Collegium Pharmaceutical
Annual Report 2017

Plain-text annual report

Table of Contents04 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2017 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-37372Collegium Pharmaceutical, Inc.(Exact name of registrant as specified in its charter) Virginia(State or other jurisdiction ofincorporation or organization) 03-0416362(I.R.S. EmployerIdentification Number) 780 Dedham Street, Suite 800Canton, MA(Address of principal executive offices) 02021(Zip Code) (781) 713-3699(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of exchange on which registered:Common stock, par value $0.001 per share The NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of“large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐(Do not check ifsmaller reporting company) Smaller reporting company ☐Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ As of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of theregistrant was approximately $272 million, based on the closing price of the registrant’s common stock on The NASDAQ Global Select Market on June 30, 2017 of $12.51 per share. Shares of theregistrant’s common stock held by each officer and director and each person known to the registrant to own 10% or more of the outstanding common stock of the registrant have been excluded in thatsuch persons may be deemed affiliates. This determination of affiliate status is not a determination for other purposes. As of March 1, 2018, there were 32,993,894 shares of the registrant's common stock, par value, $0.001 per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement for its 2018 Annual Meeting of Shareholders (the "Proxy Statement"), to be filed within 120 days of the registrant's year ended December 31, 2017,are incorporated by reference in Part II and Part III of this Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is notdeemed to be filed as part of this Form 10-K Table of ContentsTABLE OF CONTENTS Page No. PART I Item 1.Business 4 Item 1A.Risk Factors 32 Item 1B.Unresolved Staff Comments 74 Item 2.Properties 74 Item 3.Legal Proceedings 74 Item 4.Mine Safety Disclosures 76 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities 76 Item 6.Selected Financial Data 78 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations 79 Item 7A.Quantitative and Qualitative Disclosures about Market Risk 91 Item 8.Financial Statements and Supplementary Data 91 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 91 Item 9A.Controls and Procedures 91 Item 9B.Other Information 92 PART III Item 10.Directors, Executive Officers and Corporate Governance 92 Item 11.Executive Compensation 92 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 92 Item 13.Certain Relationships and Related Transactions, and Director Independence 92 Item 14.Principal Accountant Fees and Services 92 PART IV Item 15.Exhibits and Financial Statement Schedules 93 Item 16.Form 10-K Summary 96 SIGNATURES 102 2 Table of ContentsForward-Looking Information This Annual Report on Form 10-K, or this Form 10-K, includes forward-looking statements. These statements relate to futureevents or to our future financial performance and involve known and unknown risks, uncertainties and other importantfactors which may cause our actual results, performance or achievements to be materially different from any future results,performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include,but are not limited to, statements about: ·our ability to obtain and maintain regulatory approval of our products and product candidates, and any relatedrestrictions, limitations, and/or warnings in the label of an approved product;·our plans to commercialize our product candidates and grow sales of our products;·our ability to effectively commercialize in-licensed products and manage our relationships with licensors, includingour ability to satisfy our royalty payment obligations in connection with such products;·the size and growth potential of the markets for our products and product candidates, and our ability to service thosemarkets;·the success of competing products that are or become available;·our ability to obtain reimbursement and third-party payor contracts for our products;·the costs of commercialization activities, including marketing, sales and distribution;·our ability to develop sales and marketing capabilities, whether alone or with potential future collaborators;·the rate and degree of market acceptance of our products and product candidates;·changing market conditions for our products and product candidates;·the outcome of any patent infringement or other litigation that may be brought by or against us, including litigationwith Purdue Pharma, L.P. and Teva Pharmaceuticals USA, Inc.;·our ability to attract collaborators with development, regulatory and commercialization expertise;·the success, cost and timing of our product development activities, studies and clinical trials;·our ability to obtain funding for our operations;·regulatory developments in the United States and foreign countries;·our expectations regarding our ability to obtain and adequately maintain sufficient intellectual property protectionfor our products and product candidates;·our ability to operate our business without infringing the intellectual property rights of others;·the performance of our third-party suppliers and manufacturers;·our ability to secure adequate supplies of active pharmaceutical ingredient for each of our products and productcandidates;·our ability to comply with stringent U.S. and foreign government regulation in the manufacture of pharmaceuticalproducts, including U.S. Drug Enforcement Agency, or DEA, compliance;·the loss of key scientific or management personnel;·our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;·our customer concentration, which may adversely affect our financial condition and results of operations; and·the accuracy of our estimates regarding expenses, revenue, capital requirements and need for additional financing. In some cases, you can identify these statements by terms such as “aim,” “anticipate,” “believe,” “estimate,” “expect,”“forecast,” “intend,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “may,” “could,” “would,” “should,”“can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning. These forward-lookingstatements reflect our management's beliefs and views with respect to future events and are based on estimates andassumptions as of the date of this Form 10-K and are subject to risks and uncertainties. We discuss many of these risks ingreater detail under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changingenvironment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assessthe impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual resultsto differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, youshould not place undue reliance on these forward-looking statements. Any forward-looking statements that we make in thisForm 10-K speak only as of the date of such statement, and we undertake no obligation to update such statements to reflectevents or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events. Comparisons ofresults for current and any prior periods are not intended to express any future trends or indications of future performance,unless expressed as such, and should only be viewed as historical data.3 Table of Contents Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update thereasons actual results could differ materially from those anticipated in these forward-looking statements, even if newinformation becomes available in the future.We obtained the industry, market and competitive position data in this Form 10-K from our own internal estimates andresearch as well as from industry and general publications and research surveys and studies conducted by third parties. Webelieve this data is accurate in all material respects as of the date of this Form 10-K. In addition, projections, assumptions andestimates of the future performance of the industry in which we operate and our future performance are necessarily subject toa high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” PART I Item 1. Business Overview We are a specialty pharmaceutical company focused on becoming the leader in responsible pain management by developingand commercializing innovative, differentiated products for patients suffering from pain. Our first product, Xtampza, is anabuse-deterrent, extended-release, oral formulation of oxycodone, a widely prescribed opioid medication. In April 2016, theU.S. Food and Drug Administration, or FDA, approved our new drug application, or NDA, filing for Xtampza for themanagement of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternativetreatment options are inadequate. Certain human abuse potential studies are included in the approved label, as well as datasupporting the administration of the product as a sprinkle or administered through feeding tubes. In June 2016, weannounced the commercial launch of Xtampza. Xtampza has the same active ingredient as OxyContin OP, which is the largest selling abuse-deterrent, extended-releaseopioid in the United States by dollars, with $1.7 billion in U.S. sales in 2017. We conducted a comprehensive preclinical andclinical program for Xtampza consistent with FDA guidance on abuse-deterrence. These studies and clinical trialsdemonstrated that chewing, crushing and/or dissolving Xtampza, and then taking it orally or smoking, snorting, or injectingit did not meaningfully change its drug release profile or safety characteristics. By contrast, clinical trials performed by usand others — including head-to-head clinical trials comparing Xtampza with OxyContin OP — have shown that drug abuserscan achieve rapid release and absorption of the active ingredient by manipulating OxyContin OP using common householdtools and methods commonly available on the Internet. In November 2017, we announced the approval of a SupplementalNew Drug Application to the FDA for Xtampza to include comparative oral pharmacokinetic data from a clinical studyevaluating the effect of physical manipulation by crushing Xtampza compared with OxyContin OP and a control (oxycodonehydrochloride immediate-release), results from an oral human abuse potential study and the addition of an oral abusedeterrent claim. In addition, our preclinical studies and clinical trials have shown that the contents of the Xtampza capsule can be removedfrom the capsule and sprinkled on food or into a cup, and then directly into the mouth, or administered through feedingtubes, without compromising their drug release profile, safety or abuse-deterrent characteristics. By contrast, OxyContin OP,which is formulated in hard tablets, has a black box warning label stating that crushing, dissolving, or chewing can causerapid release and absorption of a potentially fatal dose of the active ingredient. We believe that Xtampza can address the painmanagement needs of patients in the United States who have difficulty swallowing and suffer from pain severe enough torequire daily, around the clock, long-term opioid treatment and for which alternative treatment options are inadequate. In December 2017, we entered into a Commercialization Agreement with Depomed, Inc., or Depomed, pursuant to whichDepomed agreed to grant us a sublicense of certain of its intellectual property related to Nucynta ER and Nucynta IR, or theNucynta Products, for commercialization of such products in the United States, the District of Columbia and Puerto Rico. Weclosed the transactions contemplated by the Commercialization Agreement, as amended, on January 9, 2018 and we beganmarketing the Nucynta Products in February 2018. Nucynta ER is an extended release formulation of tapentadol that isindicated for the management of pain severe enough to require daily, around the clock, long term opioid treatment, includingneuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate treatment options areinadequate. Nucynta IR is an immediate release formulation of tapentadol that is indicated for the management of moderateto severe acute pain in adults.4 Table of Contents Since 2010, we have devoted substantially all of our resources to the development of our patented DETERx platformtechnology, the preclinical and clinical advancement of our product candidates, pre-commercialization activities and thecreation and protection of related intellectual property. Since 2011, we have generated limited revenue from product salesand we continue to incur significant research, development and other expenses related to our ongoing operations. Prior to ourinitial public offering of common stock, or IPO, in May 2015, we funded our operations primarily through the privateplacement of preferred stock, convertible notes and commercial bank debt. Since our IPO, we have funded our operationsprimarily through the proceeds of public offerings and sale of our equity securities. Background on Chronic Pain and Opioid Abuse Patients Suffering from Chronic Pain Chronic pain, typically defined as pain that lasts beyond the healing of an injury or that persists longer than three months, isa worldwide problem with serious health and economic consequences. According to the National Institutes of Health, or NIH,chronic pain represents a public health crisis of epidemic proportions affecting approximately 100 million people in theUnited States and 20‑30% of the population worldwide — more than heart disease, cancer and diabetes combined. Commontypes of chronic pain include lower back pain, arthritis, headache, and face and jaw pain. The prevalence of chronic pain isexpected to rise in the future, as the incidence of associated illnesses such as diabetes, arthritis and cancer increases in theaging population. Chronic pain leads to over $560 billion in healthcare and productivity costs each year according to the Institute of Medicine.Prescription opioids remain the primary treatment for chronic pain. Chronic pain patients often start treatment withimmediate release opioids, but change to extended‑release opioids to achieve more convenient dosing with more consistentblood levels of the active drug. Extended‑release opioids incorporate a large amount of opioid with a time‑releasemechanism designed to deliver steady amounts of opioid, typically over 12 to 24 hours. Annual sales from extended‑release and long‑acting opioids represent approximately $5.0 billion (21 million prescriptions)of the approximately $13 billion U.S. opioid market in 2017. OxyContin OP generated U.S. sales of $1.7 billion in 2017,which represents approximately a 15% U.S. market share of all extended‑release and long‑acting opioid prescriptions. Prescription Opioid Abuse is an Epidemic in the United StatesAbusers tamper with extended‑release opioid drugs to achieve the euphoria that results from rapid increases in the bloodconcentration of the active ingredient, a potentially fatal activity known as dose dumping. The U.S. Centers for DiseaseControl and Prevention, or CDC, described abuse of prescription drugs in the United States as a growing and deadlyepidemic. Deaths in the United States from prescription opioid overdose have grown from approximately 4,000 in 1999 toapproximately 16,000 in 2013. According to a 2012 study conducted by the CDC, annually there are 144,000 treatment admissions for abuse or misuse ofopioids, 560,000 emergency room visits for misuse or abuse of opioids, over 2.5 million individuals who abuse or aredependent on opioids and over 7.3 million non‑medical users who use opioids without prescriptions or for non‑therapeuticeffects. The American Journal of Managed Care estimated in a 2013 report that opioid abuse costs public and privatehealthcare payors over $72 billion annually in direct healthcare costs, including costs of emergency room visits,rehabilitation and associated health problems. The FDA has estimated that nearly 35 million Americans have used prescription pain relievers, including opioid‑containingdrugs, for non‑prescription purposes at least once in their lifetime. A 2011 research report from the Substance Abuse andMental Health Services Administration estimated that between 1999 and 2009 there was a 430% increase in substance‑abusetreatment facility admissions resulting from the use of prescription pain relievers. According to a 2011 study by theUniversity of Michigan, one in 12 high school seniors reported non‑medical use of Vicodin, a combination ofacetaminophen and hydrocodone, and one in 20 high school seniors reported non‑medical use of OxyContin. Drug abusers find extended‑release opioids desirable because of the large amount of drug payload, which they attempt torelease quickly into the bloodstream to create euphoria. It is difficult for drug abusers to achieve this rapid release and5 Table of Contentsabsorption into the bloodstream by taking multiple intact extended‑release opioid tablets or capsules because doing so oftencauses sleepiness and/or respiratory distress before euphoria is achieved. Instead, abusers attempt to defeat theextended‑release properties in order to achieve rapid release of the active ingredient. Despite the introduction of OxyContin OP in 2010 as the first FDA‑approved, abuse‑deterrent extended‑release opioidformulation, abuse of extended‑release opioids, including OxyContin OP, continues to be a major public health issue.OxyContin OP, even with its abuse‑deterrent formulation, remains vulnerable to abuse using common household objects,like pill crushers. Third party studies found that abusers of OxyContin OP use various routes of abuse — including snorting,injection and oral abuse — despite its abuse‑deterrent features. In a third party study of OxyContin abusers both before andafter OxyContin OP was introduced, researchers found that while the non‑oral route of administration of abuse of OxyContinOP (i.e., injection, snorting and smoking) decreased after its introduction, oral abuse of OxyContin OP increased fromapproximately 52% to 75% of OxyContin abusers. OxyContin OP Tablet + $6.39 Pill Crusher = Abuseable Fine Powder in 16 Seconds Legislative and Regulatory Actions In response to widespread prescription opioid abuse, the U.S. government and a number of state legislatures have introduced,and in some cases have enacted, legislation and regulations intended to encourage the development of abuse‑deterrent formsof pain medications. The FDA has stated that addressing prescription drug abuse is a priority, and the development ofabuse‑deterrent opioids is a key part of that strategy. In 2010, Purdue received approval for a new formulation of OxyContin, named OxyContin OP, designed to make it moredifficult to abuse. In April 2013, the FDA approved new product labeling for OxyContin OP, which, for the first timeincluded abuse‑deterrent product label claims consistent with the FDA’s January 2013 draft abuse‑deterrent product labelguidance. At the same time, the FDA withdrew the approval of the original, non‑abuse‑deterrent OxyContin formulation, thuspreventing the commercialization of generic versions of the original OxyContin that did not have abuse‑deterrent properties.This decision by the FDA is consistent with its public statement that the development of abuse‑deterrent opioid analgesics isa public health priority. Recent actions to address the opioid abuse epidemic include: ·FDA guidance: In January 2013, the FDA introduced draft guidance regarding studies and clinical trials that shouldbe conducted to demonstrate that a given formulation has abuse‑deterrent properties, how those studies and clinicaltrials will be evaluated, and what product labeling claims may be approved based on the results of those studies andclinical trials. The draft guidance described four categories of abuse‑deterrence studies and clinical trials:Categories 1, 2 and 3 consist of pre‑marketing studies and clinical trials designed to evaluate a product candidate’spotentially abuse‑deterrent properties under controlled conditions, while Category 4 post‑marketing clinical trialsand studies assess the real‑world impact of a potentially abuse‑deterrent formulation. These requirements werelargely adopted in the April 2015 final FDA guidance, which also provides examples of product label claims thatmay be made based on the results of the corresponding studies and clinical trials. ·48 state and territorial attorneys general support development of abuse‑deterrent opioids: In March 2013, theNational Association of Attorneys General urged the FDA to adopt standards requiring manufacturers and marketersof prescription opioids to develop abuse‑deterrent versions of those products. Their letter, signed by6 Table of Contents48 state and territorial attorneys general, commended the FDA for expeditiously proposing guidance that establishesclear standards for manufacturers who develop and market abuse‑resistant opioid products, while consideringincentives for undertaking the research and development necessary to bring such products to market. It alsoencouraged the FDA to ensure that generic versions of such products are designed with similar abuse‑resistantfeatures. ·FDA mandated product label changes: On September 10, 2013, the FDA announced its intention to require productlabel changes to all approved extended‑release and long‑acting opioids. In particular, the FDA announced itsintention to update the indications for these opioids so that they will be indicated only for the management of painsevere enough to require daily, around‑the‑clock, long‑term opioid treatment and for which alternative treatmentoptions are inadequate. On April 16, 2014, the FDA updated these indications. The FDA also requirespost‑marketing studies and clinical trials for any such opioids. ·Massachusetts and Maine approved laws to mandate that insurers cover abuse‑deterrent opioids: In August 2014and June 2015, the governors of Massachusetts and Maine, respectively, signed laws establishing a drug formularycommission charged with identifying drugs with a heightened public health risk due to their potential for abuse andformulations of abuse‑deterrent drugs that may be substituted for these drugs that have a heightened public healthrisk. When a prescriber writes a prescription for an opioid identified as having a heightened public health risk, thepharmacist must dispense an interchangeable abuse‑deterrent product from the formulary, if one exists, except whenthe prescriber indicates “no substitution.” The Massachusetts and Maine laws also require insurers to coverabuse‑deterrent opioid drugs on a basis not less favorable than corresponding non‑abuse‑deterrent drugs. Severalother states have enacted similar legislation, including Florida, Maryland and West Virginia. ·FDA Opioids Action Plan: In February 2016, the FDA released an action plan to address the opioid abuse epidemicand reassess the FDA’s approach to opioid medications. The plan identifies FDA’s focus on implementing policiesto reverse the opioid abuse epidemic, while maintaining access to effective treatments. The actions set forth in theFDA’s plan include strengthening postmarketing study requirements to evaluate the benefit of long-term opioid use,changing the REMS requirements to provide additional funding for physician education courses, releasing a draftguidance setting forth approval standards for generic abuse-deterrent opioid formulations, and seeking input fromthe FDA’s Scientific Board to broaden the understanding of the public risks of opioid abuse. The FDA’s ScientificAdvisory Board met to address these issues on March 1, 2016. The FDA’s plan is part of a broader initiative led bythe U.S. Department of Health and Human Services, or HHS, to address opioid-related overdose, death anddependence. The HHS initiative’s focus is on improving physician’s use of opioids through education and resourcesto address opioid over-prescribing, increasing use and development of improved delivery systems for naloxone,which can reverse overdose from both prescription opioids and heroin, to reduce overdose-related deaths, andexpanding the use of Medication-Assisted Treatment, which couples counseling and behavioral therapies withmedication to address substance abuse. In March 2016, as part of the HHS initiative, the CDC released a newGuideline for Prescribing Opioids for Chronic Pain. The guideline is intended to assist primary care providerstreating adults for chronic pain in outpatient settings. The guideline provides recommendations to improvecommunications between doctors and patients about the risks and benefits of opioid therapy for chronic pain,improve the safety and effectiveness of pain treatment, and reduce the risks associated with long-term opioidtherapy. Also, in March 2016, the FDA announced required enhanced warnings for immediate-release opioid painmedications related to risks of misuse, abuse, addiction, overdose, and death. The FDA also required safety labelingchanges across all prescription opioids related to potentially harmful drug interactions. In August 2016, the FDAannounced that it is requiring boxed warnings for prescription opioid analgesics, opioid-containing cough products,and benzodiazepines. ·U.S. Senate Passed Comprehensive Addiction and Recovery Act: In March 2016, the U.S. Senate passed theComprehensive Addiction and Recovery Act to address the national epidemics of prescription opioid abuse andheroin use. Consistent with the initiatives of HHS, this legislation would expand the availability of naloxone, whichcan counter the effects of opioid overdose, for law enforcement and other first responders. The legislation also callsfor HHS to convene an interagency task force to develop best practices for pain management with opioidmedications. The legislation would also provide resources to improve state monitoring of controlled substances,including opioids. Other initiatives include resources for treating opioid addiction in incarcerated persons andexpanding opioid abuse prevention education and treatment efforts.7 Table of Contents ·Passage of 21st Century Cures Act: In December 2016, the 21st Century Cures Act became law. Among itsprovisions, the Act provides $1 billion dollars in grants to states for opioid abuse prevention and treatment. ·Introduction of Comprehensive Addiction and Recovery Act 2.0: On February 27, 2018, a bipartisan group ofsenators introduced Senate Bill 2456 (S.2456). S.2456 is characterized as “CARA 2.0,” in reference to theComprehensive Addiction and Recovery Act of 2016. CARA 2.0 would limit initial prescriptions for opioids to 3days, while exempting initial prescriptions for chronic care, cancer care, hospice or end of life care, and palliativecare. CARA 2.0 would also increase civil and criminal penalties for opioid manufacturers that fail to reportsuspicious orders for opioids or fail to maintain effective controls against diversion of opioids. The bill wouldincrease civil fines from $10,000 to $100,000, and if a manufacturer fails to maintain effective controls or reportsuspicious orders with knowledge or willful disregard, the bill would double criminal penalties from $250,000 to$500,000. In addition, in 2017 several states, including Indiana, Louisiana, and Utah, enacted laws that further limitor restrict opioid prescriptions. Types of Abuse‑Deterrent Technologies In response to the opioid abuse epidemic, the pharmaceutical industry has created a number of abuse‑deterrent products andproduct candidates, using a variety of technologies. These strategies generally fall under the following categories: ·Physical/Chemical Barriers: Physical barriers are formulations designed to prevent chewing, crushing, cutting,grating or grinding for oral or nasal abuse. Physical and chemical barriers can make it difficult to extract the opioidfrom the formulation for IV abuse using common solvents such as water. For example, OxyContin OP uses a cured,thermoformed polymer to make the tablets harder to crush for oral or nasal abuse. When crushed, the product gels inthe presence of small injectable volumes of liquid, making it more difficult to draw into a syringe. ·Agonist/Antagonist Combinations: An opioid antagonist can be co‑formulated with an active opioid ingredient, oragonist, to interfere with or reduce the euphoria associated with abuse. ·The antagonist can be physically sequestered in the tablet (e.g., Pfizer’s Embeda®). When taken orally asdirected, the majority of the encapsulated antagonist is eliminated in the gastrointestinal, or GI, tract andnot absorbed into the bloodstream, allowing the active ingredient to work. However, when crushed ordissolved by an abuser or patient, the antagonist is released with the active ingredient and both areabsorbed into the bloodstream, with the intent of blunting the euphoric effects of the active ingredient. Aproblem with this approach is that if the tablet is crushed or dissolved, the antagonist can cause the patientor abuser to experience opioid withdrawal, with potentially serious consequences. ·Alternatively, the antagonist can be co‑formulated in a fixed ratio with the active ingredient (e.g., Purdue’sTarginiq™). When taken orally as directed, most of the antagonist is circulated directly to the liver andrendered ineffective, allowing the active ingredient to work. However, when snorted or injected, theantagonist is distributed in the bloodstream before it gets to the liver, with the intent of preventingeuphoria. A disadvantage with this approach is that it limits the amount of active ingredient a patient cantake, which may make it inadequate to control chronic pain. Further, the presence of the antagonist in theco‑formulated drug may precipitate withdrawal, with potentially serious consequences. Market research studies performed for us have shown that some physicians prefer not to use an abuse‑deterrentformulation with an opioid antagonist because such formulations may be less useful in addressing chronic pain andbecause their antagonist components may precipitate withdrawal. ·Prodrug approaches: A prodrug is a drug administered in an inactive, or less active, form designed to enable moreeffective delivery. The prodrug is then converted by the body into the active ingredient through a normal,metabolic process. In a prodrug opioid, the active ingredient is designed to be released if the drug is taken orally,but if an abuser or patient takes a large amount of the drug, the prodrug is not broken down or absorbed rapidlyenough to create euphoria. If injected or snorted, the prodrug is not broken down and the active8 Table of Contentsingredient is not released. No opioids using a prodrug approach are currently marketed. ·Other approaches: Some companies are taking different approaches to abuse deterrence, including attempting toslow the rate of the drug’s entry into the brain. No opioids using such novel approaches are currently marketed. We believe Xtampza represents the best‑in‑class approach to an abuse‑deterrent extended‑release opioid formulation.Xtampza does not incorporate an opioid antagonist, is not a prodrug, and is resistant to abuse through physical or chemicalmanipulation. Chronic Pain with Dysphagia It is estimated that more than 10% of patients with chronic pain, or approximately 11 million patients, have dysphagia, ordifficulty in swallowing, because they have cancer, are elderly, have other medical problems or have difficulty swallowingwithout a known medical cause. The FDA recognized the unmet medical needs of this growing population in issuingguidance in June 2015, in which the FDA cited survey data that suggest that as many as 40% of Americans may havedifficulties swallowing tablets and capsules and noted that these difficulties can precipitate a number of adverse events andnoncompliance with treatment regimens. Except for Xtampza, all FDA‑approved, orally administered extended‑release opioids have a black box warning productlabel stating that “crushing, dissolving or chewing can cause rapid release and absorption of a potentially fatal dose of theactive drug,” making them unsuitable or unattractive for patients who suffer from chronic pain with dysphagia, or CPD.OxyContin OP’s product label states that “there have been post‑marketing reports of difficulty in swallowing OxyContintablets. These reports included choking, gagging, regurgitation and tablets stuck in the throat… Consider use of analternative analgesic in patients who have difficulty swallowing.” An external marketing study performed for us in 2013estimated that Xtampza has a peak revenue potential for U.S. patients with CPD in excess of $700 million annually. Our Solution: The DETERx Platform Technology Overview DETERx is a novel, proprietary, patented platform technology that is designed to maintain the extended‑release and safetyprofiles of highly abused drugs in the face of various methods of abuse and tampering, including chewing, crushing and/ordissolving, and then taking them orally or snorting or injecting them. The DETERx formulation consists of wax‑basedmicrospheres that are filled into a capsule. The microspheres are spherical micron‑sized beads that are prepared bycombining the active ingredient (oxycodone, in the case of Xtampza) with inactive ingredients. Each microsphere, whetherinside or outside the capsule, is designed to be abuse‑deterrent and extended‑release. The active ingredient is solubilizedand homogenously dispersed in each microsphere. Xtampza microspheres have a median particle size of approximately 300 microns and are comprised of the active ingredient(oxycodone), a fatty acid, and wax and surfactant excipients which are all Generally Recognized As Safe, or GRAS, by theFDA. The microspheres are formulated through a proprietary melt process in which the active ingredient, as a free base, iscombined with fatty acid and wax and surfactant excipients to form a molten solution in which the base is solubilized via anionic interaction with the fatty acid. The resulting homogenous liquid is spray congealed into small droplets using aproprietary spinning disk manufacturing process. The droplets rapidly congeal into solid wax‑based microspheres, which arethen filled into capsules. Differing product strengths are achieved by varying the weight of the microspheres loaded into acapsule. When administered orally as directed, the Xtampza formulation is designed to be administered every 12 hours andreleases oxycodone over an extended period of time in the GI tract by diffusion from the microspheres into gastrointestinalfluids.9 Table of Contents Because of our proprietary DETERx platform technology, each individual microsphere has extended‑release andabuse‑deterrent properties. The microspheres are designed to be administered in capsule form, sprinkled on food or into acup then directly in the mouth, or administered into the stomach via a gastric or nasogastric tube without compromising theirabuse‑deterrent, extended‑release profile. These features may make Xtampza uniquely suited to address the needs of patientssuffering from CPD. Abuse‑Deterrent Features Abusers often seek to accelerate the absorption of opioids into the bloodstream by crushing them in order to swallow, snort orsmoke the drug, or dissolving them in order to inject the drug. The wax‑based microspheres produced using the DETERxplatform technology have physical and chemical barriers that are intended to reduce the potential for these forms of abuse.We believe that microspheres made using our proprietary technology deter the most common methods of manipulatingopioids for abuse because of their features described in the table below.10 Table of ContentsAbuse‑Deterrent Features of DETERx Platform TechnologyMethod of Abuse Abuse‑Deterrent Feature: AdvantagesOral Particle Size, Matrix Composition andFusing Effect The microspheres are small and soft, so chewing or crushingthem to further reduce the particle size does not meaningfullyreduce the particle size or increase the surface area. Thehydrophobic excipient matrix of each microsphere iscomposed of soft, fatty, and wax‑based inactive ingredientsthat tend to agglomerate and fuse when crushed. Injection Less Soluble Salt Form We created a novel salt form of the active ingredient, which isless soluble in aqueous solutions (such as water) but readilydissolved in fatty excipients, such as those used in ourDETERx formulation. Matrix Composition The hydrophobic excipient matrix is designed to trap theactive ingredient, making it difficult for abusers to extract theopioid. High Melting Point Melting the waxy composition of the microspheres results inquick solidification when heat is removed, clogging a syringe. Snorting Matrix Composition The hydrophobic excipient matrix is designed to trap theactive ingredient, preventing the release of the opioid in thenose and causing temporary nasal side effects that makeXtampza undesirable for nasal abuse. Pipeline11 Table of ContentsWe have applied our DETERx platform technology to Xtampza as well as the product candidates in our pipeline, with theexception of the Nucynta Products. We recently completed formulation development work for our extended‑release,abuse‑deterrent hydrocodone program. Based upon an assessment of the market opportunity and the potential todifferentiate from currently marketed hydrocodone products as well as programs in development, we are prioritizing ourabuse deterrent hydrocodone program as our second product in development. We filed an investigational new drugapplication, or IND, with the FDA in December 2015 and initiated a clinical trial in the first quarter of 2016. We also have anextended‑release, abuse‑deterrent oxymorphone program for the treatment of chronic pain for which we have filed an IND.This program has been granted Fast Track status by the FDA. In addition, we have other extended‑release, abuse‑deterrentproduct candidates that have completed preliminary preclinical studies, including morphine for pain and methylphenidatefor the treatment of attention deficit hyperactivity disorder, or ADHD. All of these product candidates share similarabuse‑deterrent qualities as Xtampza and are designed to be suitable for patients with difficulty swallowing. We own all ofthe rights to Xtampza and our DETERx-based product candidates. Each of our product candidates is being developed to seek FDA approval in accordance with Section 505(b)(2) of the FederalFood, Drug, and Cosmetic Act, or FD&C Act. Section 505(b)(2) permits an applicant to file an NDA that relies, in part, ondata not developed by or for the applicant and to which the applicant has not received a right of reference, such as the FDA’sfindings of safety and efficacy in the approval of a similar drug, or listed drug, or published literature in support of itsapplication. XtampzaOverview Our first FDA-approved product, Xtampza, is an abuse-deterrent, extended-release, oral formulation of oxycodone, a widelyprescribed opioid medication. In April 2016, the FDA approved our new NDA filing for Xtampza for the management of painsevere enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options areinadequate. Certain human abuse potential studies are included in the approved label, as well as data supporting theadministration of the product as a sprinkle or administered through feeding tubes. In June 2016, we announced thecommercial launch of Xtampza. In October 2016, we announced the submission of a New Drug Submission to Health Canadaseeking marketing approval of Xtampza for the same indication for which we obtained approval from the FDA. Xtampza has the same active ingredient as OxyContin OP, which is the largest selling abuse-deterrent, extended-releaseopioid in the United States by dollars, with $1.7 billion in U.S. sales in 2017. We conducted a comprehensive preclinical andclinical program for Xtampza consistent with FDA guidance on abuse-deterrence. These studies and clinical trialsdemonstrated that chewing, crushing and/or dissolving Xtampza, and then taking it orally or smoking, snorting, or injectingit did not meaningfully change its drug release profile or safety characteristics. By contrast, clinical trials performed by usand others — including head-to-head clinical trials comparing Xtampza with OxyContin OP — have shown that drug abuserscan achieve rapid release and absorption of the active ingredient by manipulating OxyContin OP using common householdtools and methods commonly available on the Internet. In November 2017, we announced the approval of a SupplementalNew Drug Application to the FDA for Xtampza to include comparative oral pharmacokinetic data from a recently completedclinical study evaluating the effect of physical manipulation by crushing Xtampza compared with OxyContin OP and acontrol (oxycodone hydrochloride immediate-release), results from an oral human abuse potential study and the addition ofan oral abuse deterrent claim. In addition, our preclinical studies and clinical trials have shown that the contents of the Xtampza capsule can be removedfrom the capsule and sprinkled on food or into a cup, and then directly into the mouth, or administered through feedingtubes, without compromising their drug release profile, safety or abuse-deterrent characteristics. By contrast, OxyContin OP,which is formulated in hard tablets, has a black box warning label stating that crushing, dissolving, or chewing can causerapid release and absorption of a potentially fatal dose of the active ingredient. Market Opportunity We believe that Xtampza can capture a significant share of the $5.0 billion U.S. extended‑release opioid market, including aportion of the existing $1.7 billion OxyContin OP market. In addition, we believe that Xtampza can become a market leaderfor treating patients with chronic pain who have difficulty swallowing.12 Table of ContentsOxyContin OP Extended‑Release Market Purdue launched OxyContin OP in 2010. In April 2013, the FDA determined that Purdue had been successful indemonstrating OxyContin OP’s abuse‑deterrent characteristics and permitted Purdue to amend its product label to includecertain abuse‑deterrent claims. Since the launch of OxyContin OP, there has been a reduction in the overall abuse ofOxyContin, primarily in the snorted and injected routes of administration. Despite OxyContin OP’s commercial success, it carries with it a well‑documented abuse stigma both for physicians whoprescribe it and for patients who use it to treat chronic pain. In a market research study conducted for us in 2013, 35% ofpatients surveyed who were taking OxyContin OP indicated concern that their friends or family have a negative perceptionof OxyContin OP. Of the 1,021 patients surveyed in the study, 11% of chronic pain patients responded that they have hadtheir opioid medication stolen, most often from their home, and 76% indicated an interest in switching to a pain medicationsimilar to OxyContin OP but that was more abuse‑deterrent. A market research study of 30 physicians conducted for us in2015 concluded that while physicians view OxyContin OP as an effective and valuable option, one third reportedprescribing it less often than they would like because of patients’ reticence to use OxyContin OP because of its reputation foraddiction and abuse. Further, in a third party study of post‑marketing data on misuse and diversion of prescription opioid analgesics, the initialdecline in abuse of OxyContin OP by patients who reported abusing the non‑abuse‑deterrent OxyContin 30 days prior toentering treatment for opioid abuse disorder, plateaued at 25% to 30%, with no further decreases from 2012 to studyconclusion in 2014. A sub‑population of participants was surveyed to investigate their continued abuse of OxyContin.Among the 88 participants who abused both non‑abuse‑deterrent OxyContin and OxyContin OP, their continued abuse ofOxyContin OP was explained by: (i) a transition from non‑oral routes of administration to oral use (approximately 43%); (ii)successful efforts to defeat the abuse‑deterrent formulation mechanism leading to a continuation of inhaled or injected use(approximately 34%); and (iii) exclusive use of the oral route independent of formulation type (approximately 23%).Representative comments of participants who continued to abuse OxyContin OP demonstrated that participants were able toidentify methods of circumventing the abuse deterrent properties using the internet. Other Extended‑Release Opioids While OxyContin OP is the largest selling extended‑release opioid in the United States by dollars in 2017, there areapproximately 18 million additional prescriptions for non‑abuse‑deterrent extended‑release opioids annually in the UnitedStates. Many of these opioids include active ingredients, such as morphine, that are commonly perceived as having greateradverse side effects than oxycodone‑based formulations. Because of the abuse stigma associated with OxyContin OP andnon‑abuse‑deterrent opioid formulations, we believe that Xtampza offers physicians treating chronic pain an attractivealternative to the existing options. Our market research also demonstrates that payors recognize the prevalence of opioidabuse and its corresponding economic burden. This research indicates that “brand” prices would be acceptable for productsthat are differentiated. As such, we aim to achieve broad Tier 3 payor coverage on commercial plans and contract withMedicare and Medicaid. In a market research study conducted for us, 83% of disease specialists (such as oncologists andneurologists) and 67% of pain specialists surveyed indicated that they would prescribe Xtampza for patients withoutdysphagia. Chronic Pain with Dysphagia In a market research survey conducted for us, of 1,021 patients with chronic pain, 30% of the patients reported that they havetrouble swallowing or do not like to swallow pills, and 65% of the patients did not realize that cutting, crushing or grindingextended‑release opioids can change the drug release profile. Most of the currently approved abuse‑deterrent opioid drugsdo not have an FDA product label that permits the sprinkling of the product on food or into a cup, and then directly in themouth and administration through feeding tubes for use by patients with CPD, creating an unmet medical need due to thelack of adequate treatment options. Further, in an effort to make them easier to swallow, some patients with CPD — and 47 ofthe 1,021 patients participating in the survey conducted for us — crush their prescribed extended‑release opioids and caninadvertently harm themselves because of the rapid immediate‑release of the active ingredient. Because our Xtampzamicrospheres are designed to be able to be removed from the capsule and still retain their abuse‑13 Table of Contentsdeterrent and extended‑release properties, we believe that Xtampza is an effective pain‑management solution for patientswith CPD. Nucynta ER and Nucynta IR In December 2017, we entered into a Commercialization Agreement with Depomed, pursuant to which Depomed agreed togrant us a sublicense of certain of its intellectual property related to the Nucynta Products for commercialization of suchproducts in the United States, the District of Columbia and Puerto Rico. On January 9, 2018, we amended theCommercialization Agreement and consummated the transactions contemplated thereby. Nucynta ER is an extended release formulation of tapentadol that is indicated for the management of pain severe enoughto require daily, around‑the‑clock, long term opioid treatment, including neuropathic pain associated with diabeticperipheral neuropathy in adults, and for which alternate treatment options are inadequate. Nucynta IR is an immediaterelease formulation of tapentadol that is indicated for the management of moderate to severe acute pain in adults. Pursuant to the Commercialization Agreement, we assumed all commercialization responsibilities, including sales andmarketing, for the Nucynta Products, while Depomed continues to control manufacturing of the Nucynta Products. Webegan shipping and recognizing product sales on the Nucynta Products on January 9, 2018. We began commercialpromotion of the Nucynta Products in February 2018. We will pay a royalty to Depomed on all revenues from the sale ofNucynta Products based on certain net sales thresholds, with a fixed annual minimum royalty during the first four years ofthe Commercialization Agreement, subject to certain conditions. Onsolis In May 2016, we licensed the U.S. rights to develop and commercialize Onsolis from BioDelivery Sciences International,Inc., or BDSI. Onsolis is a Transmucosal Immediate-Release Fentanyl film indicated for the management of breakthroughpain in cancer patients 18 years of age and older, who are already receiving and who are tolerant to opioid therapy for theirunderlying persistent cancer pain. In December 2017, after a review of our product portfolio, we provided written notice toBDSI of termination of the License and Development Agreement dated May 11, 2016, or the License Agreement, whichtermination will be effective pursuant to the terms of such agreement on March 8, 2018. Upon such termination of theLicense Agreement, our rights to develop and commercialize Onsolis will revert to BDSI. Manufacturing of DETERx Products and Product Candidates Overview Xtampza and our product candidates created with our DETERx technology platform are manufactured using a proprietaryprocess. This process is reproducible, scalable and cost‑efficient, and we believe that the microsphere formulation — and therelated manufacturing process — is unique in the extended‑release opioid market. To date, we have produced Xtampza at a contract manufacturing organization, Patheon. The existing Patheon facility has thecapacity to support our commercialization of Xtampza during the first several years after commercial launch. We are workingwith Patheon to build dedicated manufacturing capacity at Patheon’s existing facility. Patheon has an established record ofmanufacturing products approved in the United States, including controlled substances. We own all of the intellectual property, including know‑how and specialized manufacturing equipment, necessary to be ableto replicate the manufacturing equipment currently located at Patheon’s facility at an alternative location (and with analternative vendor) if necessary. Drug Substances The active ingredient used in Xtampza, oxycodone base, is an odorless white crystalline powder. We currently procure thisactive ingredient pursuant to a supply agreement with a single U.S.