring public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The ASU’s amendments are effective for annual reporting periods beginning after December 31, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. This ASU amendment can be applied on a prospective basis or retrospectively. The Company is currently evaluating the impact of adopting ASU 2024-03 on its footnote disclosures.
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4—REVENUE
The Company’s sources of revenue are detailed in Note 2, Summary of Significant Accounting Policies. The Company does not consider revenue from sources other than sales of EXPAREL and ZILRETTA to be material sources of its consolidated revenue. As such, the following disclosure is limited to revenue associated with net product sales of EXPAREL and ZILRETTA.
Net Product Sales
The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers based on orders of the product placed by end-users, namely hospitals, ambulatory surgery centers and healthcare provider offices. EXPAREL is delivered directly to the end-user without the wholesaler ever taking physical possession of the product. The Company primarily sells ZILRETTA to specialty distributors and specialty pharmacies, who then subsequently resell ZILRETTA to physicians, clinics and certain medical centers or hospitals. The Company also contracts directly with healthcare providers and intermediaries such as GPOs. Product revenue is recognized when control of the promised goods are transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods. EXPAREL and ZILRETTA revenue is recorded at the time the products are transferred to the customer.
Revenues from sales of products are recorded net of returns allowances, prompt payment discounts, service fees, government rebates, volume rebates and chargebacks. These reserves are based on estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale, using the most likely amount method, except for returns, which is based on the expected value method. The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved.
Chargebacks for fees and discounts represent the estimated obligations resulting from contractual commitments to sell products to Department of Veteran Affairs hospitals, participating GPO members, 340B qualified entities and other contracted customers at prices lower than the list price. The 340B Drug Discount Program is a U.S. federal government program that requires participating drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at reduced prices. Customers claim the difference between the amount invoiced and the discounted selling price through a chargeback issued by a wholesaler. Reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and trade receivables, net. Chargeback amounts are determined at the time of sale and the Company generally issues credits for such amounts within weeks of receiving notification from a wholesaler. Reserves for chargebacks consist of anticipated credits the Company expects to issue based on expected units sold and chargebacks that customers have claimed for which credits have not yet been issued.
The calculation for some of these items requires management to make estimates based on sales data, historical return data, contracts, statutory requirements and other related information that may become known in the future. The adequacy of these provisions is reviewed on a quarterly basis.
Pacira BioSciences, Inc. | 2024 Annual Report on Form 10-K | Page F-17
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table provides a summary of activity with respect to the Company’s sales related allowances and accruals related to EXPAREL and ZILRETTA for the years ended December 31, 2024, 2023 and 2022 (in thousands):
Accounts Receivable
The majority of accounts receivable arise from product sales and represent amounts due from wholesalers, hospitals, ambulatory surgery centers, specialty distributors, specialty pharmacies and individual physicians. Payment terms generally range from zero to four months from the date of the transaction, and accordingly, there is no significant financing component.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Codification, or ASC, 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
At contract inception, the Company assesses the goods promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good that is distinct. When identifying individual performance obligations, the Company considers all goods promised in the contract regardless of whether explicitly stated in the customer contract or implied by customary business practices. The Company’s contracts with customers require it to transfer an individual distinct product, which represents a single performance obligation. The Company’s performance obligation with respect to its product sales is satisfied at a point in time, which transfers control upon delivery of EXPAREL and ZILRETTA to its customers. The Company considers control to have transferred upon delivery because the customer has legal title to the asset, physical possession of the asset has been transferred, the customer has significant risks and rewards of ownership of the asset and the Company has a present right to payment at that time.
Disaggregated Revenue
The following table represents disaggregated net product sales in the periods presented as follows (in thousands):
Year Ended December 31,
Net product sales:
Pacira BioSciences, Inc. | 2024 Annual Report on Form 10-K | Page F-18
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PACIRA BIOSCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5—INVENTORIES
The components of inventories, net are as follows (in thousands):
December 31,
NOTE 6—FIXED ASSETS
Fixed assets, net, summarized by major category, consist of the following (in thousands):
December 31,
Office furniture and equipment 1,952 2,543
(1) During the year ended December 31, 2024, the Company disposed of $19.0 million of fully depreciated machinery and equipment associated with its 45-liter EXPAREL manufacturing process at its contract manufacturing facility located in Swindon, U.K. The Company continues to operate its enhanced, larger-scale EXPAREL manufacturing process at the same facility.
(2) During the year ended December 31, 2024, an enhanced, large-scale EXPAREL manufacturing suite at the Company’s Science Center Campus in San Diego, California was placed into service, for which approximately $76.1 million was reclassified from construction in progress to machinery and equipment, leasehold improvements and computer equipment and software.
Depreciation expense for the years ended December 31, 2024, 2023 and 2022 was $21.5 million, $18.3 million and $34.2 million, respectively. In 2022, the Company accelerated $10.5 million of depreciation expense for certain machinery and equipment for which no future economic benefit was identified. During the years ended December 31, 2024, 2023 and 2022, the Company capitalized interest on the construction of manufacturing sites of $2.1 million, $3.5 million and $4.1 million, respectively.
As of December 31, 2024 and 2023, total fixed assets, net, includes manufacturing process equipment and leasehold improvements located outside of the U.S. in the amount of $51.1 million and $36.8 million, respectively.
As of December 31, 2024 and 2023, the Company had AROs of $4.2 million and $4.3 million, respectively, included in accrued expenses and other liabilities on its consolidated balance sheets, for costs associated with returning leased spaces to their original condition upon the termination of their lease agreements.
During the three months ended September 30, 2024, the U.S. Food and Drug Administration, or FDA, approved a generic competitor to EXPAREL and a U.S. District Court ruled that one of the Company’s patents was not valid (for more information, see Note 19, Commitments and Contingencies). The Company determined that these events and a subsequent decrease in the Company’s common stock price constituted impairment indicators under ASC 360 Property, Plant and Equipment. As of September 30, 2024, the Company performed a quantitative recoverability test of the carrying values of its asset group. The Company estimated the undiscounted future cash flows expected to result from the use of its asset group and determined the carrying amount of the asset group was recoverable.
Pacira BioSciences, Inc. | 2024 Annual Report on Form 10-K | Page F-19
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