‑based manufacturer. If our current supplier is14 Table of Contentsunable to supply oxycodone base in the quantities and at the times we require it, we are aware of other suppliers who wewould expect to be able to satisfy our commercial orders. Oxycodone base is classified as a narcotic controlled substance under U.S. federal law. Xtampza is, and we expect that ourproduct candidates will be, classified by the U.S. Drug Enforcement Administration, or DEA, as Schedule II controlledsubstances, meaning that they have a high potential for abuse and dependence among drugs that are recognized as having anaccepted medical use. Consequently, we expect that the manufacturing, shipping, dispensing and storing of our productcandidates will be subject to a high degree of regulation, as described in more detail under the caption “— GovernmentalRegulation — DEA Regulation.” Marketing and Commercialization We are in the process of commercializing Xtampza and the Nucynta Products in the United States with a direct sales force.We plan to explore out‑licensing partnerships for Xtampza in other international markets, such as Canada, Australia andJapan, as well as countries in Latin America and Europe. The members of our management team who are leading the commercialization of Xtampza and the Nucynta Products havesubstantial experience in pharmaceutical sales and marketing. We have a dedicated field sales force, consisting ofapproximately 131 sales professionals, to call on the approximately 11,000 physicians who write approximately 58% of thebranded extended‑release oral opioid prescriptions in the United States, with a primary focus on pain specialists. In addition,we deploy a focused sales force of approximately 14 specialty sales representatives to call on hospitals. In addition, weemploy medical sales liaisons, or MSLs, to respond to clinician inquiries about Xtampza. We also employ a market‑accessteam to support our formulary approval and payor contracting. We are continuing to execute our commercialization strategy with the input of key opinion leaders in the field of painmanagement, as well as healthcare practitioners. We have developed positioning and messaging campaigns, a publicationstrategy, initiatives with payor organizations, and distribution and national accounts strategies. Our marketing strategyincludes increasing awareness of the differentiated features of Xtampza and the Nucynta Products and increasing awarenessof solutions for patients with CPD who require or would benefit from extended‑release opioids. Intellectual Property We regard the protection of patents, designs, trademarks and other proprietary rights that we own or license as critical to oursuccess and competitive position. Our patent portfolio directed toward Xtampza and our DETERx technology consists oftwelve issued patents in the United States (seven of which claim compositions of matter, three of which claims bothcompositions of matter and methods of use, and two that claim methods of use), one granted and two pending applications inthe European Patent Office, two issued patents in Canada, and one issued patent in each of Japan and Australia. Finally, wehave six patent applications pending in the United States, one pending patent application in each of Canada and Japan, andone pending PCT application. Our issued U.S. patents are projected to expire in 2023, 2025, 2030, and 2036 and our pendingpatent applications in the United States, if issued, would be projected to expire in 2023, 2025, 2030, and 2036. In addition,we use a unique and proprietary process to manufacture our products that requires significant know‑how, which we currentlyprotect as trade secrets. Our policy is to patent the technology, inventions and improvements that we consider important to the development of ourbusiness, but only in those cases in which we believe that the costs of obtaining patent protection is justified by thecommercial potential of the technology, and typically only in those jurisdictions that we believe present significantcommercial opportunities to us. We have concluded that some of our technology is best protected as proprietary know‑how,rather than through obtaining patents. In some cases, we publish the invention such that it becomes prior art in order for us tosecure freedom to operate and to prevent a third party from patenting the invention before us. Our technology and productsare not in‑licensed from any third party, and we own all of the rights to Xtampza and our15 Table of Contentsproduct candidates. We believe we have freedom to operate in the United States and other countries, but there can be noassurance that other companies, known and unknown, will not attempt to assert their intellectual property against us. We also rely on trademarks and trade designs to develop and maintain our competitive position. We have received trademarkregistration for Collegium Pharmaceutical, Inc., DETERx, and Xtampza ER in the United States. We also depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of ouradvisors, consultants and other contractors. To help protect our proprietary know‑how that is not patentable, we rely on tradesecret protection and confidentiality agreements to protect our interests. To this end, we generally require our employees,consultants and advisors to enter into confidentiality agreements prohibiting the disclosure of confidential information and,in some cases, requiring disclosure and assignment to us of the ideas, developments, discoveries and inventions important toour business. Additionally, these confidentiality agreements require that our employees, consultants and advisors do notbring to us, or use without proper authorization, any third party’s proprietary technology. Our Strategy Our goal is to become the leader in responsible pain management by developing and commercializing innovative,differentiated products for patients suffering from pain. Key elements of our strategy to achieve this goal are to: ·Grow Xtampza in the United States. We continue to strengthen our commercial organization, including our salesforce and commercial manufacturing capacity for U.S. commercialization of Xtampza. Our management team hasextensive experience commercializing pharmaceutical products, and we are in the process of expanding sales,marketing and reimbursement functions to grow Xtampza sales in the United States. We are detailing Xtampza toapproximately 11,000 physicians who write approximately 58% of the branded extended‑release oral opioidprescriptions in the United States with a sales team of approximately 131 sales representatives. We believe that thisphysician group also represents a significant portion of the top prescribers of extended‑release and long‑actingopioids (including drugs formulated with fentanyl and methadone) currently used to treat patients with CPD. Inaddition, we deploy a separate, focused sales team of approximately 14 specialty sales representatives to detailXtampza to hospitals. ·Commercialize the Nucynta Products in the United States. In December 2017, we entered into a CommercializationAgreement with Depomed, pursuant to which Depomed agreed to grant us a sublicense of certain of its intellectualproperty related to the Nucynta Products for commercialization of such products in the United States. We beganshipping and recognizing product sales on the Nucynta Products on January 9, 2018, and we began commercialpromotion of the Nucynta Products in February 2018. We are detailing the Nucynta Products to substantially thesame physicians to whom we detail Xtampza, leveraging our existing sales organization. ·Establish strategic collaborations to accelerate and maximize the potential of our products and productcandidates worldwide. We intend to seek strategic collaborations with other pharmaceutical companies tocommercialize Xtampza and our product candidates outside the United States and to develop certain of our productcandidates that are outside of our core therapeutic focus. ·Advance other product candidates that incorporate our DETERx platform technology. We have begun advancingour development program for COL‑195, an abuse‑deterrent, extended‑release hydrocodone for the treatment ofchronic pain. We initiated clinical trials for our hydrocodone product candidate in the first quarter of 2016. We alsohave an IND application on file for COL‑172, an abuse‑deterrent, extended‑release oxymorphone for the treatmentof chronic pain, which has been granted Fast Track status by the FDA. In addition, we have COL‑171, a proprietarypreclinical DETERx extended‑release, abuse‑deterrent methylphenidate formulation for the treatment of ADHD. ·Acquire additional products and product candidates. We may identify and license, co‑promote or acquire productsor product candidates being developed for pain indications and other complementary products. Our commercialization strategy for our products continues to evolve, and as part of that evolution, we are developingpositioning and messaging campaigns, a publication strategy, initiatives with payor organizations, and distribution and16 Table of Contentsnational accounts strategies. Competition Our industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietaryproducts. We face competition and potential competition from a number of sources, including pharmaceutical andbiotechnology companies, generic drug companies, drug delivery companies and academic and research institutions. Most ofthe existing and potential competitors have significantly more financial and other resources than we do. Xtampza Currently, the only opioid drugs on the market for chronic pain relief that have an abuse‑deterrent product label areOxyContin OP and Hysingla®, both from Purdue, Embeda from Pfizer, MorphaBond ER from Inspirion DeliveryTechnologies and Arymo ER from Egalet. Hysingla is a once a day hydrocodone product. Embeda is a combination ofmorphine and naltrexone, an opioid antagonist that can be sprinkled on soft food but contains a boxed warning on itsproduct label stating that “the capsules are not to be crushed, dissolved, or chewed due to the risk of rapid release andabsorption of a potentially fatal dose of morphine.” MorphaBond ER is a twice daily morphine product formulated with ahard tablet and gelling polymers. Arymo is an extended-release morphine product formulated as a hard tablet. In addition, there are five other approved extended-release opioids that have abuse deterrent product labeling, Vantrela ERfrom Teva, Targiniq from Purdue and Troxyca ER from Pfizer, none of which are currently on the market. Vantrela ER is atwice daily hydrocodone product. Targiniq is a combination of oxycodone and naloxone, an opioid antagonist. Troxyca ERis a combination of oxycodone and naltrexone, an opioid antagonist. A number of other large and small companies aredeveloping abuse deterrent drugs for chronic pain. Many other companies have products for the treatment of chronic painwhich do not have abuse-deterrent claims in their labels, including Pernix and Mallinckrodt, as well as several genericcompanies. We believe the key competitive factors that will affect the development and commercial success of our products and productcandidates include their degree of abuse deterrence, bioavailability, therapeutic efficacy, and convenience of dosing anddistribution, as well as their safety, cost and tolerability profiles. Xtampza may also face competition from commerciallyavailable generic and branded extended‑release and long‑acting opioid drugs other than oxycodone, including fentanyl,hydromorphone, oxymorphone and methadone, as well as opioids that are currently in clinical development, including ageneric version of Xtampza ER for which Teva recently submitted an Abbreviated New Drug Application, or ANDA, to theFDA and which is the subject of patent infringement litigation filed by us in February 2018. Xtampza competes against all extended‑release opioids, including Purdue’s OxyContin OP for the treatment of patientsexperiencing pain severe enough to require around-the-clock, long-term analgesia. Although no generic oxycodoneextended‑release products are currently commercially available, it is possible that generic forms of OxyContin OP couldbecome available, in which case Xtampza would compete with any such generic oxycodone extended‑release products. Additionally, we are aware of companies with abuse‑deterrent oxycodone product candidates in late-stage development,including Egalet, Intellipharmaceutics, Nektar Therapeutics and Pain Therapeutics. If these products are successfullydeveloped, approved for marketing and become commercially available, they could represent significant competition forXtampza. It is also possible that a company that has developed an abuse‑deterrent technology could initiate anabuse‑deterrent oxycodone program at any time. Nucynta Nucynta ER competes against other long-acting opioid medications, including among others: OxyContin; Butrans; Belbuca;and Embeda. Nucynta IR competes primarily against short-acting opioids used for the management of moderate to severe acute pain inadults. There are numerous such medicines, including, among others: generic hydrocodone acetaminophen; genericoxycodone; generic oxycodone acetaminophen; and generic tramadol.17 Table of Contents Government Regulation FDA Approval Process In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The FD&C Act and otherfederal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture,storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post‑approval monitoring and reporting,sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements maysubject a company to a variety of administrative or judicial sanctions, such as warning or untitled letters, product recalls,product seizures, total or partial suspension of production or distribution, withdrawal of the product from the market,injunctions, fines, civil penalties, and criminal prosecution. Failure to meet FDA requirements for approval would also resultin a medication not being approved for marketing.The process of developing a pharmaceutical and obtaining FDA approval to market the medication in the United Statestypically involves: ·completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s goodlaboratory practices, or GLP, regulation; ·submission to the FDA of an IND for human clinical testing, which must become effective before human clinicaltrials may begin in the United States; ·approval by an independent institutional review board, or IRB, at each clinical trial site before each trial may beinitiated; ·performance of adequate and well‑controlled human clinical trials in accordance with current good clinicalpractices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication for whichFDA approval is sought; ·satisfactory completion of an FDA pre‑approval inspection of the facility or facilities at which the product ismanufactured to assess compliance with the FDA’s cGMP regulations; ·submission to the FDA of an NDA; ·satisfactory completion of a potential review by an FDA advisory committee, if applicable; and ·FDA review and approval of the NDA. Satisfaction of FDA pre‑market approval requirements typically takes many years and the actual time required may varysubstantially based upon the type, complexity, and novelty of the product or disease. Preclinical tests include laboratory evaluation of product chemistry, formulation, stability and toxicity, as well as animalstudies to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests mustcomply with federal regulations and requirements, including GLPs. The results of preclinical testing are submitted to theFDA as part of an IND along with other information, including information about product chemistry, manufacturing andcontrols, and a proposed clinical trial protocol. Long‑term preclinical tests, such as animal tests of reproductive toxicity andcarcinogenicity, may continue after the IND is submitted. The IND automatically becomes effective 30 days after receipt by FDA unless, within the 30‑day time period, the FDA raisesconcerns or questions relating to one or more proposed clinical trials and places the clinical trial on hold, including concernsthat human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA mustresolve any outstanding concerns before the clinical trial can begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or subjects under thesupervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations,including GCP, an international standard meant to protect the rights, safety and wellbeing of subjects and to define the18 Table of Contentsroles of clinical trial sponsors, administrators, and monitors; and (ii) under protocols detailing, among other things, theobjectives of the trial, the parameters to be used in monitoring safety, and any effectiveness criteria to be evaluated. Eachprotocol involving testing on U.S. subjects and subsequent protocol amendments must be submitted to the FDA as part of theIND. GCP requirements include that all research subjects provide their informed consent in writing for their participation in anyclinical trial. An independent IRB for each site proposing to conduct the clinical trial must review and approve the informedconsent information as well as the clinical trial protocol before the trial commences at that site, and must monitor the studyuntil completed. The FDA or the IRB may order the temporary or permanent discontinuation of a clinical trial at any time andon various grounds, particularly upon the belief that the clinical trial either is not being conducted in accordance with FDArequirements or presents an unacceptable risk to the clinical trial subjects, or impose other conditions. Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases mayoverlap or be combined. In Phase 1, the drug is initially introduced into healthy human subjects or patients, and is tested toassess safety, dose tolerance, absorption, metabolism, PK, pharmacological actions, side effects associated with increasingdoses, and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population todetermine the effectiveness of the drug for a particular indication, dosage tolerance, and optimum dosage, and to identifycommon AEs and safety risks. Multiple Phase 2 trials may be conducted by the sponsor to obtain information prior tobeginning larger and more extensive Phase 3 clinical trials. If a compound demonstrates evidence of effectiveness and anacceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information aboutclinical efficacy and safety in a larger number of subjects, typically at geographically dispersed clinical trial sites, to permitthe FDA to evaluate the overall benefit‑risk relationship of the drug and to provide adequate information for the labeling ofthe drug. In most cases, the FDA requires two adequate and well controlled Phase 3 clinical trials to demonstrate the efficacyof the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in rare instances where the clinical trialis a large multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinicallymeaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome andconfirmation of the result in a second trial would be practically or ethically impossible. Sponsors of clinical trials generallymust register and report key parameters of certain clinical trials at the NIH‑maintained website ClinicalTrials.gov. After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA isrequired before marketing of the product may begin in the United States. The NDA must include the results of all preclinical,clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, andcontrols. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subjectto a substantial application user fee and the manufacturer and/or sponsor under an approved new drug application are alsosubject to annual product and establishment user fees. These fees are typically increased annually. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on theagency’s threshold determination that it is sufficiently complete to permit substantive review. Rather than accept an NDA forfiling, then FDA may request additional information. In this event, the NDA must be resubmitted with the additionalinformation and may be subject to payment of additional user fees. The resubmitted application is also subject to reviewbefore the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in‑depth substantivereview. The FDA has established certain performance goals for the review of new drug applications. The agency endeavors toreview applications for standard review drug products within 10 to 12 months of the acceptance for filing, and aims to reviewapplications for drugs granted priority review, which may apply to drugs that the FDA determines offer major advances intreatment or provide a treatment where no adequate therapy exists, within six to eight months. The review process for bothstandard and priority review may be extended by FDA for three additional months to consider certain late‑submittedinformation, or information intended to clarify information already provided in the submission. The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety orefficacy, to an advisory committee — typically a panel that includes clinicians and other experts — for review, evaluation,and a recommendation as to whether the application should be approved and under what conditions. The FDA is not boundby the recommendation of an advisory committee, but it generally follows such recommendations. In addition, beforeapproving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with19 Table of ContentsGCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will notapprove the product unless compliance with cGMP is satisfactory and the NDA contains data that provide substantialevidence that the drug is safe and effective in the indication studied. After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete responseletter to indicate that the review cycle for an application is complete and that the application is not ready for approval. Acomplete response letter generally outlines the deficiencies in the submission and may require substantial additional testing,or information, in order for the FDA to reconsider the application. Even with submission of this additional information, theFDA may ultimately decide that an application does not satisfy the regulatory criteria for approval. If, and when, thosedeficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approvalletter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of informationincluded. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.Changes to certain of the conditions established in an approved application, including changes in indications, labeling, ormanufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before thechange can be implemented, which may require us to develop additional data or conduct additional preclinical studies andclinical trials. An NDA supplement for a new indication typically requires clinical data similar to that in the originalapplication, and the FDA uses similar procedures and actions in reviewing NDA supplements as it does in reviewing NDAs. REMS The FDA has the authority to require a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of the approval ofan NDA or after approval to ensure that the benefits of a drug outweigh its risks. In determining whether a REMS is necessary,the FDA must consider the size of the population likely to use the drug, the seriousness of the disease or condition to betreated, the expected benefit of the drug, the duration of treatment, the seriousness of known or potential adverse events, andwhether the drug is a new molecular entity. If the FDA determines a REMS is necessary for a new drug, the drug sponsor mustsubmit a proposed REMS plan as part of its NDA prior to approval. The FDA may also impose a REMS requirement on a drugalready on the market if the FDA determines, based on new safety information, that a REMS is necessary to ensure that thedrug’s benefits continue to outweigh its risks. A REMS can include medication guides, communication plans for healthcareprofessionals, and Elements To Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special training orcertification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use ofpatient registries. In addition, the REMS must include a timetable to periodically assess the strategy, at a minimum, at 18months, three years, and seven years after the REMS approval. The requirement for a REMS can materially affect thepotential market and profitability of a drug. In February 2009, the FDA informed manufacturers of certain opioid products that it would require a REMS for their opioiddrug products. Subsequently, the FDA initiated efforts to develop a new standardized REMS for these opioid medications toensure their safe use, and in July 2012, approved a class‑wide REMS for extended‑release and long‑acting opioid products.Extended‑release formulations of oxycodone, morphine, hydrocodone and hydromorphone, for example, are required tohave a REMS. Manufacturers subject to this class‑wide REMS must work together to implement the REMS as part of a singleshared system to reduce the burden of the REMS on the healthcare system. The central component of the extendedrelease/long acting opioid REMS program is an education program for prescribers and patients. Specifically, the REMSincludes a Medication Guide available for distribution to patients who are dispensed the drug, as well as a number of ETASU.These ETASU include training for healthcare professionals who prescribe the drug; information provided to prescribers thatthey can use to educate patients in the safe use, storage, and disposal of opioids; and information provided to prescribers ofthe existence of the REMS and the need to successfully complete the necessary training. Prescriber training required as partof the REMS is conducted by accredited, independent continuing education providers, without cost to healthcareprofessionals, under unrestricted grants funded by the opioid analgesic manufacturers. Moreover, REMS assessments must besubmitted on an annual basis to assess the extent to which the ETASU are meeting the goals of the REMS and whether thegoals or elements should be modified. As part of the FDA’s Opioid Action Plan, the agency intends to update the extended-release and long-acting opioid REMSafter having evaluated existing requirements and considered recommendations from the joint meeting of the Drug Safety andRisk Management Advisory Committee and the Anesthetic and Analgesic Drug Products Advisory20 Table of ContentsCommittee on May 3-4, 2016. The recommendations from that meeting included: extending training to other health careprofessionals involved in the management of patients with pain; expanding the REMS requirements to include theimmediate-release opioid analgesic drug manufacturers; and evaluating the best approach to implementing mandatoryprescriber education on pain management. Advertising and Promotion The FDA and other federal regulatory agencies closely regulate the marketing and promotion of drugs through, among otherthings, standards and regulations for direct‑to‑consumer advertising, communications regarding unapproved uses,industry‑sponsored scientific and educational activities, and promotional activities involving the Internet. A product cannotbe commercially promoted before it is approved. After approval, product promotion can include only those claims relating tosafety and effectiveness that are consistent with the labeling approved by the FDA. Healthcare providers are permitted toprescribe drugs for “off‑label” uses — that is, uses not approved by the FDA and therefore not described in the drug’slabeling — because the FDA does not regulate the practice of medicine. However, FDA regulations impose stringentrestrictions on manufacturers’ communications regarding off‑label uses. Failure to comply with applicable FDA requirementsand restrictions in this area may subject a company to adverse publicity and enforcement action by the FDA, the U.S.Department of Justice, or the Office of the Inspector General of the HHS, as well as state authorities. This could subject acompany to a range of penalties that could have a significant commercial impact, including civil and criminal fines andagreements that materially restrict the manner in which a company promotes or distributes drug products. Fast Track DesignationThe FDA has various programs to facilitate the development and expedite the review of drugs that are intended for thetreatment of a serious or life‑threatening condition for which there is no effective treatment and which demonstrate thepotential to address unmet medical needs for the condition. Under the Fast Track designation program, the sponsor of a newproduct candidate may request the FDA to designate the product for a specific indication as a Fast Track product concurrentwith or after the submission of the IND for the product candidate. The FDA must determine if the product candidate qualifiesfor Fast Track designation within 60 days after receipt of the sponsor’s request. In addition to other benefits, such as the ability to have more frequent interactions with the FDA, the FDA may initiate reviewof sections of a Fast Track product’s NDA before the application is complete. The FDA’s time period goal for reviewing a FastTrack application does not begin until the last section of the NDA is submitted. In addition, the Fast Track designation maybe withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinicaltrial process. Post‑Approval Requirements Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, amongother things, requirements relating to drug listing and registration, recordkeeping, periodic reporting, product sampling anddistribution, adverse event reporting and advertising, marketing and promotion restrictions. Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The FDA alsomay require post‑market testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approvedproduct, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. Inaddition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs afterapproval. Drug manufacturers and certain of their subcontractors are required to register their establishments with FDA andcertain state agencies. Registration subjects entities to periodic announced or unannounced inspections by the FDA or thesestate agencies, during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly,manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintaincompliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a companyfails to comply with regulatory standards, if it encounters problems following initial marketing, or if previouslyunrecognized problems are subsequently discovered. In addition, other regulatory actions may be taken, including, amongother things, warning letters, the seizure of products, injunctions, consent decrees placing significant restrictions on orsuspending manufacturing operations, refusal to approve pending applications or supplements to approved applications,civil penalties, and criminal prosecution. 21 Table of ContentsAs part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs tophysicians. The Prescription Drug Marketing Act, or PDMA, and associated regulations, impose certain recordkeeping andreporting requirements and other limitations on the distribution of drug samples to physicians. The PDMA also requires thatstate licensing of distributors who distribute prescription drugs meet certain federal guidelines that include minimumstandards for storage, handling and record keeping. In addition, the PDMA and a growing majority of states also imposecertain drug pedigree requirements on the sale and distribution of prescription drugs. The PDMA sets forth civil and criminalpenalties for violations. In 2010, a statutory provision was enacted that required manufacturers and authorized distributors ofrecord to report on an annual basis certain information about prescription drug samples they distributed. The FDA issued adraft compliance policy guide on the reporting requirement. The FDA stated that it would exercise enforcement discretionwith regard to companies that have not submitted reports until the FDA finalizes the reporting requirement and/or providesnotice that it is revising its exercise of enforcement discretion. The FDA may require post‑approval studies and clinical trials if the FDA finds that scientific data, including informationregarding related drugs, deem it appropriate. The purpose of such studies would be to assess a known serious risk or signals ofserious risk related to the drug or to identify an unexpected serious risk when available data indicate the potential for aserious risk. The FDA may also require a labeling change if it becomes aware of new safety information that it believesshould be included in the labeling of a drug. The Hatch‑Waxman Amendments Orange Book Listing In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims coverthe applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then publishedin the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of anabbreviated NDA, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredient in thesame strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeuticallyequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required toconduct, or submit results of, preclinical or clinical tests to prove the safety or efficacy of their drug product. Drugs approvedin this way are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacistsunder prescriptions written for the original listed drug. The ANDA applicant is required to make certain certifications to the FDA concerning any patents listed for the approvedproduct in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has notbeen filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date andapproval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. TheANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain(or carves out) any language regarding the patented method‑of‑use rather than make certifications concerning a listedmethod‑of‑use patent. If the applicant does not challenge the listed patents, the ANDA application will not be approveduntil all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents areinvalid, is called a Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA,the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has beenaccepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response tothe notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of aParagraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months,expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDAapplicant.The ANDA application also will not be approved until any applicable non‑patent exclusivity listed in the Orange Book forthe referenced product has expired. Exclusivity 22 Table of ContentsUpon NDA approval of a new chemical entity, or NCE, which is a drug that contains no active moiety that has been approvedby FDA in any other NDA, that drug receives five years of marketing exclusivity during which FDA cannot receive anyANDA seeking approval of a generic version of that drug or any Section 505(b)(2) NDA, discussed in more detail below, thatrelies on the FDA’s findings regarding that drug. A drug may obtain a three‑year period of exclusivity for a change to thedrug, such as the addition of a new indication to the labeling or a new formulation, during which FDA cannot approve anANDA or any Section 505(b)(2) NDA, if the supplement includes reports of new clinical trials (other than bioavailabilityclinical trials) essential to the approval of the supplement. An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. If there is nolisted patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before theexpiration of the exclusivity period. Section 505(b)(2) NDAs Generally, drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is aSection 505(b)(2) NDA, which enables the applicant to rely, in part, on data not developed by the applicant, such as theFDA’s findings of safety and efficacy in the approval of a similar product or published literature in support of its application. Section 505(b)(2) NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses ofpreviously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the information requiredfor approval comes from clinical trials not conducted by, or for, the applicant and for which the applicant has not obtained aright of reference. If the Section 505(b)(2) applicant can establish that reliance on FDA’s previous findings of safety andefficacy is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical trials of the newproduct. The FDA may also require companies to perform additional clinical trials or provide additional materials to supportthe change from the approved product. The FDA may then approve the new product candidate for all, or some, of the labelindications for which the referenced product has been approved, as well as for any new indication sought by theSection 505(b)(2) applicant. To the extent that the Section 505(b)(2) applicant is relying on the FDA’s findings of safety and effectiveness for an alreadyapproved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product inthe Orange Book to the same extent that an ANDA applicant would. Thus approval of a Section 505(b)(2) NDA can be stalleduntil all the listed patents claiming the referenced product have expired; until any non‑patent exclusivity, such asexclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product hasexpired; and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2)applicant. In the interim period, the FDA may grant tentative approval. Tentative approval indicates that the FDA hasdetermined that the applicant meets the standards for approval as of the date that the tentative approval is granted. Finalregulatory approval can only be granted if the FDA is assured that there is no new information that would affect finalregulatory/ approval. As with traditional NDAs, a Section 505(b)(2) NDA may be eligible for three‑year marketingexclusivity, assuming the NDA includes reports of new clinical trials (other than bioavailability clinical trials) essential tothe approval of the NDA. Disclosure of Clinical Trial Information Sponsors of clinical trials of FDA‑regulated products, including drugs, are required to register and disclose certain clinicaltrial information. Information related to the product, patient population, phase of investigation, clinical trial sites andinvestigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligatedto post certain information regarding the results of their clinical trials after completion. Disclosure of the results of these trialscan be delayed until the new product or new indication being studied has been approved. Competitors may use this publiclyavailable information to gain knowledge regarding the progress of development programs. DEA Regulation Our first product, Xtampza, is regulated as a “controlled substance” as defined in the Controlled Substances Act, or CSA,which establishes registration, security, recordkeeping, reporting, storage, distribution, importation, exportation23 Table of Contentsand other requirements administered by the DEA. The DEA regulates the handling of controlled substances through a closedchain of distribution. This control extends to the equipment and raw materials used in their manufacture and packaging, inorder to prevent loss and diversion into illicit channels of commerce. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition haveno established medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listedas Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule Vsubstances the lowest relative risk of abuse among such substances. Schedule II drugs are those that meet the followingcharacteristics: ·high potential for abuse; ·currently accepted medical use in treatment in the United States or a currently accepted medical use with severerestrictions; ·abuse may lead to severe psychological or physical dependence; and ·are considered “dangerous.” Xtampza, an abuse-deterrent oral formulation of oxycodone, is listed by the DEA as a Schedule II controlled substance underthe CSA. The Nucynta Products are also listed by the DEA as Schedule II controlled substances under the CSA.Consequently, the manufacturing, shipping, storing, selling and using of the products is subject to a high degree ofregulation. Schedule II drugs are subject to the strictest requirements for registration, security, recordkeeping and reporting.Also, distribution and dispensing of these drugs are highly regulated. For example, all Schedule II drug prescriptions must besigned by a physician, physically presented to a pharmacist and may not be refilled without a new prescription. Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlledsubstance. The registration is specific to the particular location, activity and controlled substance schedule. For example,separate registrations are needed for import and manufacturing, and each registration will specify which schedules ofcontrolled substances are authorized. The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirementsvary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule IIsubstances. Required security measures include background checks on employees and physical control of inventory throughmeasures such as cages, surveillance cameras and inventory reconciliations. Records must be maintained for the handling ofall controlled substances, and periodic reports made to the DEA, for example distribution reports for Schedule I and IIcontrolled substances, Schedule III substances that are narcotics, and other designated substances. Reports must also be madefor thefts or losses of any controlled substance, and to obtain authorization to destroy any controlled substance. In addition,special permits and notification requirements apply to imports and exports of narcotic drugs. In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I orII. Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copiesprovided to the DEA. Because Xtampza is regulated as a Schedule II controlled substance, it is subject to the DEA’sproduction and procurement quota scheme. The DEA establishes annually an aggregate quota for how much oxycodone maybe produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientificand medicinal needs. The limited aggregate amount of opioids that the DEA allows to be produced in the United States eachyear is allocated among individual companies, who must submit applications annually to the DEA for individual productionand procurement quotas. We and our contract manufacturers must receive an annual quota from the DEA in order to produceor procure any Schedule I or Schedule II substance, including oxycodone base for use in manufacturing Xtampza. The DEAmay adjust aggregate production quotas and individual production and procurement quotas from time to time during theyear, although the DEA has substantial discretion in whether or not to make such adjustments. To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle controlledsubstances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or24 Table of Contentsdiversion, can result in administrative, civil or criminal enforcement action that could have a material adverse effect on ourbusiness, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessaryregistrations or initiate administrative proceedings to revoke those registrations. In certain circumstances, violations couldresult in criminal proceedings. Individual states also independently regulate controlled substances. We and our contract manufacturers will be subject tostate regulation on distribution of these products. International Regulation In addition to regulations in the United States, we will be subject to a variety of foreign regulations regarding safety andefficacy and governing, among other things, clinical trials and commercial sales and distribution of our products. Whether ornot we obtain FDA approval for a product, we must obtain the necessary approvals by the comparable regulatory authoritiesof foreign countries before we can commence clinical trials or marketing of the product in those countries. The approvalprocess varies from country to country and can involve additional product testing and additional review periods, and thetime may be longer or shorter than that required to obtain FDA approval and, if applicable, DEA classification. Therequirements governing, among other things, the conduct of clinical trials, product licensing, pricing and reimbursementvary greatly from country to country. Regulatory approval in one country does not ensure regulatory approval in another, buta failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. Many foreign countries are also signatories to the internal drug control treaties and have implemented regulations ofcontrolled substances similar to those in the United States. Our products will be subject to such regulation which may imposecertain regulatory and reporting requirements and restrict sales of these products in those countries. Under European Union regulatory systems, marketing authorizations may be submitted either under a centralized ordecentralized procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid forall European Union member states. The decentralized procedure provides for mutual recognition of national approvaldecisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remainingmember states. Within 90 days of receiving the applications and assessment report, each member state must decide whether torecognize approval. In addition, as with HIPAA in the United States, the collection and use of personal health data in the EUis governed by the EU General Data Protection Regulation (GDPR), with many requirements mandated by the GDPR for theconsent of the individuals to whom the personal data relates, the information provided to the individuals, transfer of personaldata within and outside of the EU and the security and confidentiality of the personal data. Enforcement of the GDPR isscheduled to begin on May 25, 2018, and failure to comply with the requirements of the GDPR may result in substantial finesand other administrative penalties. In addition to regulations in Europe and the United States, we will be subject to a variety of foreign regulations governing,among other things, the conduct of clinical trials, pricing and reimbursement and commercial distribution of our products. Ifwe fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal ofregulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Other Healthcare Laws and Compliance Requirements In the United States, the research, manufacturing, distribution, sale and promotion of drug products and medical devices aresubject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers forMedicare & Medicaid Services, other divisions of HHS (e.g., the Office of Inspector General), the DOJ, state AttorneysGeneral and other state and local government agencies. For example, sales, marketing and scientific/educational grantprograms must comply with fraud and abuse laws such as the federal Anti‑Kickback Statute, the federal False Claims Act, asamended and similar state laws. In order to participate in the Medicaid program, existing federal law requires pharmaceuticalmanufacturers to pay rebates to state governments, based on a statutory formula, on covered outpatient drugs reimbursed bythe Medicaid program as a condition of having their drugs paid for by Medicaid. Manufacturers are required to report AMPand best price for each of their covered outpatient drugs to the government on a regular basis. Additionally, some stateMedicaid programs have imposed a requirement for supplemental rebates over and above the formula set forth in federal law,as a condition for coverage. In addition to the Medicaid Rebate Program, federal law also requires that if a pharmaceuticalmanufacturer wishes to have its outpatient drugs covered under Medicaid as well as25 Table of Contentsunder Medicare Part B, it must sign a “Master Agreement” obligating it to provide a formulaic discount that results in afederal ceiling price, or maximum price that participating manufacturers may charge for covered drugs sold to the U.S.Departments of Defense (including the TRICARE retail pharmacy program), Veterans Affairs, the Public Health Service andthe Coast Guard, and also provide discounts through a drug pricing agreement meeting the requirements of Section 340B ofthe Public Health Service Act, for outpatient drugs sold to certain specified eligible health care organizations. The formulafor determining the discounted purchase price under the 340B drug pricing program is defined by statute and is based on theAMP and rebate amount for a particular product as calculated under the Medicaid Drug Rebate Program, discussed above. The federal Anti‑Kickback Statute prohibits any person from knowingly and willfully soliciting, receiving, offering orpaying remuneration, directly or indirectly, to induce or reward either the referral of an individual, or the furnishing,recommending or arranging for a good or service, for which payment may be made under a federal healthcare program such asthe Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceuticalmanufacturers, on one hand, and prescribers, purchasers, and formulary managers, on the other. The term “remuneration” isnot defined in the federal Anti‑Kickback Statute and has been broadly interpreted to include the transfer of anything ofvalue, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments ofcash, waivers of payments, ownership interests and providing anything at other than its fair market value. Although there area number of statutory exemptions and regulatory safe harbors protecting certain business arrangements from prosecution, theexemptions and safe harbors are drawn narrowly and practices that involve remuneration intended to induce prescribing,purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practicesmay not meet all of the criteria for safe harbor protection from federal Anti‑Kickback Statute liability in all cases. The reachof the federal Anti‑Kickback Statute was broadened by the recently enacted Affordable Care Act, which, among other things,amends the intent requirement of the federal Anti‑Kickback Statute such that a person or entity no longer needs to haveactual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, theAffordable Care Act provides that the government may assert that a claim including items or services resulting from aviolation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False ClaimsAct (discussed below) or the civil monetary penalties statute, which imposes fines against any person who is determined tohave presented or caused to be presented claims to a federal healthcare program that the person knows or should know is foran item or service that was not provided as claimed or is false or fraudulent. Additionally, many states have adopted lawssimilar to the federal Anti‑Kickback Statute, some of which apply to referral of patients for healthcare items or servicesreimbursed by any third‑party payor, not only the Medicare and Medicaid programs in at least some cases, and do notcontain safe harbors. The federal False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, orcauses to be presented, a false or fraudulent claim for payment by a federal healthcare program. The “qui tam” provisions ofthe False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that thedefendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, thenumber of suits brought by private individuals has increased dramatically. In addition, various states have enacted falseclaims laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any third‑partypayor and not merely a federal healthcare program. There are many potential bases for liability under the False Claims Act.Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement tothe federal government. The False Claims Act has been used to assert liability on the basis of inadequate care, kickbacks andother improper referrals, improperly reported government pricing metrics such as Best Price or Average Manufacturer Price,improper promotion of off‑label uses not expressly approved by FDA in a drug’s label, and allegations as tomisrepresentations with respect to the services rendered. To the extent we participate in government healthcare programs, ourfuture activities relating to the reporting of discount and rebate information and other information affecting federal, state andthird party reimbursement of our products, and the sale and marketing of our products and our service arrangements or datapurchases, among other activities, may be subject to scrutiny under these laws. We are unable to predict whether we would besubject to actions under the False Claims Act or a similar state law, or the impact of such actions. However, the cost ofdefending such claims, as well as any sanctions imposed, could adversely affect our financial performance. Also, HIPAAcreated several new federal crimes, including healthcare fraud and false statements relating to healthcare matters. Thehealthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program,including private third‑party payors. The false statements statute prohibits knowingly and willfully falsifying, concealing orcovering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the deliveryof or payment for healthcare benefits, items or services.26 Table of Contents In addition, we may be subject to, or our marketing activities in the future may be limited by, data privacy and securityregulation by both the federal government and the states in which we conduct our business. HIPAA and its implementingregulations established uniform standards for certain “covered entities,” which are healthcare providers, health plans andhealthcare clearinghouses, governing the conduct of specified electronic healthcare transactions and protecting the securityand privacy of protected health information. The American Recovery and Reinvestment Act of 2009, commonly referred toas the economic stimulus package, included expansion of HIPAA’s privacy and security standards through HITECH, whichbecame effective on February 17, 2010. Among other things, HITECH makes HIPAA’s privacy and security standards directlyapplicable to “business associates,” which are independent contractors or agents of covered entities that receive or obtainprotected health information in connection with providing a service on behalf of a covered entity. HITECH also increasedthe civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons,and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce thefederal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. Additionally, under the federal Open Payments program, created under Section 6002 of the Affordable Care Act and itsimplementing regulations, manufacturers of drugs for which payment is available under Medicare, Medicaid or theChildren’s Health Insurance Program (with certain exceptions) must report information related to “payments or other transfersof value” made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors)and teaching hospitals, and manufacturers and applicable group purchasing organizations must report ownership andinvestment interests held by physicians (as defined above) and their immediate family members. Such reports are to be madeto the Centers for Medicare & Medicaid Services, or CMS, by the 90th day following the end of each subsequent year andCMS subsequently is to publish the reported information on a publicly available website. There are also an increasing number of state “sunshine” laws that require manufacturers to file reports with states on pricingand marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Severalstates have enacted legislation requiring pharmaceutical companies to, among other things, establish marketing complianceprograms, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials andother activities and/or register their sales representatives. Such legislation also prohibits pharmacies and other healthcareentities from providing certain physician prescribing data to pharmaceutical companies for use in sales and marketing andprohibits certain other sales and marketing practices. These laws may affect our future sales, marketing and other promotionalactivities by imposing administrative and compliance burdens on us. In addition, given the lack of clarity with respect tothese laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent stateand federal authorities. Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible thatsome of our business activities could be subject to challenge under one or more of such laws. If our operations are found to bein violation of any of the federal and state laws described above or any other governmental regulations that apply to us, wemay be subject to penalties, including criminal and significant civil monetary penalties, damages, fines, imprisonment,exclusion from participation in government healthcare programs, injunctions, recall or seizure of products, total or partialsuspension of production, denial or withdrawal of pre‑marketing product approvals, private qui tam actions brought byindividual whistleblowers in the name of the government or refusal to allow us to enter into supply contracts, includinggovernment contracts and the curtailment or restructuring of our operations, any of which could adversely affect our abilityto operate our business and our results of operations. To the extent that any of our products are approved and sold in aforeign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicablepost‑marketing requirements, including safety surveillance, anti‑fraud and abuse laws, and implementation of corporatecompliance programs and reporting of payments or transfers of value to healthcare professionals. Third‑Party Payor Coverage and Reimbursement The commercial success of Xtampza, the Nucynta Products and our product candidates, if approved, will depend, in part,upon the availability of coverage and adequate reimbursement from third‑party payors at the federal, state and private levels.Third‑party payors include governmental programs such as Medicare or Medicaid, private insurance plans and managed careplans. These third‑party payors may deny coverage or reimbursement for a product or therapy in whole or in part if theydetermine that the product or therapy was not medically appropriate or necessary. Also, third‑party payors27 Table of Contentshave attempted to control costs by limiting coverage through the use of formularies and other cost‑containment mechanismsand the amount of reimbursement for particular procedures or drug treatments. The cost of pharmaceuticals and devices continues to generate substantial governmental and third‑party payor interest. Weexpect that the pharmaceutical industry will experience pricing pressures due to the trend toward managed healthcare, theincreasing influence of managed care organizations and additional legislative proposals. Our results of operations andbusiness could be adversely affected by current and future third‑party payor policies as well as healthcare legislative reforms. Some third‑party payors also require pre‑approval of coverage for new or innovative devices or drug therapies before theywill reimburse healthcare providers who use such therapies. While we cannot predict whether any proposedcost‑containment measures will be adopted or otherwise implemented in the future, these requirements or any announcementor adoption of such proposals could have a material adverse effect on our ability to obtain adequate prices for Xtampza, theNucynta Products and our product candidates and to operate profitably. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countrieshave instituted price ceilings on specific products and therapies. Healthcare Reform In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to thehealthcare system that could affect our future results of operations. In particular, there have been and continue to be a numberof initiatives at the U.S. federal and state levels that seek to reduce healthcare costs. The Medicare Modernization Actimposed new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries. Under Part D,Medicare beneficiaries may enroll in prescription drug plans offered by private entities which will provide coverage ofoutpatient prescription drugs. Part D plans include both stand‑alone prescription drug benefit plans and prescription drugcoverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized.Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop itsown drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drugformularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily allthe drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewedby a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increasedemand for our products for which we receive marketing approval. However, any negotiated prices for our products coveredby a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while theMedicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicarecoverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results fromMedicare Part D may result in a similar reduction in payments from non‑governmental payors. The American Recovery and Reinvestment Act of 2009 provides funding for the federal government to compare theeffectiveness of different treatments for the same illness. A plan for the research will be developed by HHS, the Agency forHealthcare Research and Quality and the National Institutes for Health, and periodic reports on the status of the research andrelated expenditures will be made to Congress. Although the results of the comparative effectiveness clinical trials are notintended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the research will have onthe sales of any product, if any such product or the condition that it is intended to treat is the subject of a study. It is alsopossible that comparative effectiveness research demonstrating benefits in a competitor’s product could adversely affect thesales of our product candidates. If third‑party payors do not consider our products to be cost‑effective compared to otheravailable therapies, they may not cover our products as a benefit under their plans or, if they do, the level of payment maynot be sufficient to allow us to sell our products on a profitable basis.In March 2010, the Affordable Care Act was enacted, which includes measures to significantly change the way healthcare isfinanced by both governmental and private insurers. Among the provisions of the Affordable Care Act of importance to thepharmaceutical and biotechnology industry are the following: ·an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs andbiologic agents, apportioned among these entities according to their market share in certain government healthcareprograms;28 Table of Contents ·an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% ofthe average manufacturer price for branded and generic drugs, respectively; ·a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50%point‑of‑sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during theircoverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; ·extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled inMedicaid managed care organizations; ·expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaidcoverage to additional individuals and by adding new mandatory eligibility categories for certain individuals withincome at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaidrebate liability; ·expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; ·a licensure framework for follow‑on biologic products; ·a new Patient‑Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparativeclinical effectiveness research, along with funding for such research; ·a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; ·creation of the Independent Payment Advisory Board, which has authority to recommend certain changes to theMedicare program that could result in reduced payments for prescription drugs and those recommendations couldhave the effect of law even if Congress does not act on the recommendations (the IPAB has not yet been called uponto act as the annual determinations by the CMS Office of the Actuary have not identified a savings target forimplementation in years 2015 or 2016); and ·establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery modelsto lower Medicare and Medicaid spending, potentially including prescription drug spending that began on January1, 2011. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. TheBudget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommendproposals in spending reductions to Congress. The Joint Select Committee on Deficit Reduction did not achieve its targeteddeficit reduction of at least $1.2 trillion for the years 2012 through 2021, triggering the legislation’s automatic reductions toseveral government programs. These reductions include aggregate reductions to Medicare payments to providers of up to 2%per fiscal year, which went into effect in April 2013 and, due to the Bipartisan Budget Act of 2015, will remain in effectthrough 2025 unless additional action is taken by Congress. In January 2013, President Obama signed into law the AmericanTaxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased thestatute of limitations period for the government to recover overpayments to providers from three to five years. These newlaws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverseeffect on our customers and, accordingly, our financial operations. In December 2017, the Tax Cuts and Jobs Act, or the TCJA, repealed the shared responsibility payment for individuals whofail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code, commonly referred to as theindividual mandate, beginning in 2019. The Joint Committee on Taxation estimates that the repeal will result in over 13million Americans losing their health insurance coverage over the next ten years, and is likely to lead to increases ininsurance premiums. It is uncertain how or whether this legislation may affect our customers and, accordingly, our financialoperations. Other Regulatory Requirements29 Table of Contents We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and theuse and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, asabove, the FDA has broad regulatory and enforcement powers, including, among other things, the ability to levy fines andcivil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more ofwhich could have a material adverse effect on us. Research and Development We incurred research and development expenses of $8.6 million, $14.9 million and $8.0 million for the years endedDecember 2017, 2016 and 2015, respectively. Employees As of December 31, 2017, we had a total of 250 full‑time employees. Of these, 19 were engaged in full‑time research anddevelopment activities. None of our employees are represented by a labor organization or under any collective‑bargainingarrangements. We consider our employee relations to be good. Executive Officers of the Company The following table lists the positions, names and ages of our executive officers as of March 1, 2018:NameAgePosition(s)Executive Officers:Michael T. Heffernan, R.Ph. 53Chairman, President and Chief ExecutiveOfficerJoseph Ciaffoni46Executive Vice President and ChiefOperating OfficerPaul Brannelly45Executive Vice President and ChiefFinancial OfficerAlison B. Fleming43Executive Vice President and ChiefTechnology Officer Executive Officers Michael T. Heffernan, R.Ph., Chairman, President and Chief Executive Officer. Mr. Heffernan has served as our Presidentand Chief Executive Officer and as a member of our board of directors since October 2003. Mr. Heffernan has over twenty-five years of experience in the pharmaceutical and related healthcare industries. He was previously the Founder, Presidentand Chief Executive Officer of Onset Therapeutics, LLC, a dermatology-focused company that developed andcommercialized products for the treatment of skin-related illnesses and was responsible for the spin-off of the business fromthe Company to create PreCision Dermatology, Inc. which was acquired by Valeant Pharmaceuticals International, Inc. Mr.Heffernan has held prior positions as Co-Founder, President and Chief Executive Officer of Clinical Studies Ltd., apharmaceutical contract research organization that was sold to PhyMatrix Corp., and as President and Chief ExecutiveOfficer of PhyMatrix. Mr. Heffernan started his career at Eli Lilly and Company, where he served in numerous sales andmarketing roles. He serves on the board of directors of Keryx Biopharmaceuticals, Inc (NASDAQ: KERX) (July 2016 topresent) and Veloxis Pharmaceuticals A/S (CPH: VELO) (March 2015 to present). Mr. Heffernan previously served on theboard of directors and as Chairman of Ocata Therapeutics, Inc. (NASDAQ: OCAT), Cornerstone Therapeutics Inc. (nowknown as Chiesi USA, Inc.) (NASDAQ: CRTX) and numerous privately held companies. Mr. Heffernan graduated from theUniversity of Connecticut with a B.S. in Pharmacy in 1987 and is a Registered Pharmacist. Joseph Ciaffoni, Executive Vice President and Chief Operating Officer. Mr. Ciaffoni has served as our Executive VicePresident and Chief Operating Officer since May 2017. Prior to joining us, Mr. Ciaffoni served as President, U.S. BrandedPharmaceuticals of Endo International plc from August 2016 until May 2017. Before that, Mr. Ciaffoni held variouspositions of increasing responsibility at Biogen Idec since 2012, including Senior Vice President, Global SpecialtyMedicines Group, Senior Vice President, U.S. Commercial and Vice President, U.S. Neurology Field Operations andMarketing. Prior to joining Biogen Idec, Mr. Ciaffoni was Executive Vice President and Chief Operating30 Table of ContentsOfficer of Shionogi Inc. and President of Shionogi Pharmaceuticals. Mr. Ciaffoni also previously served as Vice President,Sales for Schering-Plough (now Merck) and held several commercial leadership roles at Sanofi-Synthelabo (now Sanofi) andNovartis. Mr. Ciaffoni received a B.A. in Communications and an M.B.A. from Rutgers, The State University of New Jersey. Paul Brannelly, Executive Vice President and Chief Financial Officer. Mr. Brannelly has served as our Executive VicePresident and Chief Financial Officer since February 2015. Prior to joining us, Mr. Brannelly served as Senior Vice President,Finance and Administration, and Treasurer of Karyopharm Therapeutics Inc. (NASDAQ: KPTI) from June 2013 to August2014. From August 2014 to November 2014, Mr. Brannelly served as a consultant to Karyopharm. Prior to joiningKaryopharm, Mr. Brannelly served as Vice President, Finance, Treasurer and Secretary at Verastem, Inc. (NASDAQ: VSTM)from August 2010 to May 2013. From January 2010 to September 2011, Mr. Brannelly held the position of Chief FinancialOfficer at the Longwood Fund, a venture capital firm aimed at investing in, managing and building healthcare companies,where he set up the financial and operational infrastructure following the closing of its first fund and eventually served asChief Financial Officer of its two startup companies, Verastem and OvaScience, Inc. (NASDAQ: OVAS). From November2005 to September 2009, he served as Vice President, Finance at Sirtris Pharmaceuticals, Inc., a biopharmaceutical companywhich GlaxoSmithKline plc purchased for $720 million in 2008, where he managed the S-1 preparation and due diligenceprocess for Sirtris' initial public offering and managed the company's transition to being a public company. Mr. Brannellystarted his biopharmaceutical career at Dyax Corporation from September 1999 to May 2002, and subsequently moved on topositions of increasing responsibility at CombinatoRx Inc. from May 2002 to November 2005, including as Vice President,Finance and Treasurer, where he led the initial public offering process. Mr. Brannelly graduated from the University ofMassachusetts at Amherst with a B.B.A. in Accounting in 1995. Alison B. Fleming, Ph.D., Chief Technology Officer. Dr. Fleming has served as our Executive Vice President and ChiefTechnology Officer since January 2017. Prior to being our Chief Technology Officer, Dr. Fleming led our development teamas our Vice President, Product Development since October 2002. Prior to joining us, Dr. Fleming's academic research focusedon implantable drug delivery systems for cancer therapy. Dr. Fleming is an inventor on several U.S. patents and pendingpatent applications, and has authored numerous scientific publications and poster presentations in the field of novel drugdelivery systems. In 2001, Dr. Fleming was the recipient of the Jorge Heller Journal of Controlled Release Outstanding PaperAward. Dr. Fleming graduated from the University of Massachusetts, Amherst in 1997 with a B.S. in Chemical Engineeringand received a Ph.D. in Chemical and Biomolecular Engineering from Cornell University in 2002. Our Corporate Information Our predecessor was incorporated in Delaware in April 2002 under the name Collegium Pharmaceuticals, Inc. In October2003, our predecessor changed its name to Collegium Pharmaceutical, Inc. In 2010, our predecessor divested its subsidiary,Onset Therapeutics, LLC to PreCision Dermatology, Inc. In July 2014, we reincorporated in the Commonwealth of Virginiapursuant to a merger whereby Collegium Pharmaceutical, Inc., a Delaware corporation, merged with and into CollegiumPharmaceutical, Inc., a Virginia corporation, with the Virginia corporation surviving the merger. Since 2010, we havedevoted substantially all of our resources to the development of our patented DETERx platform technology, the preclinicaland clinical advancement of our product candidates, the commercialization of Xtampza and the Nucynta Products, theacquisition and licensing of other products, and the creation and protection of related intellectual property. Available Information We maintain a website at www.collegiumpharma.com. We make available, free of charge on our website, our annual report onForm 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and all amendments to those reports filed orfurnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, assoon as reasonably practicable after we electronically file those reports with, or furnish them to, the Securities and ExchangeCommission, or the SEC. We also make available, free of charge on our website, the reports filed with the SEC by our officers,directors and 10% shareholders pursuant to Section 16 under the Exchange Act as soon as reasonably practicable after copiesof those filings are provided to us by those persons. The information contained on, or that can be accessed through, ourwebsite is not a part of or incorporated by reference in this Form 10‑K.31 Table of Contents Item 1A. Risk Factors. Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, aswell as all other information included in this Annual Report on Form 10-K, including our financial statements, the notesthereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results ofOperations.” If any of the following risks actually occurs, our business, financial condition, operating results, prospectsand ability to accomplish our strategic objectives could be materially harmed. As a result, the trading price of our commonstock could decline and you could lose all or part of your investment. Additional risks and uncertainties not presentlyknown to us or that we currently deem immaterial may also impair our business operations and the market price of ourcommon stock.Risks Related to Our Financial Position and Capital NeedsWe have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.We are an early commercial-stage pharmaceutical company. To date, we have focused on developing our first product,Xtampza. Investment in pharmaceutical product development is highly speculative because it entails substantial upfrontcapital expenditures and significant risk that a product candidate will fail to gain regulatory approval or becomecommercially viable. Since 2010, we have only generated limited revenue from product sales, and we continue to incursignificant research, development, commercialization and other expenses related to our ongoing operations. As a result, weare not profitable and have incurred losses in each period since January 1, 2011. For the year ended December 31, 2017, wereported a net loss of $74.9 million, and we had an accumulated deficit of $298.0 million at December 31, 2017.We expect to continue to incur losses for the foreseeable future as we continue to commercialize Xtampza and the NucyntaProducts and continue our development of, and seek regulatory approvals for, our product candidates. We may encounterunforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.The size of our future net losses will depend, in part, on our ability to generate revenues and on the rate of future growth ofour expenses. If any of our product candidates fail in clinical trials or does not gain final regulatory approval, or if approved,fails to achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we maynot be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had and willcontinue to have an adverse effect on our shareholders’ equity and working capital.We currently generate limited revenue from the sale of products and may never become profitable.We began the commercial sale of our first product, Xtampza, in June 2016 and assumed responsibility for the sales andmarketing of the Nucynta Products in January 2018, and in each case have generated limited revenue from product sales. Ourability to generate additional revenue and become profitable depends upon our ability to successfully commercializeXtampza, the Nucynta Products, our existing product candidates, and any other products and product candidates that we mayin-license or acquire in the future. Even if we are able to successfully achieve regulatory approval for these productcandidates, we do not know when any of these product candidates will generate revenue for us, if at all. Our ability togenerate revenue from our current or future product candidates depends on a number of factors, including our ability to:·successfully commercialize Xtampza and the Nucynta Products;·successfully satisfy FDA post-marketing requirements for Xtampza, including studies and clinical trials that havebeen required for other extended release/long acting opioid analgesics and individual studies and clinical trials ofXtampza;·set a commercially viable price for Xtampza and the Nucynta Products;·manufacture commercial quantities of our products at acceptable cost levels;·grow and sustain a commercial organization capable of sales, marketing and distribution for the products we intendto sell ourselves in the markets in which we have retained or acquired commercialization rights;32 Table of Contents·find suitable distribution collaborators to help us market, sell and distribute our products, if approved, in marketsoutside the United States;·obtain coverage and adequate reimbursement from third parties, including government payors;·successfully complete development activities, including the necessary clinical trials, with respect to our productcandidates;·complete and submit regulatory submissions to the FDA and obtain regulatory approval;·comply with existing and changing laws and regulations that apply to the pharmaceutical industry, includingopioid manufacturers;·respond to ongoing legal, regulatory, and public scrutiny of the pharmaceutical industry, including opioidmanufacturers; and·complete and submit applications to, and obtain regulatory approval from, foreign regulatory authorities, if wechoose to commercialize our product candidates outside the United States.In addition, because of the numerous risks and uncertainties associated with product development, including that ourproduct candidates may not advance through development or achieve the safety and efficacy endpoints of applicable clinicaltrials, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve ormaintain profitability. Furthermore, we anticipate incurring significant costs associated with commercializing these productsif regulatory approval is obtained.Even if we are able to generate revenues from the sale of our products, we may not become profitable and may need to obtainadditional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on acontinuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.If we require additional capital to fund our operations and we fail to obtain necessary financing, we may be unable tocomplete the development and commercialization of our product candidates.Our operations have consumed substantial amounts of cash. We expect to continue to spend substantial amounts to advancethe development of our product candidates and to commercialize Xtampza, the Nucynta Products and any product candidatesfor which we may receive regulatory approval. We believe that our existing cash and cash equivalents and expected revenuecontributions from Xtampza and the Nucynta Products will be sufficient to fund our operations into 2020, including fromsales of Xtampza and the Nucynta Products, and the continuation of our development of our product candidates. However,we may require additional capital for the further commercialization of Xtampza, the Nucynta Products and our productcandidates and may also need to raise additional funds sooner in order to continue development of our product candidates.We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raiseadditional capital in sufficient amounts, when required or on acceptable terms, we also could be required to:·significantly delay, scale back or discontinue the development or the commercialization of Xtampza, our productcandidates or one or more of our other research and development initiatives;·delay, scale back or discontinue the commercialization of the Nucynta Products;·seek collaborators for Xtampza and/or one or more of our product candidates at an earlier stage than otherwise wouldbe desirable or on terms that are less favorable than might otherwise be available;·relinquish or license on unfavorable terms our rights to technologies, products or product candidates, including theNucynta Products, that we otherwise would seek to develop or commercialize ourselves; or33 Table of Contents·significantly curtail operations.Our forecast of the period of time through which our financial resources will be adequate to support our operations is aforward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number offactors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptionsthat may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our futurefunding requirements, both near and long-term, will depend on many factors, including, but not limited to:·our ability to obtain and maintain abuse-deterrent claims in the product labels for our products and productcandidates;·our ability to successfully commercialize Xtampza and the Nucynta Products;·our ability to successfully satisfy the FDA post-marketing requirements of Xtampza, including studies and clinicaltrials that have been required for other extended release/long acting opioid analgesics and individual studies andclinical trials of Xtampza;·clinical development plans for our product candidates;·the outcome, timing and cost of the regulatory approval process by the FDA and foreign regulatory authorities,including the potential for regulatory authorities to require that we perform more studies than those that we currentlyexpect;·the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights,including defending Purdue’s patent infringement claims against us and prosecuting patent infringement litigationagainst Teva in connection with its submission of an ANDA for a generic version of Xtampza;·the cost and timing of completion of existing or expanded commercial-scale outsourced manufacturing activities;·the cost of maintaining, and if appropriate, expanding, sales, marketing and distribution capabilities for Xtampza,the Nucynta Products and any product candidates for which we may receive regulatory approval in regions where wechoose to commercialize our products; and·the initiation, progress, timing, costs and results of clinical trials for our product candidates and any future productcandidates we may in-license.Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us torelinquish rights to Xtampza, our technologies or product candidates.We may seek additional capital through a combination of private and public equity offerings, debt financings, receivables orroyalty financings, strategic collaborations and alliances and licensing arrangements. To the extent that we raise additionalcapital through the sale of equity or convertible debt securities, existing shareholders’ ownership interest will be diluted, andthe terms may include liquidation or other preferences that adversely affect the rights of existing shareholders. Debt,receivables and royalty financings may be coupled with an equity component, such as warrants to purchase stock, whichcould also result in dilution of our existing shareholders’ ownership. The incurrence of additional indebtedness could resultin increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on ourability to incur further debt, limitations on our ability to acquire or license intellectual property rights and other operatingrestrictions that could have a material adverse effect on our ability to conduct our business and may result in liens beingplaced on our assets and intellectual property. If we were to default on any of our indebtedness, we could lose such assets andintellectual property. If we raise additional funds through strategic collaborations and alliances and licensing arrangementswith third parties, we may have to relinquish valuable rights to Xtampza, the Nucynta Products, or our product candidates, orgrant licenses on terms that are not favorable to us. If we are unable to34 Table of Contentsraise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminateour product development or commercialization efforts or grant rights to develop and market our technologies that we wouldotherwise prefer to develop and market ourselves.We have a limited operating history, which may make it difficult for you to evaluate the success of our business to date andto assess our future viability.Our predecessor was originally incorporated in Delaware in April 2002 under the name Collegium Pharmaceuticals, Inc. InOctober 2003, our predecessor changed its name to Collegium Pharmaceutical, Inc. In July 2014, we reincorporated in theCommonwealth of Virginia pursuant to a merger whereby Collegium Pharmaceutical, Inc., a Delaware corporation, mergedwith and into Collegium Pharmaceutical, Inc., a Virginia corporation, with the Virginia corporation surviving the merger.From 2002 until 2010, our operations focused primarily on marketing proprietary therapies to the wound care anddermatology industry through our former subsidiary, Onset Therapeutics, LLC, which was spun off and became a part ofPreCision Dermatology, Inc. in 2010. Since 2010, our operations have focused primarily on developing the DETERxtechnology platform and identifying and developing product candidates that utilize the DETERx technology, including ourfirst product, Xtampza. We are currently in the early years of operating as a commercial stage company, and although wehave expanded our product portfolio to include Xtampza and the Nucynta products, we have a limited track record ofsuccessful commercialization of these products. Consequently, any predictions about our future success, performance orviability may not be as accurate as they could be if we had a longer operating history.The Commercialization Agreement with Depomed, pursuant to which we assumed responsibility for the sales andmarketing of the Nucynta Products, requires us to pay significant license fees, some of which are payable whether or notour commercialization efforts are successful. Such licensing fees may adversely affect our cash flow and our ability tooperate our business and our prospects for future growth.In December 2017, we entered into the Commercialization Agreement, pursuant to which we assumed responsibility for thesales and marketing of the Nucynta Products. We closed the transactions contemplated by the Commercialization Agreement,as amended, on January 9, 2018 and we began marketing the Nucynta Products in February 2018. During the term of theCommercialization Agreement and through December 31, 2021, we are required to pay to Depomed a minimum annuallicense fee of $135.0 million paid quarterly in arrears, plus double-digit royalties on net sales of Nucynta Products in excessof $233.0 million per year. Beginning January 1, 2022 and for each year of the Commercialization Agreement term thereafter,we are required to pay double-digit royalties on all net sales of Nucynta Products. If our commercialization efforts of theNucynta Products are unsuccessful, there can be no assurance that we will have sufficient cash flow to pay such licensingfees.Our obligation to Depomed to pay such licensing fees could:·make it more difficult for us to satisfy obligations with respect to our indebtedness, and any failure to comply withthe obligations of any of our debt instruments, including financial and other restrictive covenants, could result in anevent of default under the agreements governing such indebtedness; ·require us to dedicate a substantial portion of available cash flow to pay licensing fees, which will reduce the fundsavailable for working capital, capital expenditures, acquisitions and other general corporate purposes;·limit flexibility in planning for and reacting to changes in our business and in the industry in which we operate;·limit our ability to engage in strategic transactions or implement our business strategies;·limit our ability to borrow additional funds; and·place us at a disadvantage compared to our competitors.Any of the factors listed above could materially and adversely affect our business and our results of operations. If we do nothave sufficient cash flow to pay the licensing fees under the Commercialization Agreement, we may be required to35 Table of Contentsterminate the Commercialization Agreement, sell assets, borrow money or sell securities, none of which we can guarantee wewill be able to do on favorable terms, if at all.Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.As of December 31, 2017, we had a federal net operating loss, or NOL, carryforward of approximately $249.5 million andstate net operating loss carryovers of approximately $205.1 million, which are available to offset future taxable income. TheU.S. federal NOL carryforwards begin to expire in 2022, and the state NOL carryforwards begin to expire in 2030. We alsohad U.S. federal tax credits of approximately $3.4 million, and state tax credits of approximately $589,000. These taxattributes are generally subject to a limited carryover/carryback period, and are also subject to the annual limitations thatmay be imposed under Section 382 of the Internal Revenue Code of 1986, as amended (Code), or Section 382. The TCJA generally will allow losses incurred after 2017 to be carried over indefinitely, but limits the NOL deduction to thelesser of the NOL carryover or 80% of a corporation’s taxable income (subject to Sections 382 and 383 of the Code and otherconditions). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 will generally bedeductible to the extent of the lesser of a corporation’s NOL carryover or 100% of a corporation’s taxable income, and beavailable for twenty years from the period the loss was generated. We have not finalized our review of the impact of TCJA onthe NOL rules, and the impact, if any, to our ability to utilize and carryover net operating losses. The federal R&D credit generally has a twenty year carryover term, and our state R&D credit is generally available for afifteen year carryover. Under Section 382, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (byvalue) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income may be limited. We mayexperience ownership changes in the future as a result of shifts in our stock ownership some of which are outside our control.We have not completed a current study to assess whether an ownership change has occurred or whether there have beenmultiple ownership changes since our formation. As a result, if we earn net taxable income, our ability to use our pre-changeNOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result inincreased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs issuspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As of December 31, 2017 and 2016, we have provided a full valuation allowance for deferred tax assets including NOL andtax credit carryovers. Risks Related to our Products and Product CandidatesOur success depends in large part on the commercial success of Xtampza, our lead product, and the Nucynta Products,which we will commercialize pursuant to a Commercialization Agreement with Depomed.To date, we have invested substantial resources in the development of our lead product, Xtampza, which has been approvedby the FDA. Our business and future success are substantially dependent on our ability to successfully and timelycommercialize this product, which may never occur. We currently generate limited revenues from product sales and we maynever be able to commercialize Xtampza, the Nucynta Products, or any product candidates that are approved by the FDA,successfully.Our ability to successfully commercialize Xtampza will depend on many factors, including but not limited to:·our ability to successfully satisfy FDA post-marketing requirements, including studies and clinical trials that havebeen required for other extended release/long acting opioid analgesics and individual studies and clinical trials ofXtampza and its components;·our ability to manufacture commercial quantities of Xtampza at reasonable cost and with sufficient speed to meetcommercial demand;36 Table of Contents·our ability to continue to build and retain a sales and marketing organization to market Xtampza;·our success in educating physicians, patients and caregivers about the benefits, administration, use and coverage ofXtampza;·the perceived availability and advantages, relative cost, relative safety and relative efficacy of other abuse-deterrentproducts and treatments for chronic pain and chronic pain with dysphagia;·our ability to successfully defend any challenges to our intellectual property relating to Xtampza;·the availability of coverage and adequate reimbursement for Xtampza; and·a continued acceptable safety profile of Xtampza following approval.Our ability to successfully commercialize the Nucynta Products will depend on many factors including, but not limited to,our ability to:·develop and execute our sales and marketing strategies for the Nucynta Products;·achieve, maintain and grow market acceptance of, and demand for, the Nucynta Products;·obtain and maintain adequate coverage, reimbursement and pricing from managed care, government and other third-party payers;·maintain and manage the necessary sales, marketing, manufacturing, managed markets, and other capabilities andinfrastructure that are required to successfully integrate and commercialize the Nucynta Products;·obtain adequate supply of Nucynta ER and Nucynta IR; and·comply with applicable legal and regulatory requirements.The success of our efforts to commercialize the Nucynta Products may also depend on additional factors, including themarket acceptance of the Nucynta Products, and the outcome of a pending appellate decision in litigation between Depomedand ANDA filers who are seeking to market a generic version of the Nucynta Products in the U.S.Many of these matters are beyond our control and are subject to other risks described elsewhere in this “Risk Factors”section. Accordingly, we cannot assure you that we will be able to successfully commercialize or generate sufficient revenuefrom Xtampza, and/or the Nucynta Products. If we cannot do so, or are significantly delayed in doing so, our business will bematerially harmed.Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on the productlabeling, and our ability to successfully market Xtampza or the Nucynta Products may be adversely affected.It is estimated that the U.S. market includes approximately 11 million patients with chronic pain with dysphagia. OurXtampza microspheres are designed to be removed from the capsule and sprinkled on food or into a cup, and then directlyinto the mouth, or in feeding tubes, without compromising their extended-release properties. On April 26, 2016, the FDAgranted approval for the Xtampza NDA, including an approved product label. The FDA could change the product labeling. Ifthe product label for Xtampza is modified in the future so as to exclude the flexible dose administration options, or the FDArequires us to have a boxed warning similar to competitor product labeling stating that “crushing, dissolving or chewing cancause rapid release and absorption of a potentially fatal dose of the active drug,” it will limit our ability to differentiateXtampza from other abuse-deterrent opioid formulations on the basis of flexible dosing options, and we may not be able tomarket Xtampza for use by patients with chronic pain with dysphagia. As a result, this may have an adverse effect on ourbusiness and our prospects for future growth.37 Table of ContentsIf the FDA does not conclude that our product candidates in development are sufficiently bioequivalent, or demonstratecomparable bioavailability to their respective listed drugs, or if the FDA otherwise does not conclude that our productcandidates satisfy the requirements for the Section 505(b)(2) approval pathway, the approval pathway for those productcandidates will likely take significantly longer, cost significantly more and entail significantly greater complications andrisks than anticipated, and the FDA may not approve those product candidates.A key element of our strategy is to seek FDA approval for our product candidates through the Section 505(b)(2) regulatorypathway. Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FD&C Act, permits the filing of an NDA thatcontains full safety and efficacy reports but where at least some of the information required for approval comes from studiesnot conducted by or for the applicant, such as the FDA’s findings of safety and efficacy in the approval of a similar drug, andfor which the applicant has not obtained a right of reference and/or published literature. Such reliance is typically predicatedon a showing of bioequivalence or comparable bioavailability to an approved drug.If the FDA does not allow us to pursue the Section 505(b)(2) approval pathway for our product candidates, or if we cannotdemonstrate bioequivalence or comparable bioavailability of our product candidates to approved products, we may need toconduct additional clinical trials, provide additional data and information, and meet additional standards for regulatoryapproval. If this were to occur, the time and financial resources required to obtain FDA approval for these product candidateswould increase. Moreover, our inability to pursue the Section 505(b)(2) approval pathway could result in new competitiveproducts reaching the market sooner than our product candidates, which could have a material adverse effect on ourcompetitive position and our business prospects. Even if we are allowed to pursue the Section 505(b)(2) approval pathway,we cannot assure you that our product candidates will receive the requisite approvals for commercialization on a timelybasis, if at all.In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last fewyears, pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’sinterpretation of Section 505(b)(2) is successfully challenged, the FDA may change its policies and practices with respect toSection 505(b)(2) regulatory approvals, which could delay or even prevent the FDA from approving any NDA that we submitunder Section 505(b)(2).Even if our product candidates are approved under Section 505(b)(2), the approval will likely be subject to limitations on theindicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements forcostly post-marketing testing and surveillance to monitor the safety or efficacy of the products, including additionalpreclinical studies and clinical trials.Our decision to seek approval of our product candidates under Section 505(b)(2) increases the risk that a patentinfringement suit may be filed against us, which would delay the FDA’s final regulatory approval of such productcandidates.In connection with any NDA that we file under Section 505(b)(2), we are required to notify the patent holders of the referencelisted drug that we have certified to the FDA that any patents listed for the reference listed drug in the FDA’s Orange Bookpublication are invalid, unenforceable or will not be infringed by the manufacture, use or sale of our drug. If the patent holderfiles a patent infringement lawsuit against us within 45 days of its receipt of notice of our certification, the FDA isautomatically prevented from approving our Section 505(b)(2) NDA until the earliest of 30 months, expiration of the patents,settlement of the lawsuit or a court decision in the infringement case that is favorable to us. Accordingly, we may investsignificant time and expense in the development of our product candidates only to be subject to significant delay andexpensive and time-consuming patent litigation before our product candidates may be commercialized.Even if we are found not to infringe any potential plaintiff’s patent claims or the claims are found invalid or unenforceable,defending any such infringement claim could be expensive and time-consuming, and could delay the launch of our productcandidates and distract management from their normal responsibilities. The Court could decline to hear our summaryjudgment motion, could decline to act expeditiously to issue a decision or hold a trial, or could decline to find that all of thelisted patents are invalid or non-infringed. If we are unsuccessful in our defense of non-infringement and unable to proveinvalidity of the listed patents, the court could issue an injunction prohibiting the launch of our product candidates. If wewere to receive final regulatory approval by the FDA and launch any of our product candidates, prior to a full and finaldetermination that the patents are invalid or non-infringed, we could be38 Table of Contentssubject to substantial liability for damages if we do not ultimately prevail on our defenses to a claim of patent infringement.The regulatory approval processes of the FDA and foreign regulatory authorities are lengthy, time-consuming andunpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business willbe substantially harmed.The time required to obtain approval by the FDA and foreign regulatory authorities is unpredictable, but typically takesmany years following the commencement of preclinical studies and clinical trials and depends upon numerous factors,including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type andamount of clinical data necessary to gain approval varies among jurisdictions and may change during the course of a productcandidate’s clinical development. Although the FDA has approved Xtampza, it is possible that none of our productcandidates or any future product candidates that we may in-license, acquire or develop will ever obtain final regulatoryapproval from the FDA or any foreign regulatory authority. Moreover, even after any product candidate receives finalregulatory approval, the FDA may require, as it has for Xtampza, costly post-marketing requirements. Successful and timelysatisfaction of these post-marketing requirements will be necessary for us to maintain regulatory approval.Our product candidates could fail to receive regulatory approval from the FDA or a foreign regulatory authority, or we maybe required to conduct more extensive studies and clinical trials in order to receive such approval, for many reasons,including, but not limited to:·the FDA and/or foreign regulatory authorities may disagree with or disapprove of the design or implementation ofour clinical trials;·failure to demonstrate that a product candidate is safe and effective for its proposed indication;·failure to demonstrate that a product candidate is bioequivalent to its listed drug;·failure of clinical trials to meet criteria required for approval;·failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;·the FDA or foreign regulatory authorities may disagree with our interpretation of data from preclinical studies orclinical trials;·deficiencies in the manufacturing processes or failure of third-party manufacturing facilities with whom we contractfor clinical and commercial supplies to pass inspection;·the FDA or foreign regulatory authorities may not approve the manufacturing processes or facilities of third partymanufacturers with which we contract for clinical and commercial supplies; or·insufficient data collected from clinical trials of our product candidates or changes in the approval policies orregulations that render our preclinical and clinical data insufficient to support the submission and filing of an NDAor to obtain regulatory approval.The lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtainregulatory approval to market our product candidates, which would harm our business, results of operations and prospectssignificantly.In addition, even if we obtain approval, regulatory authorities may approve any of our product candidates for fewer or morelimited indications than we request, may not approve, with respect to certain foreign regulatory authorities, the price weintend to charge for our products, may grant approval contingent on the performance of costly post-marketing39 Table of Contentsrequirements, or may approve a product label that does not include the labeling claims necessary or desirable for thesuccessful commercialization of that product. Any of the foregoing scenarios could have a material adverse effect on ourbusiness.The FDA or a foreign regulatory authority may require more information, including additional preclinical or clinical data tosupport approval, which may delay or prevent approval and our commercialization plans, or cause us to abandon thedevelopment program. Even if we obtain regulatory approval, our product candidates may be approved for fewer or morelimited indications than we request, such approval may be contingent on the performance of costly post-marketingrequirements, or we may not be allowed to include the labeling claims necessary or desirable for the successfulcommercialization of such product candidate.In order to market and sell our products outside the United States, we will need to obtain separate marketing approvals andcomply with numerous and varied regulatory requirements and regimes, which can involve additional testing, may takesubstantially longer than the FDA approval process, and still generally includes all of the risks associated with obtainingFDA approval. In addition, in many countries outside the United States, it is required that the product be approved forreimbursement before the product can be approved for sale in that country. FDA approval does not ensure approval byregulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United Statesdoes not ensure approval by the FDA or regulatory authorities in other countries or jurisdictions. We may not obtain anyregulatory approvals on a timely basis, if at all. We may not be able to file for marketing approvals and may not receivenecessary approvals to commercialize our products in any market. If we are unable to obtain approval of any of our productcandidates by regulatory authorities in countries outside the United States, the commercial prospects of that productcandidate may be significantly diminished and our business prospects could decline.Development of our product candidates is not complete, and we cannot be certain that our product candidates will becommercialized.To commercialize our product candidates, in addition to commercializing Xtampza, we must successfully research, develop,obtain regulatory approval for, manufacture, launch, market and distribute product candidates under development. For eachproduct candidate that we intend to commercialize, we must successfully meet a number of critical developmentalmilestones, including:·selecting and developing a drug delivery technology to deliver the proper dose of drug over the desired period oftime;·determining the appropriate drug dosage that will be tolerated, safe and effective;·demonstrating the drug formulation will be stable for commercially reasonable time periods;·demonstrating that the drug is safe and effective in patients for the intended indication; and·completing the manufacturing development and scale-up to permit manufacture of our product candidates incommercial quantities and at acceptable prices.The time necessary to achieve these developmental milestones for any individual product candidate is long and uncertain,and we may not successfully complete these milestones for any of our product candidates in development. We may not beable to finalize the design or formulation of any product candidate. In addition, we may select components, solvents,excipients or other ingredients to include in our product candidates that have not been previously approved for use inpharmaceutical products, which may require us to perform additional studies and may delay clinical testing and regulatoryapproval of our product candidates. Even after we complete the design of a product candidate, the product candidate muststill be shown to be bioequivalent to an approved drug or safe and effective in required clinical trials before approval forcommercialization.We are continuing to test and develop our product candidates and may explore possible design or formulation changes to40 Table of Contentsaddress bioavailability, safety, efficacy, manufacturing efficiency and performance issues. We may not be able to completedevelopment of any product candidates that will be safe and effective and that will have a commercially reasonable treatmentand storage period. If we are unable to complete development of our product candidates, we will not be able to earn revenuefrom them.Xtampza and the Nucynta Products are subject to mandatory REMS programs, which could increase the cost, burden andliability associated with the commercialization of these products. We anticipate that our product candidates, if approved,will also be subject to mandatory REMS programs.The FDA has approved a REMS for extended release, or ER, and long acting, or LA, opioid drugs formulated with the activeingredients fentanyl, hydromorphone, methadone, morphine, oxycodone, oxymorphone, and others as part of a federalinitiative to address prescription drug abuse and misuse, or the ER/LA opioid REMS. In September 2017, the FDAannounced that immediate-release, or IR, opioid drugs will be subject to the same REMS as ER/LA opioids. One of theprimary goals of the REMS is to ensure that the benefits of these drugs continue to outweigh the risks.The REMS introduces new safety measures designed to reduce risks and improve the safe use of opioids, while continuing toprovide access to these medications for patients in pain. The REMS applies to more than 20 companies that manufactureopioid analgesics. Under the REMS, companies are required to make education programs available to prescribers based onthe FDA Blueprint for Prescriber Education for Extended Release and Long Acting Opioid Analgesics. It is expected thatcompanies will meet this obligation by providing educational grants to continuing education providers, who will developand deliver the training. The REMS also requires companies to distribute FDA-approved educational materials to prescribersand patients on the safe use of these drugs. The companies must perform periodic assessments of the implementation of theREMS and the success of the program in meeting its goals. The FDA will review these assessments and may requireadditional elements to achieve the goals of the program.If the FDA determines that a REMS is necessary during review of an application, the drug sponsor must agree to the REMSplan at the time of approval. Xtampza and the Nucynta Products have been subject to the REMS requirement since theirapproval. REMS includes a Medication Guide that is dispensed with each prescription, physician training based on FDA-identified learning objectives, audits to ensure that the FDA’s learning objectives are addressed in the physician trainings,letters to prescribing physicians, professional organizations and state licensing entities alerting each to the REMS, and theestablishment of a call center to provide more information about the REMS. We anticipate that our future product candidateswill also be subject to these REMS requirements. There may be increased cost, administrative burden and potential liabilityassociated with the marketing and sale of these types of product candidates subject to the REMS requirements, which couldreduce the commercial benefits to us from the sale of these product candidates.If we fail to comply with our obligations in the agreements under which we license intellectual property rights from thirdparties or otherwise experience disruptions to our business relationships with Depomed or other licensors, we could loselicense rights that are important to our business.We are, or may become, a party to certain intellectual property license agreements, including the CommercializationAgreement, that are important to our business and may enter into additional license agreements in the future. Our existinglicense agreements impose, and we expect that future license agreements will impose, various diligence, milestone, royaltyand other obligations on us. If we fail to comply with the obligations under the Commercialization Agreement or other suchagreements, Depomed or another such licensor may have the right to terminate the license, in which event we would not beable to market products covered by the license.In addition, Depomed may terminate the Commercialization Agreement under certain circumstances, regardless of whetherwe are compliant with the terms of such agreement. If annual net sales of the Nucynta Products are less than $180,000,000through January 1, 2022, or if they are less than $140,000,000 per year in any 12-month period commencing on January 1,2022, then Depomed will have the right to terminate the Commercialization Agreement without penalty. Depomed may alsoterminate the Commercialization Agreement for convenience at any time prior to December 31, 2018, provided it will berequired to pay a termination fee to us. In some cases, patent prosecution of our licenses is controlled solely by the licensor. If our licensors fail to obtain andmaintain patent or other protection for the proprietary intellectual property we license from them, we could lose our41 Table of Contentsrights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competingproducts using the intellectual property. In certain cases, we control the prosecution of patents resulting from licenses. In theevent we breach any of our obligations related to such prosecution, we may incur significant liability to our licensingpartners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business andscientific issues and is complicated by the rapid pace of scientific discovery in our industry. Disputes may arise regardingintellectual property subject to a licensing agreement, including:·the scope of rights granted under the license agreement and other interpretation-related issues;·the extent to which our technology and processes infringe on intellectual property of the licensor that is not subjectto the licensing agreement;·the sublicensing of patent and other rights under our collaborative development relationships;·our diligence obligations under the license agreement and what activities satisfy those diligence obligations;·the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by ourlicensors and us and our partners; and·the priority of invention of patented technology.If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensingarrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected products orproduct candidates.If we fail to obtain the necessary final regulatory approvals, or if such approvals are limited, we will not be able tocommercialize our product candidates, and we will not generate product revenues.Even if we comply with all FDA pre-approval regulatory requirements, the FDA may determine that our product candidatesare not safe or effective, and we may never obtain final regulatory approval for such product candidates. If we fail to obtainfinal regulatory approval for some or all of our product candidates, we will have fewer commercial products andcorrespondingly lower product revenues. Even if our product candidates receive final regulatory approval, such finalregulatory approval may involve limitations on the indications and conditions of use or marketing claims for our products, ormay not include certain abuse-deterrence claims or clinical trial data that we have sought, and will seek, to include in theproduct label. If we do not receive regulatory approval to include certain abuse-deterrence claims, or certain clinical data, inour product labels, our ability to successfully commercialize our products may be limited and our financial results may beadversely impacted. Further, later discovery of previously unknown problems or adverse events could result in additionalregulatory restrictions, including withdrawal of products and addition of warnings or other statements on the product label.The FDA may require us to perform lengthy Phase 4 post-approval clinical efficacy or safety trials. Post approval, the FDAmay require us to study, as it has with respect to Xtampza, the serious risks of misuse, abuse, addiction, overdose, and deathassociated with long-term use of our medications for the management of chronic pain, as well as other risks. The FDA mayalso impose additional post-marketing requirements, which will be very expensive to satisfy.In jurisdictions outside the United States, we must receive marketing authorizations from the appropriate regulatoryauthorities before commercializing our product candidates. Regulatory approval processes outside the United Statesgenerally include requirements and risks similar to, and in many cases in excess of, those associated with FDA approval.The FDA may not approve product labeling for our product candidates that would permit us to market and promote ourproducts in the United States by describing their abuse-deterrent features.We invest substantial time and money conducting Category 1, Category 2 and Category 3 abuse deterrent studies to ensurethat our product candidates developed with our DETERx technology comply with the FDA’s April 2015 guidance regardingopioid abuse deterrence. Our failure to achieve FDA approval of product labeling containing such42 Table of Contentsinformation will prevent or substantiality limit our promotion of the abuse deterrent features of our product candidates inorder to differentiate them from other opioid products containing the same active ingredients. This would make our productsless competitive in the market. There can be no assurance that any of our product candidates will receive final FDA-approvedproduct labeling that describes the abuse deterrent features of such products. Furthermore, the FDA’s April 2015 finalguidance on abuse deterrent opioids makes clear that the FDA expects sponsors to compare their formulations againstapproved abuse deterrent versions of the same opioid based on the relevant categories of testing. If a proposed product is lessresistant to manipulation than an approved product, the FDA has stated that the proposed product may not be eligible forproduct labeling regarding abuse deterrent properties. If the FDA does not approve product labeling containing abusedeterrence claims, we will not be able to promote such products based on their abuse deterrent features, may not be able todifferentiate such products from other opioid products containing the same active ingredients, and may need to lower theprice of our products to the extent that there are competing products with abuse deterrent claims on their product labels.Because the FDA closely regulates promotional materials and other promotional activities, even if the FDA initially approvesproduct labeling that includes a description of the abuse deterrent characteristics of our product, the FDA may object to ourmarketing claims and product advertising campaigns. This could lead to the issuance of warning letters or untitled letters,suspension or withdrawal of our products from the market, recalls, fines, disgorgement of money, operating restrictions,injunctions, and civil or criminal prosecution. Any of these consequences would harm the commercial success of ourproducts.Even if any of our product candidates are approved for marketing with certain abuse-deterrence claims, the April 2015 finalFDA guidance on abuse-deterrent opioids is not binding law and may be superseded or modified at any time. Also, if the FDAdetermines that our post-marketing data do not demonstrate that the abuse-deterrent properties result in reduction of abuse, ordemonstrate a shift to routes of abuse that present a greater risk, the FDA may find that product labeling revisions are needed,and potentially require the removal of our abuse-deterrence claims.Even if our product candidates receive regulatory approval, they will be subject to ongoing regulatory requirements, andwe may face regulatory enforcement action if we do not comply with the requirements.Even after a product is approved, we will remain subject to ongoing FDA and other regulatory requirements governing theproduct labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, import, export, record-keepingand reporting of safety and other post-market information. If we experience delays in obtaining FDA approval of ouradvertising and promotional materials for Xtampza, the Nucynta Products, or any product candidate that receives marketingapproval, or if FDA approval of such materials is contingent upon substantial modifications, our promotional efforts relatingto Xtampza, the Nucynta Products, and any approved product candidate may be impaired, and sales of such products maysuffer.The holder of an approved NDA is obligated to monitor and report adverse events, or AEs, and any failure of a product tomeet the specifications in the NDA. In addition, manufacturers of drug products and their facilities are subject to payment ofuser fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance withcurrent good manufacturing practices, or cGMP, and other regulations. If we or a regulatory agency discover problems with aproduct which were previously unknown, such as adverse events of unanticipated severity or frequency, or problems with thefacility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturingfacility or us, including requiring product recall, notice to physicians, withdrawal of the product from the market orsuspension of manufacturing, among other things. If we, our product candidates or the manufacturing facilities for ourproduct candidates fail to comply with applicable regulatory requirements, a regulatory agency may:·issue warning letters or untitled letters;·mandate modifications to promotional materials or require us to provide corrective information to healthcarepractitioners;·require us to enter into a consent decree, which can include the imposition of various fines, reimbursements forinspection costs and penalties for noncompliance, and require due dates for specific actions;43 Table of Contents·seek an injunction or impose civil, criminal and/or administrative penalties, damages, monetary fines, requiredisgorgement, consider exclusion from participation in Medicare, Medicaid and other federal healthcare programsand require curtailment or restructuring of our operations;·suspend or withdraw regulatory approval;·suspend any ongoing clinical trials;·refuse to approve pending applications or supplements to applications filed by us;·suspend or impose restrictions on operations, including costly new manufacturing requirements;·seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall; or·refuse to allow us to enter into government contracts.Similar post-market requirements may apply in foreign jurisdictions in which we may seek approval of our products. Anygovernment investigation of alleged violations of law could require us to expend significant time and resources in responseand could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability tocommercialize our products and generate revenue and may cause a material adverse impact on our financial condition andcash flows.In addition, the FDA’s regulations, policies or guidance may change and new or additional statutes or governmentregulations in the United States and other jurisdictions may be enacted that could further restrict or regulate post-approvalactivities. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from pendingor future legislation or administrative action, either in the United States or abroad. If we are not able to achieve and maintainregulatory compliance, we may not be permitted to market our products and/or product candidates, which would adverselyaffect our ability to generate revenue and achieve or maintain profitability.Failure to comply with ongoing governmental regulations for marketing any product, including Xtampza and the NucyntaProducts, could delay or inhibit our ability to generate revenues from their sale and could also expose us to claims or othersanctions.Advertising and promotion of any product that obtains approval in the United States, including Xtampza and the NucyntaProducts, will be heavily scrutinized by, among others, the FDA, the Department of Justice, or the DOJ, the Office of InspectorGeneral of the Department of Health and Human Services, or HHS, state attorneys general, members of Congress and thepublic. Violations, including promotion of Xtampza or the Nucynta Products, and any product for which we receive finalregulatory approval, for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, andcivil and criminal sanctions by the FDA or other government agencies. Additionally, advertising and promotion of anyproduct that obtains approval outside the United States will be heavily scrutinized by foreign regulatory authorities.In the United States, engaging in off-label promotion of Xtampza or the Nucynta Products, or any products, can also subjectus to false claims litigation under federal and state statutes, and other litigation and/or investigation, which can lead to civiland criminal penalties and fines and agreements that materially restrict the manner in which we promote or distribute ourdrug products. These false claims statutes include the federal False Claims Act, which allows any individual to bring alawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulentclaims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid.If the government prevails in the lawsuit, the individual will share in any fines or settlement funds. False Claims Act lawsuitsagainst pharmaceutical companies have increased significantly in volume and breadth in recent years, leading to severalsubstantial civil and criminal settlements based on certain sales practices promoting off-label drug uses. This increased focusand scrutiny has increased the risk that a pharmaceutical company will have to defend a false claim action, pay settlementfines or restitution, agree to comply with burdensome reporting44 Table of Contentsand compliance obligations, and be excluded from the Medicare, Medicaid and other federal and state healthcare programs.If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal governmenthas levied large civil and criminal fines against companies for alleged off-label use and has enjoined several companies fromengaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanentinjunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage thepromotion of our products, we could become subject to significant liability, which could materially adversely affect ourbusiness and financial condition.In addition, later discovery of previously unknown problems with a product, manufacturer or facility, or our failure to updateregulatory files, may result in restrictions, including withdrawal of the product from the market. Any of the following or othersimilar events, if they were to occur, could delay or preclude us from further developing, marketing or realizing the fullcommercial potential of Xtampza, the Nucynta Products and our product candidates:·failure to obtain or maintain requisite governmental approvals;·failure to obtain approvals of product labeling with abuse-deterrent claims; or·FDA required product withdrawals or warnings arising from identification of serious and unanticipated adverse sideeffects in our product candidates.Xtampza, the Nucynta Products and our product candidates contain controlled substances, the manufacture, use, sale,importation, exportation and distribution of which are subject to regulation by state, federal and foreign law enforcementand other regulatory agencies.Xtampza, the Nucynta Products and our product candidates contain, and our future product candidates will likely contain,controlled substances that are subject to state, federal and foreign laws and regulations regarding their manufacture, use, sale,importation, exportation and distribution. Xtampza’s active ingredient, oxycodone, and the Nucynta Products’ activeingredient, tapentadol, are both classified as controlled substances under the Controlled Substances Act of 1970, or CSA, andregulations of the U.S. Drug Enforcement Administration, or DEA. A number of states also independently regulate thesedrugs, including oxycodone and tapentadol, as controlled substances. Controlled substances are classified by the DEA asSchedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuseand Schedule V substances the lowest risk. Oxycodone and tapentadol are both listed by the DEA as Schedule II controlledsubstances under the CSA. For our product candidates containing controlled substances, we and our suppliers, manufacturers,contractors, customers and distributors are required to obtain and maintain applicable registrations from state, federal andforeign law enforcement and regulatory agencies and comply with state, federal and foreign laws and regulations regardingthe manufacture, use, sale, importation, exportation and distribution of controlled substances. For example, all Schedule IIdrug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a newprescription.Furthermore, the amount of Schedule II substances that can be obtained for clinical trials and commercial distribution islimited by the CSA and DEA regulations. We may not be able to obtain sufficient quantities of these controlled substances inorder to complete our clinical trials or meet commercial demand. If commercial demand for Xtampza, or any of our otherapproved products, increases and we cannot meet such demand in a timely fashion because of our limited supply of its activeingredient (in the case of Xtampza, oxycodone) then physicians may perceive such product as unavailable and may be lesslikely to prescribe it in the future.In addition, controlled substances are also subject to regulations governing manufacturing, labeling, packaging, testing,dispensing, production and procurement quotas, recordkeeping, reporting, handling, shipment and disposal. Theseregulations increase the personnel needs and the expense associated with development and commercialization of Xtampza,the Nucynta Products, and product candidates that include controlled substances. The DEA and some states conduct periodicinspections of registered establishments that handle controlled substances.Failure to obtain and maintain required registrations or to comply with any applicable regulations could delay or45 Table of Contentspreclude us from developing and commercializing Xtampza, the Nucynta Products, and product candidates that containcontrolled substances and subject us to enforcement action. The DEA may seek civil penalties, refuse to renew necessaryregistrations or initiate proceedings to revoke those registrations. In some circumstances, violations could lead to criminalproceedings. Because of their restrictive nature, these regulations could limit commercialization of products containingcontrolled substances.Clinical development is a lengthy and expensive process with an uncertain outcome, and failure can occur at any stage ofclinical development. If we are unable to design, conduct and complete clinical trials successfully, our product candidateswill not be able to receive regulatory approval.In order to obtain FDA approval for any of our product candidates, we must submit to the FDA an NDA with substantialevidence that demonstrates that the product candidate is both safe and effective in humans for its intended use. Thisdemonstration requires significant research, preclinical studies and clinical trials.All of our product candidates are in preclinical and clinical development. Clinical trials are time-consuming, expensive anddifficult to design and implement, in part because they are subject to rigorous requirements and their outcomes are inherentlyuncertain. Clinical testing may take many years to complete, and failure can occur at any time during the clinical trialprocess, even with active ingredients that have previously been approved by the FDA as being safe and effective. We couldencounter problems that halt our clinical trials or require us to repeat such clinical trials. If patients participating in clinicaltrials suffer drug-related adverse reactions during the clinical trials, or if we or the FDA believe that patients are beingexposed to unacceptable health risks, such clinical trials may be suspended or terminated. Suspensions, termination or theneed to repeat a clinical trial can occur at any stage.The clinical trial success of each of our product candidates depends on reaching statistically significant changes in patients’symptoms based on clinician-rated scales. There is a lack of consensus regarding standardized processes for assessing clinicaloutcomes based on clinician-rated scales. Accordingly, the scores from our clinical trials may not be reliable, useful oracceptable to the FDA or other regulatory agencies.Changes in standards related to clinical trial design could have a material adverse effect on our ability to design and conductclinical trials as planned. For example, we have conducted or will conduct clinical trials comparing our product candidates toboth placebo and other approved drugs, but regulatory authorities may not allow us to compare our product candidates to aplacebo in a particular clinical indication where approved products are available. In that case, both the cost and the amountof time required to conduct a clinical trial could increase. The FDA may disagree with our trial design and our interpretationof data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on thedesign for our clinical trials. The FDA may also approve a product candidate for fewer or more limited indications than werequest, or may grant approval contingent on the performance of costly post-approval clinical trials. In addition, the FDAmay not approve the product labeling claims or removal of certain warnings that we believe are necessary or desirable for thesuccessful commercialization of our product candidates.Approval may be contingent on a REMS, which could have a material adverse effect on the product labeling, distribution orpromotion of a drug product.Any of these delays or additional requirements could cause our product candidates to not be approved, or if approved,significantly impact the timing of commercialization and significantly increase our overall costs of drug development.Because the results of preclinical studies and early-stage clinical trials are not necessarily predictive of future results, anyproduct candidate we advance into additional clinical trials may not continue to have favorable results or receiveregulatory approval.All of our product candidates are in preclinical or early-stage clinical development. Success in preclinical studies and earlyclinical trials does not ensure that later clinical trials will generate adequate data to demonstrate the efficacy and safety of aninvestigational drug. Many companies in the pharmaceutical and biotechnology industries, including those with greaterresources and experience, have suffered significant setbacks in clinical trials, even after positive results in earlier clinicaltrials. Despite preliminary preclinical studies for our other extended-release, abuse deterrent product candidates, includinghydrocodone and oxymorphone for pain, and methylphenidate for the treatment of ADHD, we do46 Table of Contentsnot know whether the clinical trials we may conduct will demonstrate adequate efficacy and safety or otherwise provideadequate information to result in regulatory approval to market any of our product candidates in any particular jurisdiction.If later-stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any of our productcandidates may be compromised.Conducting clinical trials of Xtampza and our product candidates and any commercial sales of Xtampza, the NucyntaProducts, and/or product candidates may expose us to expensive product liability claims, and we may not be able tomaintain product liability insurance on reasonable terms or at all.We currently carry product liability insurance with coverage up to approximately $10.0 million. Product liability claims maybe brought against us by patients enrolled in our clinical trials, patients, healthcare providers or others using, administeringor selling our products. If we cannot successfully defend ourselves against claims that our products or product candidatescaused injuries, we could incur substantial liabilities. We may not be able to maintain insurance coverage at a reasonablecost or in an amount adequate to satisfy any liability that may arise. Regardless of merit or eventual outcome, liability claimsmay result in:·decreased demand for any product or product candidates that we may develop;·termination of clinical trial sites or entire trial programs;·injury to our reputation and significant negative media attention;·withdrawal of clinical trial participants;·significant costs to defend the related litigation;·substantial monetary awards to patients;·loss of revenue;·diversion of management and scientific resources from our business operations;·the inability to commercialize any products that we may develop; and·an increase in product liability insurance premiums or an inability to maintain product liability insurance coverage.Our inability to maintain sufficient product liability insurance at an acceptable cost to protect against potential productliability claims could prevent or inhibit the commercialization of Xtampza, the Nucynta Products, and our productcandidates. Any agreements we may enter into in the future with collaborators in connection with the development orcommercialization of Xtampza and our product candidates may entitle us to indemnification against product liability losses,but such indemnification may not be available or adequate should any claim arise. In addition, many of our agreementsrequire us to indemnify third parties and these indemnifications obligations may exceed the coverage under our productliability insurance policy.Xtampza, the Nucynta Products, and our product candidates may be associated with undesirable adverse reactions or haveother properties that could delay or prevent their regulatory approval, limit the commercial profile of their approvedproduct label, or result in significant negative consequences following any marketing approval.Undesirable adverse reactions associated with Xtampza, the Nucynta Products, and our product candidates could cause us,our IRBs, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in a restrictiveproduct label or the delay, denial or withdrawal of regulatory approval by the FDA or foreign regulatory authorities. Forexample, even though Xtampza was generally well tolerated by patients in our clinical trials, in some47 Table of Contentscases there were adverse reactions, one of which was a serious adverse event, moderate in severity, of gastroesophageal reflux.If we or others identify undesirable adverse events associated with Xtampza, the Nucynta Products, or any product candidatefor which we receive final regulatory approval, a number of potentially significant negative consequences could result,including:·we may be forced to suspend marketing of the product;·regulatory authorities may withdraw their approvals of the product or impose restrictions on its distribution;·regulatory authorities may require additional warnings or contradictions in the product label that could diminish theusage or otherwise limit the commercial success of the product;·we may be required to conduct additional post-marketing studies;·we could be sued and held liable for harm caused to patients; and·our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of Xtampza or any of our productcandidates, if approved.Risks Related to Intellectual PropertyUnfavorable outcomes in intellectual property litigation could result in costly litigation and potentially limit our ability tocommercialize our products.Our commercial success depends upon our ability to develop product candidates and commercialize products withoutinfringing the intellectual property rights of others. Our current or future product candidates or products, or any uses of them,may now or in the future infringe third-party patents or other intellectual property rights. This is due in part to theconsiderable uncertainty within the pharmaceutical industry about the validity, scope and enforceability of many issuedpatents in the United States and elsewhere in the world and, to date, there is no consistency regarding the breadth of claimsallowed in pharmaceutical patents. We cannot currently determine the ultimate scope and validity of patents which may begranted to third parties in the future or which patents might be asserted to be infringed by the manufacture, use and sale ofour products. In part as a result of this uncertainty, there has been, and we expect that there will continue to be, significantlitigation in the pharmaceutical industry regarding patents and other intellectual property rights.Third parties may assert infringement claims against us, or other parties we have agreed to indemnify, based on existingpatents or patents that may be granted in the future. We are aware of third-party patents and patent applications related tooxycodone, oxymorphone, hydrocodone, morphine, and methylphenidate drugs and formulations, including those listed inthe FDA’s Orange Book for oxycodone products. Because of the delay between filing and publication of patent applications,and because applications can take several years to issue, there may be currently pending third-party patent applications thatare unknown to us, which may later result in issued patents. Because of the uncertainty inherent in intellectual propertylitigation, we could lose, even if the case against us was weak or flawed.If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such thirdparty to continue developing or commercializing Xtampza or our product candidates, products and technology. However, wemay not be able to obtain any required license on commercially reasonable terms or at all. Even if we are able to obtain alicense, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could beforced, including by court order, to cease commercializing the infringing technology or product. In addition, in any suchproceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if weare found to have willfully infringed a patent. A finding of infringement could48 Table of Contentsprevent us from commercializing Xtampza or our product candidates or force us to cease some of our business operations.In connection with any NDA that we file under Section 505(b)(2), including the NDA for Xtampza, we are required to notifythe patent holder of the reference listed drug that we identify in our NDA, that we have certified to the FDA that any patentslisted for the listed drug in the FDA’s Orange Book publication are invalid, unenforceable or will not be infringed by themanufacture, use or sale of our drug. If the patent holder files a patent infringement lawsuit against us within 45 days of itsreceipt of notice of our certification, the FDA is automatically prevented from approving our Section 505(b)(2) NDA until theearliest of 30 months after the lawsuit is filed, expiration of the patents, settlement of the lawsuit and a court decision in theinfringement case that is favorable to us. Accordingly, we may invest significant time and expense in the development of ourproduct candidates only to be subject to significant delay and patent litigation before our product candidates may becommercialized.If we are found by the court to have infringed a valid patent claim, we could be prevented from using the patentedtechnology or be required to pay the patent holder for the right to license the patented technology. If we decide to pursue alicense to use one or more of these patents, we may not be able to obtain a license on commercially reasonable terms, if at all,or the license we obtain may require us to pay substantial royalties or grant cross licenses to our patent rights. For example, ifthe relevant patent is owned by a competitor, such as Purdue, that competitor may choose not to license patent rights to us. Ifwe decide to develop alternative technology, we may not be able to do so in a timely or cost-effective manner, if at all.Even if we are found not to infringe or patent claims are found invalid or unenforceable, defending any such infringementclaim would be expensive and time consuming, and could delay the approval or commercialization of our productcandidates and distract management from their normal responsibilities.Competitors may sue us as a way of delaying the introduction of our products. Any litigation, including any interference orderivation proceedings to determine priority of inventions, oppositions or other post-grant review proceedings to patents inthe United States or in countries outside the United States, or litigation against our collaborators may be costly and timeconsuming and could have a material adverse effect on our operating results, our ability to raise capital needed tocommercialize products and our overall financial condition. We expect that litigation may be necessary in some instances todetermine the validity and scope of our proprietary rights. Litigation may be necessary in other instances to determine thevalidity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use orsale of our products. Ultimately, the outcome of such litigation could compromise the validity and scope of our patents orother proprietary rights or hinder our ability to manufacture and market our products.If we are unable to obtain or maintain intellectual property rights for our technology, products and product candidates, wemay lose valuable assets or experience reduced market share.We depend on our ability to protect our proprietary technology. We rely on patent and trademark laws, unpatented tradesecrets and know-how, and confidentiality, licensing and other agreements with employees and third parties, all of whichoffer only limited protection. Our success depends in large part on our ability to obtain and maintain patent protection in theUnited States and other countries with respect to our proprietary technology and product candidates.The steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of ourproprietary information or infringement of our intellectual property rights, both inside and outside the United States. Therights already granted under any of our currently issued patents and those that may be granted under future issued patentsmay not provide us with the proprietary protection or competitive advantages we are seeking.The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute allnecessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail toidentify patentable aspects of inventions made in the course of our development and commercialization activities before itis too late to obtain patent protection on them.Given the amount of time required for the development, testing and regulatory review of product candidates, patentsprotecting such product candidates might expire before or shortly after such product candidates are commercialized. If49 Table of Contentswe are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patentprotection obtained is not sufficient, our competitors could develop and commercialize technology and products identical,similar or superior to ours, and our ability to successfully commercialize our technology and products may be adverselyaffected.With respect to patent rights, our patent applications may not issue into patents, and any issued patents may not provideprotection against competitive technologies, may be held invalid or unenforceable if challenged or may be interpreted in amanner that does not adequately protect our technology, product candidates or future product candidates. Even if our patentapplications issue into patents, they may not issue in a form that will provide us with any meaningful protection, preventcompetitors from competing with us, or otherwise provide us with any competitive advantage. The examination process mayrequire us to narrow the claims in our patents, which may limit the scope of patent protection that may be obtained. Ourcompetitors may design around or otherwise circumvent patents issued to us or licensed by us.The scope of patent protection in the United States and in foreign jurisdictions is highly uncertain, and changes in U.S. andforeign patent law have increased that uncertainty and could diminish the value of patents in general, thereby impairingour ability to protect our product candidates and any future products.The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal and factualquestions and has in recent years been the subject of much litigation. Changes in either the patent laws or interpretation ofthe patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of ourpatent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States,and these foreign laws may also be subject to change.Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in theUnited States and other jurisdictions typically are not published until 18 months after filing or, in some cases, not at all.Therefore, we cannot be certain that we were the first to make the inventions claimed in our owned or licensed patents orpending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance,scope, validity, enforceability and commercial value of our patent rights, both in the United States and abroad, are highlyuncertain.Recent patent reform legislation could increase the uncertainties and costs associated with the prosecution of our patentapplications and the enforcement or defense of our issued patents. The Leahy-Smith America Invents Act, or the Leahy-SmithAct, which was signed into law on September 16, 2011, made significant changes to U.S. patent law, including provisionsthat affect the way patent applications are prosecuted and litigated. Many of the substantive changes to patent law associatedwith the Leahy-Smith Act and, in particular, the “first to file” provisions described below, only became effective on March16, 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding theprosecution of our patent applications and the enforcement or defense of our issued patents.Pursuant to the Leahy-Smith Act, the United States transitioned to a “first to file” system in which the first inventor to file apatent application will be entitled to the patent. In addition, third parties are allowed to submit prior art before the issuanceof a patent by the U.S. Patent and Trademark Office, or USPTO, and may become involved in opposition, derivation,reexamination, or inter partes review challenging our patent rights or the patent rights of others. Grounds for a validitychallenge could be an alleged failure to meet any of several statutory requirements, including novelty, nonobviousness andenablement. It is possible that prior art of which both we and the patent examiner were unaware during prosecution exists,which could render our patents invalid. Moreover, there may exist prior art of which we were or are aware, and which we didnot or do not consider relevant to our patents, but which could nevertheless be determined to render our patents invalid. Anadverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patentrights, which could have a material adverse effect on our competitive position with respect to third parties.Because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents thatwe own or license from third parties may be challenged in the courts or patent offices in the United States and abroad. Suchchallenges may result in the loss of patent protection, the narrowing of claims in such patents, or the invalidity orunenforceability of such patents, which could limit our ability to stop others from using or commercializing similar oridentical technology and products, or limit the duration of the patent protection for our technology and products. Protectingagainst the unauthorized use of our patented technology, trademarks and other intellectual property50 Table of Contentsrights is expensive, difficult and, may in some cases not be possible. In some cases, it may be difficult or impossible to detectthird party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, andproving any such infringement may be even more difficult.We may be forced to litigate to enforce or defend our intellectual property, which could be expensive, time consuming andunsuccessful, and result in the loss of valuable assets.We may be forced to litigate to enforce or defend our intellectual property rights against infringement and unauthorized useby competitors, and to protect our trade secrets. To counter infringement or unauthorized use, litigation may be necessary inthe future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity andscope of our own intellectual property rights. In so doing, we may place our intellectual property at risk of being invalidated,rendered unenforceable or limited or narrowed in scope.Further, this can be expensive and time consuming. Many of our current and potential competitors have the ability todedicate substantially greater resources to defend their intellectual property rights than we can.Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating ourintellectual property. Litigation could result in substantial costs and diversion of management resources, which could have amaterial adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overallfinancial condition. In addition, an adverse result in any litigation proceeding could put one or more of our patents at risk ofbeing invalidated, held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discoveryrequired in connection with intellectual property litigation, there is a risk that some of our confidential information could becompromised by disclosure during litigation. There could also be public announcements of the results of hearings, motionsor other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it couldhave a material adverse effect on the price of shares of our common stock.We may be subject to claims by third parties of ownership of what we regard as our own intellectual property orobligations to make compensatory payments to employees or others.While it is our policy to require our employees and contractors who may be involved in the development of intellectualproperty to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing or obtainingsuch an agreement with each party who, in fact, develops intellectual property that we regard as our own. In addition, theymay breach the assignment agreements or such agreements may not be self-executing, and we may be forced to bring claimsagainst third parties, or defend claims they may bring against us, to determine the ownership of what we regard as ourintellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, wemay lose valuable intellectual property rights or personnel. Such intellectual property rights could be awarded to a thirdparty, and we could be required to obtain a license from such third party to commercialize our technology or products. Such alicense may not be available on commercially reasonable terms or at all. Even if we are successful in defending against suchclaims, litigation could result in substantial costs and be a distraction to management.If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.In addition to seeking patents for some of our technology, products and product candidates, we rely on trade secrets,including unpatented know-how, technology and other proprietary information, to maintain our competitive position. Weseek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties whohave access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers,consultants, advisors and other third parties. Despite these efforts, any of these parties may breach the agreements anddisclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies forsuch breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive andtime-consuming, and the outcome is unpredictable. In addition, some courts both within and outside the United States maybe less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independentlydeveloped by a competitor, we would have no right to prevent such competitor, or51 Table of Contentsthose to whom they communicate with, from using that technology or information to compete with us. If any of our tradesecrets were to be disclosed or independently developed, our competitive position would be harmed.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitivelyexpensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to developand sell their own products and, further, may export otherwise infringing products to territories where we have patentprotection but enforcement is not as strong as that in the United States. These products may compete with our products injurisdictions where we do not have any issued patents or our patent claims or other intellectual property rights may not beeffective or sufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreignjurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcementof patents and other intellectual property protection, particularly those relating to pharmaceuticals, which could make itdifficult for us to stop the infringement of our patents or the marketing of competing products in violation of our proprietaryrights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divertour efforts and attention from other aspects of our business.We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their formeremployers.Many of our employees, including our senior management, were previously employed at other biotechnology orpharmaceutical companies, including potential competitors. These employees typically executed proprietary rights, non-disclosure and non-competition agreements in connection with their previous employment. Although we try to ensure thatour employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claimsthat we or these employees have used or disclosed intellectual property, including trade secrets or other proprietaryinformation, of any such employee’s former employer. We are not aware of any threatened or pending claims related to thesematters, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, inaddition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we aresuccessful in defending against such claims, litigation could result in substantial costs, damage our reputation and be adistraction to management.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions,fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reducedor eliminated for non-compliance with these requirements.The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,documentary, fee payment and other similar provisions during the patent application process. In addition, periodicmaintenance fees on issued patents are required to be paid to the USPTO and foreign patent agencies in several stages overthe lifetime of the patents. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other meansin accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse ofthe patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to,failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize andsubmit formal documents. If we fail to maintain the patents and patent applications covering our product candidates, ourcompetitive position would be adversely affected.52 Table of ContentsRisks Related to the Commercialization of Our Product CandidatesIf we are unable to successfully develop and utilize our own sales and marketing capabilities or enter into strategicalliances with marketing collaborators, we may not be successful in commercializing Xtampza, the Nucynta Products andour product candidates and may be unable to generate sufficient product revenue.Our commercial organization continues to grow and evolve, and in light of its short history and limited track record, wecannot guarantee that we will be successful in marketing Xtampza, the Nucynta Products or any of our product candidatesthat may be approved for marketing. In addition, we will have to compete with other pharmaceutical and biotechnologycompanies with extensive and well-funded sales and marketing operations to recruit, hire, train and retain sales andmarketing personnel. If we are unable to continue to grow and maintain adequate sales, marketing and distributioncapabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and maynot become profitable. Factors that may inhibit our efforts to commercialize our product candidates in the United Statesinclude:·our inability to recruit and retain adequate numbers of effective sales and marketing personnel;·the inability of sales personnel to obtain access to adequate numbers of physicians who may prescribe Xtampza, theNucynta Products and our product candidates;·the lack of complementary products to be offered by sales personnel, which may put us at a competitivedisadvantage relative to companies with more extensive product lines; and·unforeseen costs and expenses associated with creating and maintaining an independent sales and marketingorganization.If we are not successful in recruiting and retaining sales and marketing personnel or in building a sales and marketinginfrastructure or if we do not successfully enter into appropriate strategic alliances with marketing collaborators, agreementswith contract sales organizations or collaboration arrangements, we will have difficulty commercializing Xtampza, theNucynta Products or our product candidates. To the extent we commercialize Xtampza or our product candidates by enteringinto agreements with third-party collaborators, we may have limited or no control over the sales, marketing and distributionactivities of these third parties, in which case our future revenues would depend heavily on the success of the efforts of thesethird parties.If physicians, patients, healthcare payors and the medical community do not accept and use Xtampza, the NucyntaProducts or our product candidates, if approved, we will not achieve sufficient product revenues and our business willsuffer.Physicians, patients, healthcare payors and the medical community may not accept and use Xtampza, the Nucynta Productsor any of our product candidates (if regulatory approval is obtained), for which we receive final regulatory approval.Acceptance and use of Xtampza, the Nucynta Products and any product candidates for which we receive final regulatoryapproval will depend on a number of factors including:·the timing of market introduction of our products and product candidates as well as competitive products;·approved indications, warnings and precautions language that may be less desirable than anticipated;·perceptions by members of the healthcare community, including physicians, about the safety and efficacy ofXtampza, the Nucynta Products and our product candidates;·perceptions by members of the healthcare community, including physicians, about the relevance and efficacy of ourabuse deterrent technology in reducing potential risks of unintended use;53 Table of Contents·published studies demonstrating the cost-effectiveness of Xtampza, the Nucynta Products and our productcandidates relative to competing products;·the potential and perceived advantages of Xtampza, the Nucynta Products and our product candidates overalternative treatments;·the convenience and ease of administration to patients of Xtampza, the Nucynta Products and our productcandidates;·actual and perceived availability of coverage and reimbursement for Xtampza, the Nucynta Products and ourproduct candidates from government or other third-party payors;·any negative publicity related to our or our competitors’ products that include the same active ingredient asXtampza, the Nucynta Products and our product candidates;·the prevalence and severity of adverse side effects, including limitations or warnings contained in a product’s FDAapproved product labeling;·our ability to implement a REMS; and·effectiveness of marketing and distribution efforts by us and any licensees and distributors.If Xtampza, the Nucynta Products, or our product candidates for which we receive final regulatory approval, fail to achieve anadequate level of acceptance by physicians, healthcare payors, patients or the medical community, we will not be able togenerate significant revenue, and we may not become or remain profitable. Since we expect to rely on sales generated byXtampza and the Nucynta Products for substantially all of our revenues for the foreseeable future, the failure of Xtampza orthe Nucynta Products to find market acceptance would harm our business prospects.Recently enacted and future legislation may increase the difficulty and cost for us to commercialize Xtampza, the NucyntaProducts, and our product candidates and may reduce the prices we are able to obtain for our products.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes andproposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates,restrict or regulate post-approval activities or affect our ability to profitably sell Xtampza, the Nucynta Products, or anyproduct candidates for which we obtain marketing approval.Cost reduction legislation could decrease the coverage and price that we receive for any approved products, including forreimbursement through Medicare and private payors.The pricing of pharmaceutical products, in general, and specialty drugs, in particular, has also been a topic of concern in theU.S. government. There can be no assurance as to how this scrutiny on pricing of pharmaceutical products will impact futurepricing of our products or pharmaceutical products generally. The current administration has indicated that reducing theprice of prescription drugs will be a priority of the administration. The implementation of any price controls on prescriptiondrugs, whether at the federal or state level, may adversely affect our business, operating results and financial condition.Laws intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhanceremedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, imposenew taxes and fees on the health industry and impose additional health policy reforms may continue the downward pressureon pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens andoperating costs. The Affordable Care Act, as well as other healthcare reform measures that have been and may be adopted inthe future, may result in more rigorous coverage criteria, new payment methodologies and in additional downward pressureon the price that we receive for any approved product, and could seriously harm our future revenues. Any reduction inreimbursement from Medicare or other government programs may result in a similar54 Table of Contentsreduction in payments from private payors. The implementation of cost containment measures or other healthcare reformsmay compromise our ability to generate revenue, attain profitability or commercialize our products. At the same time, therehave been significant ongoing efforts to modify or eliminate the Affordable Care Act. For example, the TCJA, enacted onDecember 22, 2017, repealed the shared responsibility payment for individuals who fail to maintain minimum essentialcoverage under section 5000A of the Internal Revenue Code, commonly referred to as the individual mandate, beginning in2019. The Joint Committee on Taxation estimates that the repeal will result in over 13 million Americans losing their healthinsurance coverage over the next ten years and is likely to lead to increases in insurance premiums. Further legislativechanges to and regulatory changes under the Affordable Care Act remain possible. It is unknown what form any such changesor any law proposed to replace the Affordable Care Act would take, and how or whether it may affect our business in thefuture.Newly enacted FDA regulations may require us to expend additional resources to obtain or maintain regulatoryapproval. For example, in August 2017 President Trump signed into law the Food & Drug Administration ReauthorizationAct (FDARA). This legislation imposes significant new requirements for clinical trial sponsors which will affect, among otherthings, the development of drugs and biological products for pediatric use. This legislation may result in new regulations,which may affect future options or timelines for regulatory approval.Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales andpromotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will beenacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes onthe marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of theFDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringentproduct labeling and post-marketing testing and other requirements.On February 27, 2018, a bipartisan group of senators introduced Senate Bill 2456 (S.2456). S.2456 is characterized as“CARA 2.0,” in reference to the Comprehensive Addiction and Recovery Act of 2016. CARA 2.0 would limit initialprescriptions for opioids to 3 days, while exempting initial prescriptions for chronic care, cancer care, hospice or end of lifecare, and palliative care. CARA 2.0 would also increase civil and criminal penalties for opioid manufacturers that fail toreport suspicious orders for opioids or fail to maintain effective controls against diversion of opioids. The bill would increasecivil fines from $10,000 to $100,000, and if a manufacturer fails to maintain effective controls or report suspicious orderswith knowledge or willful disregard, the bill would double criminal penalties from $250,000 to $500,000. If this bill weresigned into law, it could adversely affect our ability to successfully commercialize Xtampza, the Nucynta Products, and ourproduct candidates if approved. In addition, in 2017 several states, including Indiana, Louisiana, and Utah, enacted laws thatfurther limit or restrict opioid prescriptions.In addition, state pharmacy laws may permit pharmacists to substitute generic products for branded products if the productsare therapeutic equivalents, or may permit pharmacists and pharmacy benefit managers to seek prescriber authorization tosubstitute generics in place of Xtampza or our product candidates, which could significantly diminish demand for them andsignificantly impact our ability to successfully commercialize our products and generate revenues.Even if we are able to commercialize Xtampza, the Nucynta Products, and any of our product candidates, our products maybecome subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which could have amaterial adverse effect on our business. Such pricing regulations may address the rebates that manufacturers offer topharmaceutical benefit managers, or the discounts that manufacturers provide others within the pharmaceuticaldistribution chain.The regulations that govern marketing approvals, pricing and reimbursement for new drug products vary widely from countryto country. Current and future legislation may significantly change the approval requirements in ways that could involveadditional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before itcan be marketed. In many countries, the pricing review period begins after marketing or product licensing approval isgranted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental controleven after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country,but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods,which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.Pricing limitations may hinder our ability to recoup our investment in Xtampza, the Nucynta Products, and our productcandidates even if our product candidates obtain marketing approval.55 Table of ContentsOur ability to commercialize any product successfully will also depend in part on the extent to which coverage and adequatereimbursement for these products and related treatments will be available from government health administration authorities,private health insurers and other organizations. Government authorities and third-party payors, such as private health insurersand health maintenance organizations, determine which medications they will cover and establish reimbursement levels. Aprimary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-partypayors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.Increasingly, third-party payors are requiring that drug companies provide them with discounts and rebates from list pricesand are challenging the prices charged for medical products. We have agreed to provide such discounts and rebates to certainthird-party payors. We expect increasing pressure to offer larger discounts and rebates. Additionally, a greater number ofthird-party payors may seek discounts and rebates in order to offer or maintain access for Xtampza, the Nucynta Products andour product candidates, if approved. We cannot be sure that coverage and reimbursement will be available for any productthat we commercialize and, if reimbursement is available, what the level of reimbursement will be and whether it will besatisfactory. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which weobtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limitedlevels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may bemore limited than the purposes for which the drug is approved by the FDA or foreign regulatory authorities. Moreover,eligibility for coverage and reimbursement does not imply that any drug will be paid for in all cases or at a rate that coversour costs, including research, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs, ifapplicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates may varyaccording to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already setfor lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reducedby mandatory discounts or rebates required by government healthcare programs or private payors and by any futurerelaxation of laws that presently restrict imports of drugs from policy and payment limitations in setting their ownreimbursement policies. Our inability to promptly obtain coverage and profitable reimbursement rates from bothgovernment-funded and private payors for any approved products that we develop could have a material adverse effect onour operating results, our ability to raise capital needed to commercialize products and our overall financial condition.Social issues around the abuse of opioids, including law enforcement concerns over diversion of opioids and regulatoryefforts to combat abuse, could decrease the potential market for Xtampza, the Nucynta Products, and our productcandidates.Media stories regarding prescription drug abuse and the diversion of opioids and other controlled substances arecommonplace. Law enforcement and regulatory agencies may apply policies and guidelines that seek to limit the availabilityor use of opioids. Such efforts may inhibit our ability to commercialize Xtampza, the Nucynta Products, and our productcandidates.Aggressive enforcement and unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioiddrugs; the limitations of abuse-resistant formulations; the ability of drug abusers to discover previously unknown ways toabuse opioid drugs, including Xtampza and the Nucynta Products; public inquiries and investigations into prescription drugabuse; litigation; or regulatory activity regarding sales, marketing, distribution or storage of opioid drugs could have amaterial adverse effect on our reputation. Such negative publicity could reduce the potential size of the market for Xtampza,the Nucynta Products, and our product candidates and decrease the revenues we are able to generate from their sale.Similarly, to the extent opioid abuse becomes less prevalent or less urgent of a public health issue, regulators and third partypayers may not be willing to pay a premium for abuse-deterrent formulations of opioids.Efforts by the FDA and other regulatory bodies to combat abuse of opioids may negatively impact the market for our productand product candidates. In February 2016, the FDA released an action plan to address the opioid abuse epidemic and reassessthe FDA’s approach to opioid medications. The plan identifies the FDA’s focus on implementing policies to reverse theopioid abuse epidemic, while maintaining access to effective treatments. The actions set forth in the FDA’s plan includestrengthening post marketing study requirements to evaluate the benefit of long-term opioid use, changing the REMSrequirements to provide additional funding for physician education courses, releasing a draft guidance setting forth approvalstandards for generic-abuse deterrent opioid formulations, and seeking input from the FDA’s Science56 Table of ContentsBoard to broaden the understanding of the public risks of opioid abuse. The FDA’s Science Board met to address these issueson March 1, 2016. The FDA’s plan is part of a broader initiative led by the HHS to address opioid-related overdose, death anddependence. The HHS initiative’s focus is on improving physician’s use of opioids through education and resources toaddress opioid over-prescribing, increasing use and development of improved delivery systems for naloxone, which canreverse overdose from both prescription opioids and heroin, to reduce overdose-related deaths, and expanding the use ofMedication-Assisted Treatment, which couples counseling and behavioral therapies with medication to address substanceabuse. Also as part of this initiative, the CDC has launched a state grant program to offer state health departments resources toassist with abuse prevention efforts, including efforts to track opioid prescribing through state-run electronic databases. InMarch 2016, as part of the HHS initiative, the CDC released a Guideline for Prescribing Opioids for Chronic Pain. Theguideline is intended to assist primary care providers treating adults for chronic pain in outpatient settings. The guidelineprovides recommendations to improve communications between doctors and patients about the risks and benefits of opioidtherapy for chronic pain, improve the safety and effectiveness of pain treatment, and reduce the risks associated with long-term opioid therapy. The guideline states that no treatment recommendations about the use of abuse-deterrent opioids can bemade at this time.The FDA continues to evaluate extended release and abuse-deterrent opioids in the postmarket setting. In March 2017, theFDA’s Advisory Committee met to discuss OPANA ER (oxymorphone hydrochloride) extended release tablets. A majority ofthe Advisory Committee voted that the benefits do not outweigh the risks of OPANA ER. Upon the FDA’s subsequent requestin June 2017, OPANA ER was removed from the market. Also, in July 2017, the FDA held a public workshop to discussavailable data and methods to assess the impact of opioid formulations with abuse-deterrent properties on misuse, abuse,addiction, overdose, and death in the postmarket context. The FDA will continue to scrutinize the impact of abuse-deterrentopioids and in the future could impose further restrictions to products currently on the market, which may include changinglabeling, imposing additional prescribing restrictions, or seeking a product’s removal from the market.The DEA continues to increase its efforts to hold manufacturers, distributors, prescribers and pharmacies accountable throughvarious enforcement actions as well as the implementation of compliance practices for controlled substances. In addition,many state legislatures are considering various bills intended to reduce opioid abuse, for example by establishingprescription drug monitoring programs and mandating prescriber education. Further, the FDA is requiring “black-box”warnings on immediate release opioids highlighting the risk of misuse, abuse, addiction, overdose and death. In addition,during the 2016 presidential campaign, as well as implementing a REMS for immediate release opioids, many electedofficials, including President Trump, called for the DEA to restrict the amount of opioids that can be manufactured in the U.S.The DEA recently proposed reducing the quota for controlled substances to be manufactured in the U.S. in 2018. In March2017, President Trump announced the creation of a commission, through ONDCP, to make recommendations to the presidenton how to best combat opioid addiction and abuse. In August 2017, the commission issued a preliminary report calling onPresident Trump to officially declare the crisis of opioid abuse a national emergency. On October 26, 2017, President Trumpdeclared the opioid crisis a “national public health emergency”. The commission’s final report was released in earlyNovember 2017.Recently, CVS Pharmacy announced it would only fill first-time opioid prescriptions for acute pain for a seven day supply. InJuly 2017, the Pharmaceutical Care Management Association, a trade association representing pharmacy benefit managers,wrote a letter to the commissioner of FDA in which it expressed support for, among other things, the CDC guidelines and aseven-day limit on the supply of opioids for acute pain. In addition, states, including the Commonwealths of Massachusettsand Virginia and the States of New York, Ohio, Arizona, Maine, New Hampshire, Vermont, Rhode Island, Colorado,Wisconsin, Alabama, South Carolina, Washington and New Jersey, have either recently enacted, intend to enact, or havepending legislation or regulations designed to, among other things, limit the duration and quantity of initial prescriptions ofimmediate release forms of opiates and, mandate the use by prescribers of prescription drug databases and mandate prescribereducation. Also, at the state and local level, a number of states and cities have brought separate lawsuits against variouspharmaceutical companies marketing and selling opioid pain medications, alleging misleading or otherwise improperpromotion of opioid drugs to physicians and consumers. In addition, the attorneys general from several states haveannounced the launch of a joint investigation into the marketing and sales practices of drug companies that market opioidpain medications. Many of these changes and others could cause us to expend additional resources in developing andcommercializing Xtampza, the Nucynta Products, and our product candidates to meet additional requirements.Advancements in development and approval of generic abuse-deterrent opioids could also compete with and potentiallyimpact physician use of our product candidates and cause our product candidates to be less commercially successful.57 Table of ContentsIf the FDA or other applicable regulatory authorities approve generic products with abuse deterrent claims that competewith Xtampza, the Nucynta Products, or any of our product candidates, it could reduce our sales.Once an NDA, including a Section 505(b)(2) application, is approved, the product covered thereby becomes a “listed drug”which can, in turn, be cited by potential competitors in support of approval of an abbreviated NDA, or ANDA. The FD&CAct, FDA regulations and other applicable regulations and policies provide incentives to manufacturers to create modified,non-infringing versions of a drug to facilitate the approval of an ANDA or other application for generic substitutes. Thesemanufacturers might only be required to conduct a relatively inexpensive study to show that their product has the sameactive ingredients, dosage form, strength, route of administration, and conditions of use, or product labeling, as our productand that the generic product is absorbed in the body at the same rate and to the same extent as, or is bioequivalent to, ourproduct. These generic equivalents would be significantly less costly than ours to bring to market and companies thatproduce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a genericcompetitor, a significant percentage of the sales of any branded product are typically lost to the generic product.Accordingly, competition from generic equivalents to our products would substantially limit our ability to generate revenuesand therefore to obtain a return on the investments we have made in our product and product candidates.Guidelines and recommendations published by various organizations can reduce the use of our products, if approved.Government agencies promulgate regulations and guidelines directly applicable to us and to Xtampza, the Nucynta Products,and our product candidates. In addition, professional societies, practice management groups, private health and sciencefoundations and organizations involved in various diseases from time to time may also publish guidelines orrecommendations to the healthcare and patient communities. Recommendations of government agencies or these othergroups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitanttherapies. Recommendations or guidelines suggesting the reduced use of our products or the use of competitive or alternativeproducts as the standard of care to be followed by patients and healthcare providers could result in decreased use of ourproducts.Risks Related to Our Dependence on Third PartiesIf the third-party manufacturer of Xtampza fails to devote sufficient time and resources to Xtampza, or its performance issubstandard, our costs may be higher than expected and could have a material adverse effect on our business. Ourcommercialization partner also relies on a sole supplier to manufacture Nucynta ER, which presents a similar risk.We do not own any manufacturing facilities and have limited experience in drug development and commercialmanufacturing. We currently have no plans to build our own clinical or commercial scale manufacturing facility. We lack theresources and expertise to manufacture and test, on a commercial scale, the technical performance of Xtampza and ourproduct candidates. We currently rely, and expect to continue to rely, on a limited number of experienced personnel and onecontract manufacturer for Xtampza and each product candidate, as well as other vendors to formulate, test, supply, store anddistribute Xtampza and our product candidates for our clinical trials and FDA registration, and we control only certainaspects of their activities. Although we have identified alternate sources for these services, it would be time-consuming, andrequire us to incur additional cost, to qualify these sources.Our reliance on a limited number of vendors and, in particular, Patheon, as our single manufacturer for Xtampza, exposes usto the following risks, any of which could delay FDA approval of our product candidates and commercialization of ourproducts, result in higher costs, or deprive us of potential product revenues:·Our contract manufacturer, or other third parties we rely on, may encounter difficulties in achieving the volume ofproduction needed to satisfy commercial demand, may experience technical issues that impact quality orcompliance with applicable and strictly enforced regulations governing the manufacture of pharmaceuticalproducts, may be affected by natural disasters that interrupt or prevent manufacturing of our products, mayexperience shortages of qualified personnel to adequately staff production operations, may experience shortages ofraw materials and may have difficulties finding replacement parts or equipment.58 Table of Contents·Our contract manufacturers could default on their agreements with us to meet our requirements for commercialsupplies of Xtampza.·The use of alternate manufacturers may be difficult because the number of potential manufacturers that have thenecessary governmental licenses to produce narcotic products is limited. Additionally, the FDA and the DEA mustapprove any alternative manufacturer of Xtampza or any product candidate for which we receive regulatoryapproval, before we may use the alternative manufacturer to produce commercial supplies.·It may be difficult or impossible for us to find a replacement manufacturer on acceptable terms quickly, or at all. Ourcontract manufacturer and vendors may not perform as agreed or may not remain in the contract manufacturingbusiness for the time required to successfully produce, store and distribute our products.·If our contract manufacturer were to terminate our arrangement or fail to meet our commercial manufacturingdemands, we may be forced to delay our development and commercial programs.Our reliance on third parties reduces our control over our development and commercialization activities but does not relieveus of our responsibility to ensure compliance with all required legal, regulatory and scientific standards. The FDA and otherregulatory authorities require that Xtampza and our product candidates that we may eventually commercialize bemanufactured according to cGMP and similar foreign standards. Any failure by our third-party manufacturer to comply withcGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of productcandidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our productcandidates. In addition, such failure could be the basis for the FDA to issue a warning or untitled letter, withdraw approvalsfor products previously granted to us, or take other regulatory or legal action, including recall or seizure, total or partialsuspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplementalapplications, detention or product, refusal to permit the import or export of products, injunction, imposing civil penalties orpursuing criminal prosecution.Our commercialization partner currently relies on a single supplier to manufacture each of the Nucynta Products. Any stockout, or failure to obtain sufficient supplies of each of the Nucynta Products, or the necessary active pharmaceuticalingredients, excipients or components necessary to manufacture each of the Nucynta Products, could adversely affect ourability to commercialize the Nucynta Products, which could in turn adversely affect our results of operations and financialcondition. Our commercialization partner, Depomed, experienced delays in the manufacture, packaging and delivery ofcertain dosage strengths of Nucynta ER in the third and fourth quarters of 2017 and the first quarter of 2018 followingHurricanes Irma and Maria in Puerto Rico. We and our commercialization partner may continue to experience further outagesin the future.Because we currently rely on a sole supplier to manufacture the active pharmaceutical ingredient of Xtampza, anyproduction problems with our supplier could have a material adverse effect on us.We presently depend upon a single supplier for the active ingredient for Xtampza — oxycodone base — and we intend tocontract with this supplier, as necessary, for commercial supply of our products. Although we have identified an alternatesource for oxycodone base, it would be time-consuming and costly to qualify this source. Since we currently obtain ouractive ingredient from this manufacturer on a purchase-order basis, either we or our supplier may terminate our arrangement,without cause, at any time without notice. If our supplier were to terminate our arrangement or fail to meet our supply needs,we might incur substantial costs and be forced to delay our development or commercialization programs. Any such delaycould have a material adverse effect on our business.We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractualduties or meet expected deadlines, or if they terminate their agreement with us, we may not be able to obtain regulatoryapproval for or commercialize our product candidates and our business could suffer a material adverse effect.We have relied upon and plan to continue to rely upon contract research organizations, or CROs, to monitor and manage datafor our ongoing preclinical and clinical programs. We rely on these parties for execution of our clinical trials, and controlonly certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies and59 Table of Contentsclinical trials are conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and ourreliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply withfederal regulations and current Good Clinical Practices, or GCP, which are international standards meant to protect the rightsand health of patients and to define the roles of clinical trial sponsors, advisors and monitors, enforced by the FDA, theCompetent Authorities of the Member States of the European Economic Area, or EEA, and foreign regulatory authorities inthe form of International Conference on Harmonization, or ICH, guidelines for all of our product candidates in clinicaldevelopment. Regulatory authorities enforce these GCP through periodic inspections of trial sponsors, principalinvestigators and trial sites. In addition, we and our CROs are required to comply with special regulations regarding theenrollment of recreational drug abusers in clinical trials. If we or any of our CROs fail to comply with applicable GCP andother regulations, including as a result of any recent changes in such regulations, the clinical data generated in our clinicaltrials may be deemed unreliable and the FDA or foreign regulatory authorities may require us to perform additional clinicaltrials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatoryauthority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. In addition,our clinical trials must be conducted with product produced under cGMP requirements. While we have agreements governingactivities of our CROs, we have limited influence over their actual performance. Failure to comply with applicableregulations in the conduct of the clinical trials for our product candidates may require us to repeat preclinical studies andclinical trials, which would delay the regulatory approval process.Our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannotcontrol whether or not they devote sufficient time and resources to our ongoing clinical and preclinical programs. If CROs donot successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or ifthe quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols,regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not beable to obtain regulatory approval for or successfully commercialize our product candidates. As a result, the commercialprospects for our product candidates would be harmed, our costs could increase substantially and our ability to generaterevenue could be delayed.Switching or adding additional CROs involves additional cost and requires management time and focus, and there is alimited number of CROs that are equipped and willing to manage clinical trials that involve recreational drug abusers. OurCROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some ofour CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safetyof the patients participating in our clinical trials warrants such termination, if we make a general assignment for the benefit ofour creditors or if we are liquidated. Identifying, qualifying and managing performance of third-party service providers canbe difficult, time-consuming and cause delays in our development programs. In addition, there is a natural transition periodwhen a new CRO commences work and the new CRO may not provide the same type or level of services as the originalprovider. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounterchallenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business,financial condition and prospects. If any of our relationships with our CROs terminate, we may not be able to enter intoarrangements with alternative CROs or to do so on commercially reasonable terms. As a result, delays may occur, which canmaterially impact our ability to meet our desired clinical development timelines.Our internal capacity to perform these functions is limited. Outsourcing these functions involves risks that third parties maynot perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use ofthird-party service providers requires us to disclose our proprietary information to these parties, which could increase the riskthat this information will be misappropriated. We currently have a small number of employees, which limits the internalresources we have available to identify and monitor our third-party providers. To the extent, we are unable to identify andsuccessfully manage the performance of third-party service providers in the future, our ability to advance our productcandidates through clinical trials will be compromised. There can be no assurance that we will not encounter similarchallenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business,financial condition and prospects.60 Table of ContentsIn the future, we may depend on collaborations with third parties for the development and commercialization of Xtampza,the Nucynta Products and our product candidates. If those collaborations are not successful, we may not be able tocapitalize on the market potential of these product candidates.We may not be successful in establishing development and commercialization collaborations which could adversely affect,and potentially prohibit, our ability to develop or commercialize Xtampza, our products and our product candidates. Thesecollaborations, including the Commercialization Agreement for Nucynta ER and Nucynta IR, pose the following risks to us:·Collaborators may have significant discretion in determining the efforts and resources that they will apply to thesecollaborations.·Collaborators may not pursue development and commercialization of our product or product candidates or mayelect not to continue or renew development or commercialization programs based on clinical trial results, changes inthe collaborator’s strategic focus or available funding or external factors such as an acquisition that diverts resourcesor creates competing priorities.·Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trialor abandon our product or product candidate, repeat or conduct new clinical trials or require a new formulation ofour product or product candidate for clinical testing.·Collaborators may conduct clinical trials inappropriately, or may obtain unfavorable results in their clinical trials,which may have an adverse effect on the development or commercialization of our product or product candidates.·Collaborators could independently develop, or develop with third parties, products that compete directly orindirectly with our product or product candidates if the collaborators believe that competitive products are morelikely to be successfully developed or can be commercialized under terms that are more economically attractive thanours.·A collaborator with marketing and distribution rights to one or more products may not commit sufficient resourcesto the marketing and distribution of such products.·Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietaryinformation in such a way as to invite litigation that could jeopardize or invalidate our proprietary information orexpose us to potential litigation.·Disputes may arise between the collaborators and us that result in the delay or termination of the research,development or commercialization of our product and product candidates or that result in costly litigation orarbitration that diverts management attention and resources.·We may lose certain valuable rights under circumstances specified in our collaborations.·Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue furtherdevelopment or commercialization of the applicable product or product candidates.·Collaboration agreements may not lead to development or commercialization of products or product candidates inthe most efficient manner or at all. If a future collaborator of ours were to be involved in a business combination, thecontinued pursuit and emphasis on our product development or commercialization program under suchcollaboration could be delayed, diminished or terminated.·Our ability to successfully commercialize product candidates pursuant to collaboration agreements may beadversely affected by disputes or delays arising from supply and/or manufacturing agreements between suchcollaborators and third parties—agreements to which we may not be a party.61 Table of ContentsWe may rely on collaborators to market and commercialize our products, and, if approved, our product candidates, whomay fail to effectively commercialize our products.We may utilize strategic collaborators or contract sales forces, where appropriate, to assist in the commercialization ofXtampza, the Nucynta Products and our product candidates, if approved by the FDA. We currently possess limited resourcesand may not be successful in establishing collaborations or co-promotion arrangements on acceptable terms, if at all. We alsoface competition in our search for collaborators and co-promoters. If we enter into strategic collaborations or similararrangements, we will rely on third parties for financial resources and for development, commercialization, sales andmarketing and regulatory expertise. Our collaborators, if any, may fail to develop or effectively commercialize our productsand product candidates because they cannot obtain the necessary regulatory approvals, they lack adequate financial or otherresources or they decide to focus on other initiatives. Any failure of our third-party collaborators to successfully market andcommercialize our product and product candidates would diminish our revenues.Manufacturing issues may arise that could increase product and regulatory approval costs, delay commercialization orlimit commercial supply.As we scale up manufacturing of our products and product candidates and conduct required stability testing, we mayencounter product, packaging, equipment and process-related issues that may require refinement or resolution in order toproceed with our planned clinical trials, obtain regulatory approval for commercial marketing and build commercialsupplies. In the future, we may identify impurities, which could result in increased scrutiny by regulatory authorities, delaysin our clinical programs and regulatory approval, increases in our operating expenses, failure to obtain or maintain approvalor limitations in our commercial supply.Our customer concentration may materially adversely affect our financial condition and results of operations.A significant percentage of our product shipments are to a limited number of independent wholesale drug distributors. Threeof our wholesale distributors represented 39%, 29% and 23% of our product shipments for the year endedDecember 31, 2017. If we were to lose the business of one or more of these distributors, or if any of these distributors failed tofulfill their obligations or refused or experienced difficulty in paying us on a timely basis, or negotiated larger discounts, itwould have a material adverse effect on our business, financial condition, results of operations and cash flows.Risks Related to Our Business and StrategyWe face substantial competition from other biotechnology and pharmaceutical companies, which may result in othersdiscovering, developing or commercializing products before or more successfully than we do.The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Inaddition, the competition in the pain and opioid market is intense. We have competitors both in the United States andinternationally, including major multinational pharmaceutical companies, biotechnology companies and universities andother research institutions.We face and will continue to face competition from other companies in the pharmaceutical and medical device industries.Xtampza, the Nucynta Products, and our product candidates, if approved, will compete with currently marketed oral opioids,transdermal opioids, local anesthetic patches, stimulants and implantable and external infusion pumps that can be used forinfusion of opioids and local anesthetics. Products of these types are marketed by Actavis, Depomed, Egalet, Endo,Mallinckrodt, Pernix, Pfizer, Purdue, Teva, and others. Some of these current and potential future competitors may beaddressing the same therapeutic areas or indications as we are. Many of our current and potential future competitors havesignificantly greater research and development capabilities than we do, have substantially more marketing, manufacturing,financial, technical, human and managerial resources than we do, and have more institutional experience than we do.Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources beingconcentrated in our competitors.As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able toor may obtain patent protection or other intellectual property rights that allow them to develop and commercialize62 Table of Contentstheir products before us and limit our ability to develop or commercialize our product and product candidates. Ourcompetitors may also develop drugs that are safer, more effective, more widely used and less costly than ours, and they mayalso be more successful than us in manufacturing and marketing their products.Furthermore, if the FDA approves a competitor’s 505(b)(2) application for a drug candidate before our application for asimilar drug candidate and grants the competitor a period of exclusivity, the FDA may take the position that it cannotapprove our NDA for a similar drug candidate. For example, several competitors have developed extended-releasehydrocodone products, and if the FDA grants exclusivity, we could be subject to a delay that would dramatically reduce theexpected market penetration for our hydrocodone product candidate. Additionally, even if our 505(b)(2) application isapproved for marketing, we may still be subject to competition from other hydrocodone products, including approvedproducts or other approved 505(b)(2) NDAs for different conditions of use that would not be restricted by any grant ofexclusivity to us.In addition, competitors have developed or are in the process of developing technologies that are, or in the future may be, thebasis for competitive products. Some of these products may have an entirely different approach or means of accomplishingsimilar therapeutic effects than our product candidates. Our competitors may develop products that are safer, more effectiveor less costly than our product candidates and, therefore, present a serious competitive threat to our product offerings.The widespread acceptance of currently available therapies with which our product and product candidates, if approved,compete may limit market acceptance of our product and product candidates even if commercialized. Oral medications,transdermal drug delivery systems, such as drug patches, injectable products and implantable drug delivery devices arecurrently available treatments for chronic pain, are widely accepted in the medical community and have a long history of use.These treatments will compete with our product and product candidates, if approved, and the established use of thesecompetitive products may limit the potential for our product and product candidates to receive widespread acceptance ifcommercialized.The use of legal and regulatory strategies by competitors with innovator products, including the filing of citizen petitions,may delay or prevent the introduction or approval of our product candidates, increase our costs associated with theintroduction or marketing of our products, or significantly reduce the profit potential of our product candidates.Companies with innovator drugs often pursue strategies that may serve to prevent or delay competition from alternatives totheir innovator products. These strategies include, but are not limited to:·filing “citizen petitions” with the FDA that may delay competition by causing delays of our product approvals;·seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate a product’sbioequivalence or “sameness” to the related innovator product;·filing suits for patent infringement that automatically delay FDA approval of products seeking approval based onthe Section 505(b)(2) pathway;·obtaining extensions of market exclusivity by conducting clinical trials of innovator drugs in pediatric populationsor by other methods;·persuading the FDA to withdraw the approval of innovator drugs for which the patents are about to expire, thusallowing the innovator company to develop and launch new patented products serving as substitutes for thewithdrawn products;·seeking to obtain new patents on drugs for which patent protection is about to expire; and·initiating legislative and administrative efforts in various states to limit the substitution of innovator products bypharmacies.63 Table of ContentsThese strategies could delay, reduce or eliminate our entry into the market and our ability to generate revenues from ourproduct and product candidates.Our future success depends on our ability to retain our key personnel.We are highly dependent upon the services of our key personnel, including our President and Chief Executive Officer,Michael T. Heffernan, our Chief Financial Officer, Paul Brannelly, our Chief Operating Officer, Joseph Ciaffoni and our ChiefTechnology Officer, Alison Fleming, PhD. Each employee is employed by us at will and is permitted to terminate his or heremployment with us at any time pursuant to the terms of his employment agreement. We do not maintain “key person”insurance for any of our executives or other employees. The loss of the services of Mr. Heffernan, Mr. Brannelly, Mr. Ciaffonior Dr. Fleming could impede the achievement of our development and commercialization objectives.If we are unable to attract and retain highly qualified scientific and technical employees, we may not be able to groweffectively.Our future growth and success depend on our ability to recruit, retain, manage and motivate our scientific, clinical,manufacturing and commercial employees. The loss of any member of our senior management team or the inability to hire orretain experienced management personnel could compromise our ability to execute our business plan and harm our operatingresults. Because of the specialized scientific nature of our business, we rely heavily on our ability to attract and retainqualified personnel. The competition for qualified personnel in the pharmaceutical field is intense, and as a result, we may beunable to continue to attract and retain qualified personnel necessary for the development of our business or to recruitsuitable replacement personnel.We will need to grow the size of our organization, and we may experience difficulties in managing this growth.We have experienced a period of rapid growth. Our management, personnel and systems may not be adequate to support thisand future growth. We may not be able to effectively manage the expansion of our operations, which may result inweaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees andreduced productivity among remaining employees. Future growth could require significant capital expenditures and maydivert financial resources from other projects, such as the development of our existing or future product candidates. Futuregrowth would impose significant added responsibilities on members of management, including:·managing the commercialization of any FDA-approved products;·overseeing clinical trials effectively;·identifying, recruiting, maintaining, motivating and integrating additional employees, including any sales andmarketing personnel engaged in connection with the commercialization of any approved product;·managing our internal development efforts effectively while complying with our contractual obligations tolicensors, licensees, contractors and other third parties;·improving our managerial, development, operational and financial systems and procedures; and·developing our compliance infrastructure and processes to ensure compliance with regulations applicable to publiccompanies.As our operations expand, we will need to manage additional relationships with various strategic collaborators, suppliers andother third parties. Our future financial performance and our ability to commercialize our product and product candidates andto compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must beable to manage our development efforts and clinical trials effectively and hire, train and integrate additional management,administrative and sales and marketing personnel. We may not be able to accomplish these tasks, and our failure toaccomplish any of them could prevent us from successfully growing our company.64 Table of ContentsWe may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies,that could have a material adverse effect on our operating results, dilute our shareholders’ ownership, increase our debt orcause us to incur significant expense.As part of our business strategy, we may pursue acquisitions of assets, including preclinical, clinical or commercial stageproducts or product candidates, or businesses, in-licensing or out-licensing of products, product candidates or technologies,or other strategic alliances and collaborations, to expand our existing technologies and operations. We may not identify orcomplete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipatedbenefits of any such transaction, any of which could have a material adverse effect on our financial condition, results ofoperations and cash flows. We have limited experience with acquiring other companies, products or product candidates, andlimited experience with licensing and forming strategic alliances and collaborations. We may not find suitable acquisitioncandidates, and if we make an acquisition, we may not integrate the acquisition successfully into our existing business andwe may incur additional debt or assume unknown or contingent liabilities in connection therewith. Integration of anacquired company or assets may also disrupt ongoing operations, require the hiring of additional personnel and theimplementation of additional internal systems and infrastructure, especially the acquisition of commercial assets, and requiremanagement resources that would otherwise focus on developing our existing business. We may not be able to find suitablestrategic alliance or collaborators or identify other investment opportunities, and we may experience losses related to anysuch investments.To finance any acquisitions, licenses or collaborations, we may incur significant transaction expenses and we may choose toissue debt or shares of our common or preferred stock as consideration. Any such issuance of shares would dilute theownership of our shareholders. If the price of our common stock is low or volatile, we may not be able to acquire, license, orotherwise obtain rights to other assets or companies or fund a transaction using our stock as consideration. Alternatively, itmay be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds maynot be available on terms that are favorable to us, or at all.Our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage inmisconduct or other improper activities, including noncompliance with regulatory standards and requirements, whichcould cause significant liability for us and harm our reputation.We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants andvendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional,reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates:·FDA, DEA or similar regulations of foreign regulatory authorities, including those laws requiring the reporting oftrue, complete and accurate information to such authorities;·manufacturing standards;·federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established andenforced by foreign regulatory authorities; or·laws that require the reporting of financial information or data accurately.In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws andregulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations mayrestrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentiveprograms and other business arrangements. Activities subject to these laws also involve the improper use of informationobtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. Wehave adopted a Code of Ethics, but it is not always possible to identify and deter misconduct by employees and other thirdparties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown orunmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from afailure to comply with such laws or regulations. If any such actions are instituted against us, and we are not successful indefending ourselves or asserting our rights, those actions could have a material adverse effect on our business and results ofoperations, including the imposition of civil, criminal and administrative penalties,65 Table of Contentsdamages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs,contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any ofwhich could have a material adverse effect on our ability to operate our business and our results of operations.Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse, transparency, andother healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion fromgovernment healthcare programs, contractual damages, reputational harm, administrative burdens, and diminished profitsand future earnings.Healthcare providers, physicians and payors play a primary role in the recommendation and prescription of Xtampza, theNucynta Products, and any product candidates for which we may obtain marketing approval. Our future arrangements withpayors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations thatmay constrain the business or financial arrangements and relationships through which we market, sell and distributeXtampza, the Nucynta Products, and any product candidates for which we may obtain marketing approval. Even though wedo not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors,federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicableto our business. Restrictions under applicable federal, state and foreign healthcare laws and regulations may affect our abilityto operate and expose us to areas of risk, including:·the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, offering,receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referralof an individual for, or the purchase, order or recommendation of, any good or service, for which payment may bemade under federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not needto have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;·the federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower orqui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federalgovernment, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or concealan obligation to pay money to the federal government. In addition, the government may assert that a claimincluding items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false orfraudulent claim for purposes of the False Claims Act;·the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal andcivil liability for executing a scheme to defraud any healthcare benefit program or making false statements relatingto healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actualknowledge of the statute to defraud any healthcare benefit program or specific intent to violate it in order to havecommitted a violation;·HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, orHITECH, and its implementing regulations, which also imposes obligations on certain covered entity healthcareproviders, health plans, and healthcare clearinghouses as well as their business associates that perform certainservices involving the use or disclosure of individually identifiable health information, including mandatorycontractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiablehealth information;·federal laws requiring drug manufacturers to report annually information related to certain payments and othertransfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists andchiropractors) and teaching hospitals, as well as ownership or investment interests held by physicians and theirimmediate family members, including under the federal Open Payments program, commonly known as the SunshineAct, as well as other state and foreign laws regulating marketing activities and requiring manufacturers to reportmarketing expenditures, payments and other transfers of value to physicians and other healthcare providers;66 Table of Contents·federal government price reporting laws, which require us to calculate and report complex pricing metrics togovernment programs, where such reported prices may be used in the calculation of reimbursement and/or discountson our marketed drugs. Participation in these programs and compliance with the applicable requirements maysubject us to potentially significant discounts on our products, increased infrastructure costs, potential liability forthe failure to report such prices in an accurate and timely manner, and potentially limit our ability to offer certainmarketplace discounts; and·state and foreign equivalents of each of the above laws, including state anti-kickback and false claims laws, whichmay apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental payors, including private insurers; state laws which require pharmaceutical companies to comply withthe pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgatedby the federal government or otherwise restricting payments that may be made to healthcare providers; and state andforeign laws governing the privacy and security of health information in certain circumstances, many of which differfrom each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.While we do not submit claims and our customers will make the ultimate decision on how to submit claims, we may providereimbursement guidance and support regarding our products to our customers and patients. If a government authority were toconclude that we provided improper advice to our customers and/or encouraged the submission of false claims forreimbursement, we could face action by government authorities. Efforts to ensure that our business arrangements with thirdparties will comply with applicable healthcare laws and regulations will involve substantial costs. Nonetheless, it is possiblethat governmental authorities will conclude that our business practices may not comply with current or future statutes,regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations arefound to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subjectto significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from participation ingovernment funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of ouroperations.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines orpenalties or incur significant costs.In connection with our research and development activities and our manufacture of materials and products and productcandidates, we are subject to federal, state and local laws, rules, regulations and policies governing the use, generation,manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens andwastes. Although we believe that we have complied with the applicable laws, regulations and policies in all material respectsand have not been required to correct any material noncompliance, we may be required to incur significant costs to complywith environmental and health and safety regulations in the future. Current or future laws and regulations may impair ourresearch, development or production efforts. Failure to comply with these laws and regulations also may result in substantialfines, penalties or other sanctions.Our research and development involves the use, generation and disposal of hazardous materials, including chemicals,solvents, agents and biohazardous materials. Although we believe that our safety procedures for storing, handling anddisposing of such materials comply with the standards prescribed by state and federal regulations, we cannot completelyeliminate the risk of accidental contamination or injury from these materials. We currently contract with third parties todispose of these substances that we generate, and we rely on these third parties to properly dispose of these substances incompliance with applicable laws and regulations. We cannot eliminate the risk of contamination or injury from thesematerials. If these third parties do not properly dispose of these substances in compliance with applicable laws andregulations, we may be subject to legal action by governmental agencies or private parties for improper disposal of thesesubstances. The costs of defending such actions and the potential liability resulting from such actions are often very large. Inthe event we are subject to such legal action or we otherwise fail to comply with applicable laws and regulations governingthe use, generation and disposal of hazardous materials and chemicals, we could be held liable for any damages that result,and any such liability could exceed our resources.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries toour employees, this insurance may not provide adequate coverage against potential liabilities. We maintain insurance forenvironmental liability or toxic tort claims, but we may not continue to maintain such insurance in the future, and67 Table of Contentssuch insurance, to the extent maintained, may not be adequate to cover liabilities that may be asserted against us inconnection with our storage or disposal of biological, hazardous or radioactive materials.Our business and operations would suffer in the event of computer system failures, accidents or security breaches.Despite the implementation of security measures, our internal computer systems, and those of our CROs, contractmanufacturing organization, or CMO, and other third parties on which we rely, are vulnerable to damage from computerviruses, unauthorized access, cyber attacks and other malfeasance, natural disasters, terrorism, war and telecommunicationand electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and couldresult in a material disruption of our commercial and clinical activities and business operations, in addition to possiblyrequiring substantial expenditures of resources to remedy. If such an event were to occur and cause interruptions in ouroperations, it could result in a material disruption of our commercialization and drug development programs. For example,the loss of clinical trial data from completed or ongoing clinical trials could result in delays in our regulatory approval effortsand significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach wasto result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietaryinformation, we could incur liability and the further commercialization of our products and development of our productcandidates could be delayed.Risks Related to Our Common StockThe price of our common stock may be volatile and you may lose all or part of your investment.The market price of our common stock is highly volatile and may be subject to wide fluctuations in response to numerousfactors, some of which are beyond our control. In addition to the factors discussed in these Risk Factors, these factors include:·the success of competitive products or technologies;·regulatory actions with respect to our product and product candidates or our competitors’ products or productcandidates;·actual or anticipated changes in our growth rate relative to our competitors;·the outcome of any patent infringement or other litigation that may be brought against us, including the ongoingPurdue litigation;·announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures,collaborations or capital commitments;·results of clinical trials of our product and product candidates or those of our competitors;·regulatory or legal developments in the United States and other countries;·developments or disputes concerning patent applications, issued patents or other proprietary rights;·the recruitment or departure of key personnel;·the level of expenses related to our product and product candidates or clinical development programs;·actual or anticipated variations in our quarterly operating results;·the number and characteristics of our efforts to in-license or acquire additional product candidates or products;·introduction of new products or services by us or our competitors;·failure to meet the estimates and projections of the investment community or that we may otherwise provide to thepublic;·actual or anticipated changes in estimates as to financial results, development timelines or recommendations bysecurities analysts;68 Table of Contents·variations in our financial results or those of companies that are perceived to be similar to us;·fluctuations in the valuation of companies perceived by investors to be comparable to us;·share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;·announcement or expectation of additional financing efforts;·sales of our common stock by us, our insiders or our other shareholders;·changes in accounting practices;·significant lawsuits, including patent or shareholder litigation;·changes in the structure of healthcare payment systems;·market conditions in the pharmaceutical and biotechnology sectors;·general economic, industry and market conditions;·publication of research reports about us, our competitors or our industry, or positive or negative recommendations orwithdrawal of research coverage by securities or industry analysts; and·other events or factors, many of which are beyond our control.In addition, the stock market in general, and pharmaceutical and biotechnology companies in particular, have experiencedextreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance ofthese companies. Broad market and industry factors may negatively affect the market price of our common stock, regardlessof our actual operating performance. The realization of any of the above risks or any of a broad range of other risks statedabove could have a material adverse effect on the market price of our common stock.As we operate in the pharmaceutical and biotechnology industry, we are especially vulnerable to these factors to the extentthat they affect our industry or our products. In the past, securities class action litigation has often been initiated againstcompanies following periods of volatility in their stock price. This type of litigation could result in substantial costs anddivert our management’s attention and resources, and could also require us to make substantial payments to satisfyjudgments or to settle litigation.Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or theperception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price ofour common stock. As of December 31, 2017, holders of an aggregate of approximately 4.5 million shares of our commonstock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to includetheir shares in registration statements that we may file for ourselves or other shareholders. Once we register these shares, theycan be freely sold in the public market, subject to volume limitations applicable to affiliates.Actual or potential sales of our common stock by our directors or employees, including our executive officers, pursuant topre-arranged stock trading plans or otherwise could cause our stock price to fall or prevent it from increasing fornumerous reasons, and actual or potential sales by such persons could be viewed negatively by investors.In accordance with the guidelines specified under Rule 10b5-1 of the Exchange Act and our policies regarding stocktransactions, our directors and employees, including our executive officers, could adopt stock trading plans pursuant towhich they may sell shares of our common stock from time to time in the future. Generally, sales under such plans by ourexecutive officers and directors require public filings. Actual or potential sales of our common stock by such persons couldcause our common stock to fall or prevent it from increasing for numerous reasons. For example, a substantial number ofshares of our common stock becoming available (or being perceived to become available) for sale in the public market couldcause the market price of our common stock to fall or prevent it from increasing. Also, actual or69 Table of Contentspotential sales by such persons could be viewed negatively by investors.Future issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentiveplans, could result in additional dilution of the percentage ownership of our shareholders and could cause our stock priceto fall.We expect that significant additional capital will be needed in the future to continue our planned operations. To raisecapital, we may sell substantial amounts of common stock or securities convertible into or exchangeable for common stock.These future issuances of common stock or common stock-related securities, together with the exercise of outstandingoptions and any additional shares issued in connection with acquisitions, if any, may result in material dilution to ourinvestors. Such sales may also result in material dilution to our existing shareholders, and new investors could gain rights,preferences and privileges senior to those of holders of our common stock.Our principal shareholders and management own a majority of our stock and have the ability to exert significant controlover matters subject to shareholder approval.As of December 31, 2017, our executive officers, directors, holders of 5% or more of our capital stock and their respectiveaffiliates beneficially owned a majority of our voting stock, including shares subject to outstanding options and warrants. Asa result, if these shareholders were to choose to act together, they would be able to significantly influence the outcome of allmatters requiring shareholder approval, including the election of directors, amendments of our organizational documents, orapproval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicitedacquisition proposals or offers for our common stock that you may feel are in your best interest. The interests of this group ofshareholders may not always coincide with your interests or the interests of other shareholders and they may act in a mannerthat advances their best interests and not necessarily those of other shareholders, including seeking a premium value for theircommon stock, and might affect the prevailing market price for our common stock. Such concentration of ownership controlmay:·delay, defer or prevent a change in control;·entrench our management and/or the board of directors; or·impede a merger, consolidation, takeover or other business combination involving us that other shareholdersmay desire.In addition, persons associated with Longitude Capital Partners, LLC and Skyline Venture Partners V, L.P. currently serve onour board of directors. The interests of Longitude Capital Partners, LLC and Skyline Venture Partners V, L.P. may not alwayscoincide with the interests of the other shareholders, and the concentration of control in Longitude Capital Partners, LLC andSkyline Venture Partners V, L.P. limits other shareholders’ ability to influence corporate matters. We may also take actionsthat our other shareholders do not view as beneficial, which may adversely affect our results of operations and financialcondition and cause a decline in our stock price.We are subject to anti-takeover provisions in our amended and restated articles of incorporation and amended andrestated bylaws and under Virginia law that could delay or prevent an acquisition of our company, even if the acquisitionwould be beneficial to our shareholders.Certain provisions of Virginia law, the state in which we are incorporated, and our amended and restated articles ofincorporation and amended and restated bylaws could hamper a third party’s acquisition of us, or discourage a third partyfrom attempting to acquire control of us. These provisions include:·a provision allowing our board of directors to set the terms of and issue preferred stock with rights senior to those ofthe common stock without any vote or action by the holders of our common stock. The issuance of preferred stockcould adversely affect the rights and powers, including voting rights, of the holders of common stock;70 Table of Contents·advance written notice procedures and notice requirements with respect to shareholder proposals and shareholdernomination of candidates for election as directors;·a provision that only the board of directors, the chairman of the board of directors or the president may call a specialmeeting of the shareholders;·the application of Virginia law prohibiting us from entering into certain transactions with the beneficial owner ofmore than 10 percent of our outstanding voting stock for a period of three years after such person first reached thatlevel of stock ownership, unless certain conditions are met;·a provision dividing our board of directors into three classes, each serving three-year terms;·the requirement that the authorized number of our directors be changed only by resolution of our board of directors;·a provision that our board of directors shall fill any vacancies on our board of directors, including vacanciesresulting from a board of directors’ resolution to increase the number of directors;·limitations on the manner in which shareholders can remove directors from the board of directors;·the lack of cumulative voting in the election of directors; and·the prohibition on shareholders acting by less-than-unanimous written consent.These provisions also could limit the price that certain investors might be willing to pay in the future for shares of ourcommon stock. In addition, these provisions make it more difficult for our shareholders to remove our board of directors ormanagement or elect new directors to our board of directors.We may fail to qualify for continued listing on The NASDAQ Global Select Market which could make it more difficult forinvestors to sell their shares.Our common stock is listed on The NASDAQ Global Select Market (NASDAQ). As a NASDAQ listed company, we arerequired to satisfy the continued listing requirements of NASDAQ for inclusion in the Global Select Market to maintain suchlisting, including, among other things, the maintenance of a minimum closing bid price of $1.00 per share and shareholders’equity of at least $10.0 million. There can be no assurance that we will be able to maintain compliance with the continuedlisting requirements or that our common stock will not be delisted from NASDAQ in the future. If our common stock isdelisted by NASDAQ, we could face significant material adverse consequences, including:·a limited availability of market quotations for our securities;·reduced liquidity with respect to our securities;·a determination that our shares are a “penny stock,” which will require brokers trading in our shares to adhere tomore stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market forour shares;·a limited amount of news and analyst coverage for our company; and·a decreased ability to issue additional securities or obtain additional financing in the future.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business,our stock price and trading volume could decline.The trading market for our common stock depends in part on the research and reports that securities or industry analystspublish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate71 Table of Contentsor unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceasecoverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might causeour stock price and trading volume to decline.We are an “emerging growth company” and we intend to take advantage of reduced disclosure and governancerequirements applicable to emerging growth companies, which could result in our common stock being less attractive toinvestors and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies willmake our shares of common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company for up tofive years. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptionsfrom various reporting requirements applicable to other public companies, but not to emerging growth companies, including,but not limited to, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduceddisclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies andno requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements. We willremain an emerging growth company until the earliest of (i) December 31, 2020, (ii) the first fiscal year after our annual grossrevenue are $1.07 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than$1.0 billion in non-convertible debt securities or (iv) the end of any fiscal year in which the market value of our commonstock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year.In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of theextended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accountingstandards. An emerging growth company can therefore delay the adoption of certain accounting standards until thosestandards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transitionperiod and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption ofsuch standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision toopt out of the extended transition period for complying with new or revised accounting standards is irrevocable.We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of theseexemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less activetrading market for our common stock and our stock price may be more volatile.If investors find our common stock less attractive as a result of our reduced reporting requirements, there may be a less activetrading market for our common stock and our stock price may be more volatile. We may also be unable to raise additionalcapital as and when we need it.If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accuratelyreport our financial condition, results of operations or cash flows, which may adversely affect investor confidence in usand, as a result, the value of our common stock.The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting.Commencing with our annual report on Form 10-K for the year ended December 31, 2016, we are required, under Section 404of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internalcontrol over financial reporting. This assessment must include disclosure of any material weaknesses identified by ourmanagement in our internal control over financial reporting. A material weakness is a control deficiency, or combination ofcontrol deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that amaterial misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered publicaccounting firm on the effectiveness of our internal control over financial reporting. However, for as long as we remain anemerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from variousreporting requirements that are applicable to other public companies that are not emerging growth companies including, butnot limited to, not being required to comply with the independent registered public accounting firm attestation requirement.72 Table of ContentsOur compliance with Section 404 will require that we incur substantial accounting expense and expend significantmanagement efforts. We currently do not have an internal audit group, and we will need to hire additional accounting andfinancial staff with appropriate public company experience and technical accounting knowledge, and compile the systemand process documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able tocomplete our evaluation, testing and any required remediation in a timely fashion, which could potentially subject us tosanctions or investigations by the SEC or other regulatory authorities. During the evaluation and testing process, if weidentify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that ourinternal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses orsignificant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal controlover financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations orcash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independentregistered public accounting firm determines we have a material weakness or significant deficiency in our internal controlover financial reporting once that firm begin its reviews, we could lose investor confidence in the accuracy and completenessof our financial reports, the market price of our common stock could decline, and we could be subject to sanctions orinvestigations by NASDAQ, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internalcontrol over financial reporting, or to implement or maintain other effective control systems required of public companies,could also restrict our future access to the capital markets.Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.We are subject to the periodic reporting requirements of the Exchange Act. Our disclosure controls and procedures aredesigned to reasonably assure that information required to be disclosed by us in reports we file or submit under the ExchangeAct is accumulated and communicated to management, recorded, processed, summarized and reported within the timeperiods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter howwell conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systemare met.These inherent limitations reflect the reality that judgments can be faulty, and that breakdowns can occur because of simpleerror or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two ormore people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our controlsystem, misstatements due to error or fraud may occur and not be detected.The exercise of options and warrants and other issuances of shares of common stock or securities convertible into orexercisable for shares of common stock will dilute your ownership interests and may adversely affect the future marketprice of our common stock.Sales of our common stock in the public market, either by us or by our current shareholders, or the perception that these salescould occur, could cause a decline in the market price of our securities. All of the shares of our common stock held by thoseof our current shareholders may be immediately eligible for resale in the open market either in compliance with an exemptionunder Rule 144 promulgated under the Securities Act, or pursuant to an effective resale registration statement that we havepreviously filed with the SEC. Such sales, along with any other market transactions, could adversely affect the market priceof our common stock.In addition, as of December 31, 2017, there were (a) outstanding options to purchase an aggregate of 3,037,690 shares of ourcommon stock at a weighted average exercise price of $13.00 per share, of which options to purchase 1,025,252 shares of ourcommon stock were then exercisable, and (b) 2,445 shares of common stock issuable upon the exercise of warrants topurchase common stock at a weighted-average exercise price of $12.27 per share. The exercise of options and warrants atprices below the market price of our common stock could adversely affect the price of shares of our common stock.Additional dilution may result from the issuance of shares of our common stock in connection with collaborations ormanufacturing arrangements or in connection with other financing efforts. Any issuance of our common stock that is not made solely to then-existing shareholders proportionate to their interests, suchas in the case of a stock dividend or stock split, will result in dilution to each shareholder by reducing his, her or itspercentage ownership of the total outstanding shares. Moreover, if we issue options or warrants to purchase our commonstock in the future and those options or warrants are exercised you may experience further dilution. Holders of shares of73 Table of Contentsour common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering of shares of anyclass or series.We have broad discretion in the use of our cash and cash equivalents, and, despite our efforts, we may use them in amanner that does not increase the value of your investment.We have broad discretion in the use of our cash and cash equivalents, and investors must rely on the judgment of ourmanagement regarding the use of our cash and cash equivalents. Our management may not use cash and cash equivalents inways that ultimately increase the value of our common stock. Our failure to use our cash and cash equivalents effectivelycould result in financial losses that could have a material adverse effect on our business, cause the price of our common stockto decline and delay the commercialization or development of our product and product candidates. We may invest our cashand cash equivalents in short-term or long-term, investment-grade, interest-bearing securities. These investments may notyield favorable returns. If we do not invest or apply our cash and cash equivalents in ways that enhance shareholder value, wemay fail to achieve expected financial results, which could cause the price of our common stock to decline.Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capitalappreciation, if any, will be your sole source of gain.We have never declared or paid cash dividends on our common stock. We currently intend to retain all of our future earnings,if any, to finance the growth and development of our business and do not anticipate declaring or paying any cash dividendsfor the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends. As aresult, capital appreciation, if any, of our capital stock will be your sole source of gain for the foreseeable future. Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties Our corporate headquarters are located in Canton, Massachusetts, where we lease 19,335 square feet of office space(including chemistry and pilot/formulation laboratories) under a lease agreement that was amended in March 2015. The leaseterm terminates in August 2020, five years following the date that the landlord delivered the expansion space with certainimprovements substantially completed. The lease term may be extended for an additional five years at our election. We believe that our existing facility is adequate for our current and expected future needs. We may seek to negotiate newleases or evaluate additional or alternate space for our operations. We believe that appropriate alternative space is readilyavailable on commercially reasonable terms. Item 3. Legal Proceedings Xtampza Litigation We filed the NDA for Xtampza as a 505(b)(2) application, which allows us to reference data from an approved drug listed inthe FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book), inthis case OxyContin OP. The 505(b)(2) process requires that we certify to the FDA and notify Purdue, as the holder of theNDA and any other Orange Book-listed patent owners, that we do not infringe any of the patents listed for OxyContin OP inthe Orange Book, or that the patents are invalid. We made such certification and provided such notice on February 11, 2015and such certification documented why Xtampza does not infringe any of the 11 Orange Book listed patents for OxyContinOP, five of which have been invalidated in court proceedings. Under the Hatch-Waxman Act of 1984, Purdue had the optionto sue us for infringement and receive a stay of up to 30 months before the FDA could issue a final approval for Xtampza ER,unless the stay was earlier terminated. 74 Table of ContentsPurdue exercised its option and elected to sue us for infringement in the District of Delaware on March 24, 2015 assertinginfringement of three of Purdue’s Orange Book-listed patents (Patent Nos. 7,674,799, 7,674,800, and 7,683,072) and a non-Orange Book-listed patent (Patent No. 8,652,497), and accordingly, received a 30-month stay of FDA approval. The Delaware court transferred the case to the District of Massachusetts. After we filed a partial motion for judgment on thepleadings relating to the Orange Book-listed patents, the District Court of Massachusetts ordered judgment in our favor onthose three patents, and dismissed the claims asserting infringement of those patents with prejudice. Upon dismissal of thoseclaims, the 30-month stay of FDA approval was lifted. As a result, we were able to obtain final approval for Xtampza ER andlaunch the product commercially. In November 2015, Purdue filed a follow-on suit asserting infringement of another patent, Patent No. 9,073,933, which waslate-listed in the Orange Book and therefore could not trigger any stay of FDA approval. In June 2016, Purdue filed anotherfollow-on suit asserting infringement of another non-Orange Book listed patent, Patent No. 9,155,717. In April 2017, Purduefiled another follow-on suit asserting infringement of another patent, Patent No. 9,522,919, which was late-listed in theOrange Book and therefore could not trigger any stay of FDA approval. Then, in September 2017, Purdue filed anotherfollow-on suit asserting infringement of another non-Orange Book listed patent, Patent No. 9,693,961. In October 2017, and in response to the filing of our Supplemental NDA (“sNDA”) seeking to update the drug abuse anddependence section of the Xtampza label, Purdue filed another suit asserting infringement of the ʼ933 and ʼ919 patent. Wefiled a motion to dismiss that action, and the Court granted our motion on January 16, 2018. The current suits have been consolidated by the District of Massachusetts, where Purdue continues to assert infringement offive patents: the ʼ497 patent, the ʼ933 patent, the ʼ717 patent, the ʼ919 patent, and the ʼ961 patent. None of these suits areassociated with any stay of FDA approval for the Xtampza drug product. Purdue has made a demand for monetary relief buthas not quantified their alleged damages. Purdue has also requested a judgment of infringement and an injunction on the saleof our products accused of infringement. We have denied all claims and seek a judgment that the patents are invalid and/ornot infringed by us; we are also seeking a judgment that the case is exceptional, with an award to us of our fees for defendingthe case. The parties are in the early stages of fact discovery. Written discovery has commenced with depositions expected tocommence during the second half of 2018. A claim construction and summary judgment hearing was held on June 1, 2017.On November 21, 2017, the Court issued its claim construction ruling, construing certain claims of the ʼ933, ʼ497, and ʼ717patents. At this time, the Motion for Summary Judgment, which asserted that claims of the ’933, ’497, and ’717 patents areinvalid and not infringed, remains pending. We are not able to predict with certainty when the Court will decide our motion.The Scheduling Order has been amended to stay the close of fact discovery until after the Court decides our Motion forSummary Judgment. No trial date has been scheduled. We are, and plan to continue, defending this case vigorously. At this stage, we are unable to evaluate the likelihood of anunfavorable outcome or estimate the amount or range of potential loss, if any. Nucynta Litigation On February 7, 2018, Purdue filed a patent infringement suit against Collegium NF, LLC and Collegium Pharmaceutical, Inc.in the District of Delaware. Specifically, Purdue argues that our sale of immediate release and extended release Nucyntainfringes U.S. Patent Nos. 9,861,583, 9,867,784, and 9,872,836. Purdue has made a demand for monetary relief in theComplaint but has not quantified its alleged damages. Our response to the Complaint is currently due April 9, 2018. We plan to defend this case vigorously. At this stage, we are unable to evaluate the likelihood of an unfavorable outcome orestimate the amount or range of potential loss, if any. Teva Litigation We filed the NDA for Xtampza as a 505(b)(2) application, which allows us to reference data from an approved drug listed inthe FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the75 Table of ContentsOrange Book), in this case OxyContin OP. We have twelve patents listed in the FDA Orange Book as covering our abuse-deterrent product and methods of using it to treat patients: Patents Nos. 7,399,488; 7,771,707; 8,449,909; 8,557,291; 8,758,813; 8,840,928; 9,044,398; 9,248,195; 9,592,200; 9,682,075; 9,737,530 and 9,763,883. Teva Pharmaceuticals USA filed a Notice Letter of Patent Certification against all twelve listed patents, alleging that theywere invalid and/or not infringed by the proposed oxycodone product that is the subject of Teva’s ANDA. On February 22,2018—within the 45-day period that gives us a 30-month stay on FDA approval of Teva’s ANDA while the parties have anopportunity to litigate—we sued Teva in the District of Delaware on eleven of the patents listed in the Orange Book. Thecase was assigned to the Hon. Judge Stark. We plan to assert and defend our intellectual property vigorously in this case. At this stage, we are unable to evaluate thelikelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any. Opioid-Related Request and Subpoenas We, like a number of other pharmaceutical companies, have received subpoenas or civil investigative demands related toopioid sales and marketing. We have received such subpoenas or civil investigative demands from the Offices of theAttorney General of each of Washington, New Hampshire, and Massachusetts. We are currently cooperating with the each ofthe foregoing states in their respective investigations. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecuritiesMarket InformationOur common stock is publicly traded on the NASDAQ Global Select Market under the symbol “COLL” since May 7, 2015.Prior to May 7, 2015, there was no public trading market for our common stock. The following table sets forth, for the periodsindicated, the high and low sales prices for our common stock as reported on NASDAQ:Year Ended December 31, 2017 High LowFirst quarter $17.60 $9.88Second quarter $13.20 $7.37Third quarter $13.47 $9.03Fourth quarter $20.92 $9.01 Year Ended December 31, 2016 High LowFirst quarter $28.47 $13.80Second quarter $20.03 $11.55Third quarter $20.25 $8.24Fourth quarter $20.55 $13.81 HoldersAs of February 28, 2018, there were 36 holders of record of our common stock. The number of holders of record does notinclude beneficial owners whose shares are held by nominees in street name.DividendsWe have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash dividends onour common stock in the foreseeable future.76 Table of ContentsStock Performance GraphThe following graph shows a comparison from May 7, 2015, the date on which our common stock first began trading on theNASDAQ Global Select Market, of the total cumulative shareholder return on an assumed investment of $100.00 in cash inour common stock as compared to the same investment in the NASDAQ Composite Index and the NASDAQ BiotechnologyIndex, all through December 31, 2017. Such returns are based on historical results and are not intended to suggest futureperformance. Data for the NASDAQ Composite Index and NASDAQ Biotechnology Index assume reinvestment of dividends,however no dividends have been declared on our common stock to date. December 31,December 31,$100 investment in stock or index May 7, 2015 20162017Collegium Pharmaceutical, Inc. (COLL) $100.00 $126.69$150.20NASDAQ Composite Index (IXIC) $100.00 $109.84$139.59NASDAQ Biotechnology Index (NBI) $100.00 $79.90$93.20 The performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC,nor shall such information be incorporated by reference into any future filing under the Securities Act, except to the extentthat we specifically incorporate it by reference into such filing.Recent Sales of Unregistered SecuritiesThere were no unregistered sales of equity securities during the period covered by this Annual Report on Form 10-K.Use of Proceeds In March 2017, we commenced an “at-the-market” offering of our common stock and entered into a Controlled EquityOffering Sales Agreement (the “ATM Sales Agreement”) with Cantor Fitzgerald, as agent, pursuant to which we may issueand sell, from time to time, shares of our common stock having an aggregate offering price of up to $60.0 million. As ofDecember 31, 2017, we had sold an aggregate of 3,126,998 shares of common stock under the ATM Sales Agreement at anaverage gross sales price of $11.36 per share, generating net proceeds of $34.3 million after deduction of underwritingdiscounts and commissions and expenses payable by us. The proceeds from the sales were used to fund77 Table of Contentsthe continued commercialization of Xtampza, research and development efforts of our other product candidates, workingcapital and other general corporate purposes. Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any of our equity securities during the fourth quarter of the fiscal year ended December 31, 2017. Item 6. Selected Financial DataYou should read the following selected financial data together with our consolidated financial statements and the relatednotes appearing elsewhere in this Form 10-K and “Management’s Discussion and Analysis of Financial Condition andResults of Operations” section of this Form 10-K. The selected historical financial information in this section is not intendedto replace our financial statements and the related notes thereto. Our historical results are not necessarily indicative of resultsto be expected in any period in the future. Years ended December 31, 2017 2016 2015 2014 2013 (in thousands, except share and per share amounts)Statement of Operations Data: Product revenues, net$28,476 $1,711 $ — $ — $ —Costs and expenses Cost of product revenues 2,595 213 — — —Research and development 8,572 14,948 7,975 14,959 14,157Selling, general and administrative 92,756 80,632 18,932 2,706 1,885Total costs and expenses 103,923 95,793 26,907 17,665 16,042Loss from operations (75,447) (94,082) (26,907) (17,665) (16,042)Interest income (expense), net 582 (94) (439) (252) (76)Other income (expense), net — — 91 — (79)Net loss$(74,865) $(94,176) $(27,255) $(17,917) $(16,197)Basic and diluted net loss per common share:$(2.47) $(3.88) $(1.48) $(22.72) $(4.06)Weighted-average shares used to compute loss percommon share: 30,265,262 24,262,945 13,542,282 933,997 1,697,044 (1)See Note 3 to our consolidated financial statements included elsewhere in this Form 10-K for an explanation of themethod used to calculate net loss per common share attributable to common shareholders, including the method used tocalculate the number of shares used in the computation of the per share amount. As of December 31, 2017 2016 2015 2014 2013Balance Sheet Data: Cash and cash equivalents $118,697 $153,225 $95,697 $1,634 $7,551Working capital 101,996 132,979 88,451 (5,921) 5,643Total assets 135,568 162,017 97,718 5,090 9,034Other long-term liabilities — 1,513 4,214 6,914 834Total shareholders’ equity (deficit) 104,080 134,908 85,072 (89,348) (68,225)(1)Working capital is calculated as current assets minus current liabilities.78 (1)(1)(1)Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with ourconsolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10‑K. The followingdiscussion contains forward‑looking statements that involve risks and uncertainties. Our actual results and the timing ofcertain events could differ materially from those anticipated in these forward‑looking statements as a result of certain factors,including those discussed below and as set forth under “Risk Factors.” Please also refer to the section under heading“Forward‑Looking Statements.”OverviewWe are a specialty pharmaceutical company focused on becoming the leader in responsible pain management by developingand commercializing innovative, differentiated products for patients suffering from pain. Our first product, Xtampza, is anabuse-deterrent, extended-release, oral formulation of oxycodone, a widely prescribed opioid medication. In April 2016, theU.S. Food and Drug Administration, or FDA, approved our new drug application, or NDA, filing for Xtampza for themanagement of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternativetreatment options are inadequate. Certain human abuse potential studies are included in the approved label, as well as datasupporting the administration of the product as a sprinkle or administered through feeding tubes. In June 2016, weannounced the commercial launch of Xtampza. In October 2016, we announced the submission of a New Drug Submission toHealth Canada seeking marketing approval of Xtampza for the same indication for which we obtained approval from theFDA.Xtampza has the same active ingredient as OxyContin OP, which is the largest selling abuse-deterrent, extended-releaseopioid in the United States by dollars, with $1.7 billion in U.S. sales in 2017. We conducted a comprehensive preclinical andclinical program for Xtampza consistent with FDA guidance on abuse-deterrence. These studies and clinical trialsdemonstrated that chewing, crushing and/or dissolving Xtampza, and then taking it orally or smoking, snorting, or injectingit did not meaningfully change its drug release profile or safety characteristics. By contrast, clinical trials performed by usand others — including head-to-head clinical trials comparing Xtampza with OxyContin OP — have shown that drug abuserscan achieve rapid release and absorption of the active ingredient by manipulating OxyContin OP using common householdtools and methods commonly available on the Internet. In November 2017, we announced the approval of a SupplementalNew Drug Application to the FDA for Xtampza to include comparative oral pharmacokinetic data from a clinical studyevaluating the effect of physical manipulation by crushing Xtampza compared with OxyContin OP and a control (oxycodonehydrochloride immediate-release), results from an oral human abuse potential study and the addition of an oral abusedeterrent claim.In addition, our preclinical studies and clinical trials have shown that the contents of the Xtampza capsule can be removedfrom the capsule and sprinkled on food or into a cup, and then directly into the mouth, or administered through feedingtubes, without compromising their drug release profile, safety or abuse-deterrent characteristics. By contrast, OxyContin OP,which is formulated in hard tablets, has a black box warning label stating that crushing, dissolving, or chewing can causerapid release and absorption of a potentially fatal dose of the active ingredient. We believe that Xtampza can address the painmanagement needs of patients in the United States who suffer from chronic pain and have difficulty swallowing.In December 2017, we entered into a Commercialization Agreement with Depomed, Inc., or Depomed, pursuant to whichDepomed agreed to grant us a sublicense of certain of its intellectual property related to Nucynta ER and Nucynta IR, or theNucynta Products, for commercialization of such products in the United States, the District of Columbia and Puerto Rico.Nucynta ER is an extended release formulation of tapentadol that is indicated for the management of pain severe enough torequire daily, around‑the‑clock, long term opioid treatment, including neuropathic pain associated with diabetic peripheralneuropathy in adults, and for which alternate treatment options are inadequate. Nucynta IR is an immediate releaseformulation of tapentadol that is indicated for the management of moderate to severe acute pain in adults.79 Table of ContentsSince 2010, we have devoted substantially all of our resources to the development of our patented DETERx platformtechnology, the preclinical and clinical advancement of our product candidates, pre-commercialization activities and thecreation and protection of related intellectual property. Since 2011, we have generated limited revenue from product salesand we continue to incur significant research, development and other expenses related to our ongoing operations. Prior to ourinitial public offering of common stock, or IPO, in May 2015, we funded our operations primarily through the privateplacement of preferred stock, convertible notes and commercial bank debt. Since our IPO, we have funded our operationsprimarily through the proceeds of public offerings and sale of our equity securities.OutlookWe expect to continue to incur significant commercialization expenses related to marketing, manufacturing, distribution,selling and reimbursement activities. We are detailing Xtampza to approximately 11,000 physicians who writeapproximately 58% of the branded extended-release oral opioid prescriptions in the United States with a sales team ofapproximately 131 sales representatives. In addition, we deploy a separate, hospital focused sales team.We began shipping and recognizing product sales on the Nucynta Products on January 9, 2018, and we began commercialpromotion of the Nucynta Products in February 2018. We are detailing the Nucynta Products to substantially the samephysicians to whom we detail Xtampza, leveraging our existing sales organization. We will pay a royalty to Depomed on allrevenues from the sale of Nucynta Products based on certain net sales thresholds, with a minimum royalty of $135.0 millionper year during the first four years of the Commercialization Agreement, subject to certain conditions. If Depomed or itscontract manufacturers are unable to deliver a certain percentage of ordered quantities of the Nucynta Products for a period oftwo months or longer in calendar year 2018, then Depomed may be required to make a payment (or offset the minimumroyalties) to ensure that we receive a minimum level of gross profit for 2018.We have never been profitable and have incurred net losses in each year since inception. We incurred net losses of$74.9 million, $94.2 million and $27.3 million for the years ended December 31, 2017, 2016 and 2015, respectively. As ofDecember 31, 2017, we had an accumulated deficit of $298.0 million. Substantially all of our net losses resulted from costsincurred in connection with our research and development programs and from selling, general and administrative costsassociated with our operations. We expect to continue to incur net losses as we continue to commercialize Xtampza and theNucynta Products. Our net losses may fluctuate significantly from quarter to quarter and year to year. We expect our expenseswill increase in connection with our ongoing activities as we:·expand our sales and marketing efforts for Xtampza and the Nucynta Products, including hiring additional personnelto expand our commercial organization;·expand our regulatory and compliance functions;·conduct clinical trials of our product candidates;·continue scale-up and improvement of our manufacturing processes;·continue our research and development efforts;·manufacture preclinical study and clinical trial materials;·maintain, expand and protect our intellectual property portfolio;·seek regulatory approvals for our product candidates that successfully complete clinical trials;·hire additional clinical, quality control and technical personnel to conduct our clinical trials;·hire additional scientific personnel to support our product development efforts;·expand operational, financial and management systems; and·hire additional selling, general and administrative personnel to operate as a commercial stage public company. We believe that our cash and cash equivalents at December 31, 2017, together with expected cash inflows from thecommercialization of Xtampza and the Nucynta Products, will enable us to fund our operating expenses, debt service andcapital expenditure requirements into 2020. In addition, we may in the future seek to fund our operations through additionalpublic or private equity or debt financings or other sources. However, we may be unable to raise additional funds or enterinto such other arrangements when needed on favorable terms or at all. If we are unable to obtain financing or increaseprofitability, the related lack of liquidity will have a material adverse effect on our operations and future prospects. 80 Table of ContentsFinancial Operations OverviewProduct RevenuesProduct revenue through the year ended December 31, 2017 has been generated from product sales of Xtampza. Product salesof Xtampza are recorded net of estimated chargebacks, rebates, sales incentives and allowance, distribution service fees, aswell as estimated product returns. Cost of Product RevenuesCost of product revenues include the cost of active pharmaceutical ingredient (“API”), the cost of producing finished goodsthat correspond with revenue for the reporting period, as well as certain period costs related to freight, packaging, stabilityand quality testing.Research and Development ExpensesResearch and development expenses consist of development costs associated with our DETERx platform technology andproduct candidates programs. These costs are expensed as incurred and include:·compensation and employee‑related costs, including stock‑based compensation;·costs associated with conducting our preclinical, clinical and regulatory activities, including fees paid to third‑partyprofessional consultants and service providers;·costs incurred under clinical trial agreements;·costs for laboratory supplies;·costs to acquire, develop and manufacture preclinical study and clinical trial materials; and·facilities, depreciation and other expenses including allocated expenses for rent and maintenance of facilities. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or futurepreclinical studies and clinical trials of our product candidates. At this time, due to the inherently unpredictable nature ofpreclinical and clinical development, and given the early stage of our product candidates, we are unable to estimate with anycertainty the costs we will incur and the timelines required for the development of our product candidates. Clinical andpreclinical development timelines, the probability of success and development costs can differ materially from expectations.In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangementswill be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.Our research and development has been focused primarily on developing our DETERx platform technology and Xtampza.Accordingly, historically we have not tracked research and development costs by project. In addition, we use our employeeand infrastructure resources across multiple research and development projects. We expect to track specific project costswhen additional product candidates enter clinical trials in humans.Selling, General and Administrative ExpensesSelling, general and administrative expenses consist primarily of salaries and employee‑related costs, including stock‑basedcompensation and travel expenses for our employees in executive, finance, sales and marketing and administrative functions.Other selling, general and administrative expenses include facility‑related costs and professional fees for directors,accounting and legal services, and expenses associated with obtaining and maintaining patents.We anticipate that our selling, general and administrative expenses will increase in the future as we increase ouradministrative headcount to support our continued research and development and potential commercialization of ourproduct candidates, in addition to the continued expansion of our commercialization efforts for Xtampza and the NucyntaProducts. We also anticipate increased expenses related to audit, legal, regulatory and tax‑related services associated withmaintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investorrelations costs associated with being a public company.81 Table of ContentsOther Expense, Net Other expense, net consists of interest income and interest expense. Emerging Growth Company Status Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transitionperiod provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, anemerging growth company can delay the adoption of certain accounting standards until those standards would otherwiseapply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as aresult, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards isrequired for companies that are not emerging growth companies. Critical Accounting Policies and Significant Judgments and EstimatesOur management’s discussion and analysis of our financial condition and results of operations are based on our financialstatements, which have been prepared in accordance with generally accepted accounting principles in the United States(GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financialstatements. We evaluate our estimates and judgments on an ongoing basis. Estimates include revenue recognition, includingthe estimates of product returns, units prescribed, discounts and allowances related to commercial sales of Xtampza, estimatesutilized in the valuation of inventory, accounting for stock-based compensation, contingencies and tax valuation reserves.We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonableunder the circumstances, the results of which form the basis for making judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Actual results may differ from these estimates under differentassumptions or conditions.While our significant accounting policies are described in more detail in the notes to our financial statements appearingelsewhere in this Form 10-K, we believe the following accounting policies to be most critical to the significant judgmentsand estimates used in the preparation of our financial statements.82 Table of ContentsRevenue RecognitionOur accounting policy for revenue recognition will have a substantial impact on reported results and relies on certainestimates. Estimates are based on historical experience, current conditions and on various other assumptions that arereasonable under the circumstances, the results of which form the basis for making judgments about the carrying values ofassets, liabilities and equity and the amounts of revenues and expenses. Actual results may differ from these estimates underdifferent assumptions or conditions.Product RevenueRevenue for product sales is recognized when there is persuasive evidence of an arrangement; title and risk of loss havepassed to the customer, which generally occurs upon delivery; when estimated provisions for chargebacks, rebates, salesincentives and allowances, distribution service fees, and returns are reasonably determinable; and when collectability isreasonably assured. Product sales are recorded net of estimated chargebacks, rebates, sales incentives and allowances,distribution service fees, as well as estimated product returns.Beginning in the third quarter of 2017, we determined that we have sufficient experience with sales of Xtampza to estimateour returns at time of shipment. We sell our products primarily to distributors and retailers (“customers”), which in turn sellthe product to pharmacies for the treatment of patients. We provide the right of return to our customers for a limited timebefore and after the product expiration date. As a result of our experience to date with Xtampza sales, we determined that wecan reasonably estimate the amount of future product returns. This determination has enabled us to recognize revenue earlieron the sell-in method, net of a provision for estimated returns, because we can record revenue once sold to the customer ratherthan waiting until the product is sold to the end user on a sell-through method. We recorded a one-time $4.4 million increaseto revenues during the three months ended September 30, 2017 as a result of our change to the sell-in method in the thirdquarter of 2017.Sales DeductionsSales deductions consist primarily of managed care rebates; government rebates; co-pay program incentives; sales incentivesand allowances; provisions for product returns; distribution service fees; prompt pay discounts; and chargebacks. Thesedeductions are recorded as reductions to revenue in the same period as the related sales are recognized. Reserves are based onestimates of the amounts earned or to be claimed on the related sales. Estimates are based on our historical experience ofexisting or similar programs, current contractual and statutory requirements, specific known market events and trends,industry data and forecasted customer buying and payment patterns. As a result, we estimate the accruals and related reservesrequired for amounts payable under these programs.If actual results vary, we may need to adjust these estimates, which could have an effect on earnings in the period of theadjustment.InventoryUpon approval of Xtampza by the FDA in April 2016, we began capitalizing inventory costs for Xtampza in preparation forthe product launch. Prior to April 2016, we expensed costs associated with Xtampza, including raw materials, work in processand finished goods, as research and development expense. We have not capitalized inventory costs related to our other drugdevelopment programs.We have capitalized $1.8 million of inventory as of December 31, 2017. We expect sales of the capitalized units to occurduring the next twelve months. We expect costs of product revenues to increase due to the expected increases in net productsales of Xtampza and the fact that we had expensed all manufacturing costs as research and development expense in periodsprior to FDA approval of Xtampza. The impact on cost of product revenues as a result of inventory not capitalized prior toFDA approval is immaterial.Impairment of Long‑Lived AssetsLong‑lived assets consist primarily of finite-lived intangible assets and property and equipment. We test long‑lived assets forpotential impairment whenever triggering events or circumstances present an indication of impairment. If the sum ofexpected undiscounted future cash flows of the long‑lived assets is less than the carrying amount of such assets,83 Table of Contentsthe long‑lived assets would be written down to the estimated fair value, calculated based on the present value of expectedfuture cash flows.As of December 31, 2017, our only intangible asset was the licensed right to develop and commercialize Onsolis fromBioDelivery Sciences International, Inc. (“BDSI”). Onsolis is a Transmucosal Immediate-Release Fentanyl film indicated forthe management of breakthrough pain in cancer patients 18 years of age and older, who are already receiving and who aretolerant to opioid therapy for their underlying persistent cancer pain. On December 8, 2017, after a review of our productportfolio, we provided written notice to BDSI of the termination of the License and Development Agreement dated May 11,2016, or the License Agreement, which termination will be effective pursuant to the terms of such agreement on March 8,2018. Upon such termination of the License Agreement, our rights to develop and commercialize Onsolis will revert to BDSI.As such, we considered this notice a triggering event warranting an assessment of impairment indicators and test forrecoverability. Based on the results of the impairment assessment and recoverability test, we recognized a full impairment of$1.8 million related to the license of Onsolis in December 2017.We have not recognized any impairment losses on property and equipment assets for the years ended December 31, 2017,2016 and 2015.Stock‑Based CompensationWe account for grants of stock options and restricted stock to employees based on their grant date fair value and recognizecompensation expense over the vesting periods. We estimate the fair value of stock options as of the date of grant using theBlack‑Scholes option pricing model, and we estimate the fair value of restricted stock awards and restricted stock units basedon the fair value of the underlying common stock as determined by our board of directors or the value of the servicesprovided, whichever is more readily determinable. We account for stock options, restricted stock awards and restricted stockunits to non‑employees using the fair value approach. Stock options and restricted stock awards to non‑employees aresubject to periodic revaluation over their vesting terms.Stock‑based compensation expense represents the cost of the grant date fair value of employee stock option grantsrecognized over the requisite service period of the awards (usually the vesting period) on a straight‑line basis, net ofestimated forfeitures. We estimate the fair value of stock option grants using the Black‑Scholes option pricing model, whichrequires the input of subjective assumptions, including (i) the risk‑free interest rate, (ii) the expected volatility of our stock,(iii) the expected term of the award and (iv) the expected dividend yield. The risk‑free interest rates for periods within theexpected life of the option are based on the yields of zero‑coupon U.S. Treasury securities. Prior to our IPO, there was nopublic market for the trading of our common stock. Due to the lack of a public market for the trading of our common stockprior to our recent IPO and a lack of Company‑specific historical and implied volatility data, we have based our estimate ofexpected volatility on the historical volatility of a group of similar companies that are publicly traded. For these analyses, wehave selected companies with comparable characteristics to ours, including enterprise value, risk profiles, position within theindustry, and with historical share price information sufficient to meet the expected life of the stock‑based awards. Wecompute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalentperiod of the calculated expected term of our stock‑based awards. We will continue to apply this process until a sufficientamount of historical information regarding the volatility of our own stock price becomes available. The expected termrepresents the period of time that options are expected to be outstanding. Because there was not enough historical exercisebehavior through December 31, 2017, we determined the expected life assumption using the simplified method, which is anaverage of the contractual term of the option and the vesting period.Fair Value of Common Stock. After our stock began trading on NASDAQ on May 7, 2015, the fair value of common stockunderlying our options was determined by the closing price of our common stock on the date of the grant. Prior to the IPO,the fair value of the shares of our common stock underlying our stock options was determined by our board of directors.Because there was no public market for our common stock, our board of directors determined the fair value of our commonstock at the time of grant of the option by considering a number of objective and subjective factors, including valuations ofcomparable companies, sales of our convertible preferred stock to unrelated third parties, our operating and financialperformance and general and industry specific economic outlook.Net Operating Loss CarryforwardsAs of December 31, 2017, we had a federal net operating loss, or NOL, carryforward of approximately $249.5 million84 Table of Contentsand state net operating loss carryovers of approximately $205.1 million, which are available to offset future taxable income.The U.S. federal NOL carryforwards begin to expire in 2022, and the state net operating losses begin to expire in 2030. Wealso had U.S. federal tax credits of approximately $3.4 million, and state tax credits of approximately $589,000. These taxattributes are generally subject to a limited carryover/carryback period, and are also subject to the annual limitations thatmay be imposed under Section 382 of the Code, or Section 382. The TCJA generally will allow losses incurred after 2017 to be carried over indefinitely, but will limit the NOL deduction tothe lesser of the NOL carryover or 80% of a corporation’s taxable income (subject to Code Sections 382/383 and otherlimitations). Also, there will be no carryback for losses incurred after 2017. Losses incurred prior to 2018 generally will bedeductible to the extent of the lesser of a corporation’s NOL carryover or 100% of a corporation’s taxable income, and beavailable for twenty years from the period the loss was generated. We have not finalized our review of the impact of TCJA onthe NOL rules, and the impact, if any, to our ability to utilize and carryover net operating losses. The federal R&D credit generally has a twenty year carryover term, and our state R&D credit is generally available for afifteen year carryover. Under Section 382, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (byvalue) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income may be limited. We mayexperience ownership changes in the future as a result of shifts in our stock ownership some of which are outside our control.We have not completed a current study to assess whether an ownership change has occurred or whether there have beenmultiple ownership changes since our formation. As a result, if we earn net taxable income, our ability to use our pre-changeNOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result inincreased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs issuspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As of December 31, 2017 and 2016, we have provided a full valuation allowance for deferred tax assets including NOL andtax credit carryovers. Uncertain Tax Positions and Income TaxesWe record uncertain tax positions on the basis of a two‑step process whereby (i) we determine whether it is more likely thannot that the tax positions will be sustained on the basis of the technical merits of the positions and (ii) for those tax positionsthat meet the more‑likely‑than‑not recognition threshold, we recognize the largest amount of tax benefit that is more than50% likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties relatedto unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the relatedtax liability. During 2017, the Company identified unrecognized tax benefits associated with the IRS audit of its 2015 corporate incometax return, and the risk of claiming R&D credits without a formal R&D study. The gross unrecognized tax benefits associatedwith these two items at December 31, 2017 is $1.4 million. 85 Table of ContentsResults of Operations Comparison of the Years Ended December 31, 2017, 2016 and 2015The following table summarizes the results of our operations for the years ended December 31, 2017, 2016 and 2015: Years ended December 31, 2017 2016 2015 (in thousands)Product revenues, net$28,476 $1,711 $ —Cost of product revenues 2,595 213 —Research and development 8,572 14,948 7,975Selling, general and administrative 92,756 80,632 18,932Interest income (expense), net 582 (94) (348)Net loss$(74,865) $(94,176) $(27,255)Comparison of the Years Ended December 31, 2017 and 2016Product revenues, net were $28.5 million for the year ended December 31, 2017, compared to $1.7 million for the year endedDecember 31, 2016. The $26.8 million increase was primarily related to an $18.6 million increase in sold-through units ofXtampza, as well as a $3.8 million increase as a result of changing to the sell-in method during the year endedDecember 31, 2017. In addition, a $4.4 million increase to revenues was recorded in the third quarter of 2017 to recognizerevenue from shipments from prior periods as a result of changing to the sell-in method in the third quarter of 2017. Cost of product revenues was $2.6 million for the year ended December 31, 2017, compared to $213,000 for the year endedDecember 31, 2016. The $2.4 million increase was primarily related to increased sales in the year ended December 31, 2017. Research and development expenses were $8.6 million for the year ended December 31, 2017, compared to $14.9 million forthe year ended December 31, 2016. The $6.3 million decrease was primarily related to:·a decrease in clinical trial costs of $4.0 million due to the completion of certain clinical trials in 2016;·a decrease in research-related regulatory costs of $2.1 million following the commercial launch of Xtampza in 2016;·a decrease in Xtampza manufacturing costs of $1.9 million reflecting that, prior to April 2016, we expensedmanufacturing costs associated with Xtampza as research and development expense; offset by·an increase in non-clinical trial costs of $932,000 relating to studies required to be conducted following FDAapproval of Xtampza; and·an increase in salaries, wages and benefits of $678,000 primarily due to an increase in research and development,including an increase in incentive compensation and stock-based compensation expense. Selling, general and administrative expenses were $92.8 million for the year ended December 31, 2017, compared to$80.6 million for the year ended December 31, 2016. The $12.2 million increase was primarily related to:·an increase in salaries, wages and benefits of $15.8 million primarily due to an increase from 234 to 250 employees,including the addition of a sales force of approximately 150 employees in the second quarter of 2016, and stock-based compensation expense; ·an increase in legal fees of $2.1 million, primarily due to costs related to litigation;·an increase of $1.8 million due to the impairment charge relating to the termination of the License Agreement withBDSI; offset by·a decrease in PMR and other regulatory costs associated with FDA approval of Xtampza of $3.9 million, primarilydue to higher one-time costs incurred upon the commercial launch of Xtampza in 2016;·a decrease in commercial, sales and marketing costs of $2.9 million, primarily due to higher costs incurred upon thecommercial launch of Xtampza in 2016; and·a decrease in distribution and commercial manufacturing costs of $667,000. 86 Table of ContentsComparison of the Years Ended December 31, 2016 and 2015Product revenues, net were $1.7 million for the year ended December 31, 2016, compared to zero for the year endedDecember 31, 2015. The $1.7 million increase was due to the commercial launch of Xtampza in June 2016. Cost of product revenues was $213,000 for the year ended December 31, 2016, compared to zero for the year endedDecember 31, 2015. The $213,000 increase was due to the commercial launch of Xtampza in June 2016. Research and development expenses were $14.9 million for the year ended December 31, 2016, compared to $8.0 million forthe year ended December 31, 2015. The $6.9 million increase was primarily related to:·an increase in clinical trial costs of $5.2 million due to clinical trials with Xtampza and the commencement ofclinical trials for our second product candidate;·an increase in salaries, wages and benefits of $1.6 million primarily due to headcount, bonuses and stockcompensation expense; and·an increase in manufacturing and transfer costs of $1.2 million primarily related to the development of amanufacturing process for Onsolis; offset by·a decrease in consulting costs of $1.1 million primarily due to the completion of FDA advisory committeepreparation in 2015. Selling, general and administrative expenses were $80.6 million for the year ended December 31, 2016 compared to $18.9million for the year ended December 31, 2015. The $61.7 million increase was primarily related to:·an increase in salaries, wages and benefits of $26.4 million primarily due to an increase from 35 to 206employees, including the addition of a sales force of approximately 150 employees, and an increase in stock-basedcompensation expense;·an increase in sales and marketing costs of $15.9 million primarily due to preparation for and support of thecommercial launch of Xtampza;·an increase in commercial costs of $9.0 million primarily due to consultant costs related to analytics and strategiesfor the commercialization of Xtampza;·an increase in Post Marketing Requirement and PDUFA costs required for Xtampza of $7.5 million;·an increase in professional fees of $1.2 million primarily due to audit, insurance, accounting, recruiting and board ofdirector fees;·an increase in distribution and commercial manufacturing costs of $1.0 million;·an increase in legal fees of $600,000 primarily due to costs related to litigation; and·an increase in amortization expense of $397,000 associated with the upfront fee for the Onsolis License Agreement. Liquidity and Capital ResourcesSources of liquidityWe have incurred net losses and negative cash flows from operations since inception. Since inception, we have funded ouroperations primarily through the private placements of our preferred stock and convertible notes, public offerings of commonstock, and commercial bank debt. As of December 31, 2017, we had $118.7 million in cash and cash equivalents.Equity FinancingIn January 2016, we issued and sold in a public offering an aggregate of 2,750,000 shares of our common stock at $20.00 pershare. We received proceeds from this public offering of approximately $51.2 million, after deduction of underwritingdiscounts and commissions and expenses payable by us.In October 2016, we issued and sold in a public offering an aggregate of 5,750,000 shares of our common stock at $16.00 pershare, including 750,000 shares of common stock upon the exercise by the underwriters of their option to purchaseadditional shares at the public offering price. We received net proceeds from this public offering of approximately $86.2million, after deduction of underwriting discounts and commissions and estimated expenses payable by us.87 Table of ContentsIn March 2017, we commenced an “at-the-market” offering of our common stock and entered into the ATM Sales Agreementwith Cantor Fitzgerald, as agent, pursuant to which we may issue and sell, from time to time, shares of our common stockhaving an aggregate offering price of up to $60.0 million. As of December 31, 2017, we had sold an aggregate of 3,126,998shares of common stock under the ATM Sales Agreement at an average gross sales price of $11.36 per share, generating netproceeds of $34.3 million after deduction of underwriting discounts and commissions and expenses payable by us, all ofwhich were sold during the year ended December 31, 2017.Silicon Valley Bank Term Loan Facility Since August 2012, the Company has maintained a term loan facility with Silicon Valley Bank, which was amended andreplaced in connection with, and as a condition to, consummation of the transactions contemplated by theCommercialization Agreement. Under the amended and replaced term loan, the Company now has a term loan facility in anamount of $11.5 million (the “New Term Loan”), which replaces the Company’s previously existing term loan facility. Theproceeds of the New Term Loan were used by the Company to finance certain payment obligations under theCommercialization Agreement and to repay the balance of the previously existing term loan. The New Term Loan alsoprovided SVB’s consent with respect to transactions contemplated by the Commercialization Agreement, including thedelivery by SVB of a standby letter of credit in an aggregate amount of $33.75 million. The New Term Loan bears interest at a rate per annum of 0.75% above the prime rate (as defined in the agreement governingthe New Term Loan). The Company will repay the New Term Loan in equal consecutive monthly installments of principalplus monthly payments of accrued interest, commencing in July 2019, provided that, if the Company achieves EBITDA (asdefined in the agreement governing the New Term Loan) in excess of $2.5 million for two (2) consecutive calendar quartersprior to June 2019, such payments will commence in January 2020. All outstanding principal and accrued and unpaidinterest under the New Term Loan, and all other outstanding obligations with respect to the New Term Loan, are due andpayable in full in December 2022. The Company may prepay the New Term Loan, in full but not in part, with a prepaymentfee of (i) 3.0% of the outstanding principal balance prior to January 2019, (ii) 2.0% of the outstanding principal balancefollowing January 2019 and prior to January 2020 and (iii) 1.0% of the outstanding principal balance following January2020, plus, in each case, a final payment fee of $719. Under the New Term Loan, the Company will be required to maintain a liquidity ratio of at least 2.0 to 1.0. Any amountsoutstanding during the continuance of any event of default under the New Term Loan will bear additional interest at the perannum rate of 5.0%. Cash flows Years ended December 31, 2017 2016 2015Net cash used in operating activities$(67,018) $(75,053) $(21,567)Net cash used in investing activities (990) (2,977) (362)Net cash provided by financing activities 33,480 135,558 115,992 Operating activities. Cash used in operating activities was $67.0 million in the year ended December 31, 2017 and$75.1 million in the year ended December 31, 2016. The $8.1 million decrease in cash used in operating activities wasprimarily due to the change in net loss, partially offset by changes in the working capital accounts, including significantchanges in accounts receivable and accrued rebates, returns and discounts in the year ended December 31, 2017, and non-cash operating activities such as stock-based compensation expense, non-cash impairment charges and depreciation andamortization. We expect cash used in operating activities to increase in the foreseeable future as we continue tocommercialize Xtampza and the Nucynta Products and fund research, development and clinical activities for additionalproduct candidates.Cash used in operating activities was $75.1 million in the year ended December 31, 2016 and $21.6 million in the yearended December 31, 2015. The $53.5 million increase in cash used in operating activities was due primarily to the change innet loss, partially offset by changes in the working capital accounts.88 Table of ContentsInvesting activities. Cash used in investing activities was $990,000 in the year ended December 31, 2017 and $3.0 million inthe year ended December 31, 2016. The decrease in cash used in investing activities was primarily due to a one-time upfrontfee paid to BDSI for the Onsolis License Agreement in the year ended December 31, 2016.Cash used in investing activities was $3.0 million in the year ended December 31, 2016 and $362,000 in the year endedDecember 31, 2015. The increase in cash used in investing activities was primarily due to a one-time upfront fee paid toBDSI for the Onsolis License Agreement in the year ended December 31, 2016.Financing activities. Cash provided by financing activities for the year ended December 31, 2017 primarily represents netproceeds of $34.3 million from the issuance of common stock, partially offset by the repayment of term notes of $2.7million. Cash provided by financing activities for the year ended December 31, 2016 primarily represents net proceeds of $137.3million from the issuance of common stock, partially offset by the repayment of term notes of $2.7 million.Cash provided by financing activities for the year ended December 31, 2015 primarily represents net proceeds from the IPOand from the sale of Series D convertible preferred stock of $72.0 million and $44.8 million, respectively.Funding requirementsSince 2011, we have generated limited revenue from product sales and we continue to incur significant research,development and other expenses related to our ongoing operations. As we continue to commercialize Xtampza and add theNucynta Products to our portfolio, we anticipate that we will continue to incur losses in the near future as we grow ourcommercial organization and continue the development of, and seek regulatory approvals for, other product candidates. Weare subject to all of the risks common to the commercialization and development of new pharmaceutical products, and wemay encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affectour business. We will also incur additional costs associated with operating as a commercial stage public company. Weanticipate that we will need substantial additional funding in connection with our continuing operations.Until we can generate a sufficient amount of revenue from our pharmaceutical products, if ever, we expect to finance futurecash needs through public or private equity or debt offerings. Additional capital may not be available on reasonable terms, ifat all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have tosignificantly delay, scale back or discontinue the development or commercialization of one or more of our products orproduct candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result indilution to our existing shareholders, increased fixed payment obligations and the existence of securities with rights that maybe senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrictour operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt,limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that couldadversely impact our ability to conduct our business. Any of these events could significantly harm our business, financialcondition and prospects.89 Table of ContentsOur forecast of the period of time through which our financial resources will be adequate to support our operations is aforward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number offactors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capitalresources sooner than we currently expect. The amount and timing of future funding requirements, both near- and long-term,will depend on many factors, including:·the cost of growing and maintaining sales, marketing and distribution capabilities for Xtampza, the NucyntaProducts and any other products for which we may receive regulatory approval;·the generation of reasonable levels of revenue from the sale of Xtampza and the Nucynta Products;·our ability to pay license fees and royalties for our in-licensed products;·the design, initiation, progress, size, timing, costs and results of preclinical studies and clinical trials for our productcandidates;·the outcome, timing and cost of regulatory approvals by the FDA and comparable foreign regulatory authorities,including the potential for the FDA or comparable foreign regulatory authorities to require that we perform morestudies than, or evaluate clinical endpoints other than those that we currently expect;·the timing and costs associated with manufacturing Xtampza and our product candidates for preclinical studies,clinical trials and, if approved, for commercial sale;·the number and characteristics of product candidates that we pursue;·the cost of patent infringement litigation, including our litigation with each of Purdue Pharma, L.P., or Purdue, andTeva Pharmaceuticals USA, Inc., or Teva, relating to Xtampza, the Nucynta Products or our product candidates,which may be expensive to defend and delay the commercialization of our product candidates;·our need to expand our research and development activities, including our need and ability to hire additionalemployees;·our need to implement additional infrastructure and internal systems and hire additional employees to operate as apublic company;·our need to expand our regulatory and compliance functions; and·the effect of competing technological and market developments. If we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital,our business, financial condition and results of operations could be materially adversely affected.Contractual ObligationsThe following table summarizes our contractual obligations as of December 31, 2017 that will affect our future liquidity: Less than More than Total 1 year 1 - 3 years 3 - 5 years 5 years (in thousands) Operating lease obligations $639 $234 $405 $ — $— Long term debt (including interest) 1,479 1,479 — — — Purchase obligations 9,000 3,000 6,000 — — Total $11,118 $4,713 $6,405 $ — $ — Operating lease obligations represent future minimum lease payments under our non‑cancelable operating lease in effectas of December 31, 2017, reflecting remaining lease payments for our current facility in Canton, Massachusetts. Long‑term debt obligations represent future principal and interest payments under our Original Term Loan, as amendedas of December 31, 2017. Purchase obligations represent the minimum purchase obligations of up to $3.0 million under a manufacturing agreementas of December 31, 2017. The disclosed amounts represent the maximum amount that could be payable under theminimum purchase obligations. 90 (1)(2)(3)(1)(2)(3)Table of ContentsWe also have employment agreements with executive officers that would require us to make severance payments to them ifwe terminate their employment without cause or the executives resign for good cause. These payments are contingent uponthe occurrence of various future events, and the amounts payable under these provisions depend upon the level ofcompensation at the time of termination of employment, are therefore not calculable at this time, and, as a result, we have notincluded any such amounts in the table above. Off‑Balance Sheet Arrangements We did not have during the periods presented any off‑balance sheet arrangements, as defined under SEC rules. Item 7A. Quantitative and Qualitative Disclosures about Market Risks We are exposed to market risk related to changes in interest rates. As of December 31, 2017, we had cash and cashequivalents consisting of cash and money market funds of $118.7 million. Our primary exposure to market risk is interest ratesensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our money marketfunds are short-term highly liquid investments. Due to the short-term duration and the low risk profile of our investments, animmediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. Item 8. Consolidated Financial Statements and Supplementary DataOur consolidated financial statements, together with the reports of our independent registered public accounting firms, beginon page F‑1 of this Form 10‑K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and ProceduresThe Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer, hasevaluated the effectiveness of the Company's disclosure controls and and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. The term “disclosure controls andprocedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of acompany that are designed to ensure that information required to be disclosed by us in the reports that we file or submitunder the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rulesand forms. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures were effective as of December 31, 2017. Management’s Report on Internal Control Over Financial ReportingInternal control over financial reporting refers to the process designed by, or under the supervision of, our Chief ExecutiveOfficer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (1)pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositionsof our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that our receipts and expenditures are beingmade only in accordance with authorizations of our management and directors; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that couldhave a material effect on the financial statements.Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectivesbecause of its inherent limitations. Internal control over financial reporting is a process that involves human diligence andcompliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control overfinancial reporting also can be circumvented by collusion or improper management override. Also, projections of anyevaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that91 Table of Contentscontrols may become inadequate because of changes in conditions, or that the degree of compliance with policies orprocedures may deteriorate. Because of such limitations, there is a risk that material misstatements may not be prevented ordetected on a timely basis by internal control over financial reporting. However, these inherent limitations are knownfeatures of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though noteliminate, this risk.Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as suchterm is defined in Rules 13a 15(f) and 15d 15(f) under the Exchange Act. Under the supervision and with the participation ofour management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of theeffectiveness of our internal control over financial reporting. Management has used the framework set forth in the reportentitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of theTreadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation,management has concluded that our internal control over financial reporting was effective at the reasonable assurance levelas of December 31, 2017, the end of our most recent fiscal year.Attestation Report of the Registered Public Accounting FirmThis Form 10-K does not include an attestation report of our registered public accounting firm due to an exemptionestablished by the JOBS Act for “emerging growth companies.”Changes in Internal Control Over Financial ReportingThere has been no change in our internal control over financial reporting during the fiscal quarter ended December 31, 2017that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information Not applicable. PART III Item 10. Directors, Executive Officers, and Corporate GovernanceOther than the information regarding our executive officers provided in Part I of this report under the heading “Business—Executive Officers of the Registrant,” the information required to be furnished pursuant to this item is incorporated herein byreference to our definitive proxy statement for the 2018 Annual Meeting of the Shareholders.Our board of directors has adopted a Code of Ethics applicable to all of our employees, executive officers and directors. TheCode of Ethics is available on our website at www.collegiumpharma.com. Our board of directors is responsible for overseeingcompliance with the Code of Ethics, and our board of directors or an appropriate committee thereof must approve anywaivers of the Code of Ethics for employees, executive officers or directors. Disclosure regarding any amendments to theCode of Ethics, or any waivers of its requirements, will be made on our website. Item 11. Executive CompensationThe information required by this Item 11 is incorporated herein by reference from our definitive proxy statement for the 2018Annual Meeting of Shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 is incorporated herein by reference from our definitive proxy statement for the 2018Annual Meeting of Shareholders. Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item 13 is incorporated herein by reference from our definitive proxy statement for the 2018Annual Meeting of Shareholders. Item 14. Principal Accountant Fees and Services92 Table of ContentsThe information required by this Item 14 is incorporated herein by reference from our definitive proxy statement for the 2018Annual Meeting of Shareholders. PART IV Item 15. Exhibits and Financial Statement Schedules Consolidated Financial Statements See Part II, Item 8 for the Financial Statements required to be included in this Form 10-K. Consolidated Financial Statement Schedules All financial statement schedules are omitted because they are not applicable or the required information is included in theconsolidated financial statements or notes thereto. ExhibitsExhibitNumberExhibit Description2.1†Agreement and Plan of Merger, dated July 10, 2014, by and between Collegium Pharmaceutical, Inc., aDelaware corporation, and Collegium Pharmaceutical, Inc., a Virginia corporation.(1)3.1†Second Amended and Restated Articles of Incorporation of Collegium Pharmaceutical, Inc.(2)3.2†Amended and Restated Bylaws of Collegium Pharmaceutical, Inc.(8)4.1†Eighth Amended and Restated Investor Rights Agreement, dated March 6, 2015, by and among CollegiumPharmaceutical, Inc. and certain of its shareholders.(1)4.2†Warrant to Purchase Stock, dated October 28, 2010, issued by Collegium Pharmaceutical, Inc. to ComericaBank.(1)10.1†Office Lease Agreement, dated August 28, 2012, by and between 780 Dedham Street Holdings, LLC andCollegium Pharmaceutical, Inc.(1)10.2†Loan and Security Agreement, dated August 28, 2012, by and between Silicon Valley Bank and CollegiumPharmaceutical, Inc.(1)10.3†First Amendment to Loan and Security Agreement, dated January 31, 2014, by and between Silicon ValleyBank and Collegium Pharmaceutical, Inc.(1)10.4†Assumption and Second Amendment to Loan and Security Agreement, dated August 12, 2014, by andbetween Silicon Valley Bank and Collegium Pharmaceutical, Inc.(1)10.5†Third Amendment to Loan and Security Agreement, dated September 25, 2014, by and between SiliconValley Bank and Collegium Pharmaceutical, Inc.(1)10.6†Fourth Amendment to Loan and Security Agreement, dated October 31, 2014, by and between Silicon ValleyBank and Collegium Pharmaceutical, Inc.(1)10.7†Consent and Sixth Amendment to Loan and Security Agreement, dated January 9, 2018, by and betweenCollegium Pharmaceutical, Inc. and Silicon Valley Bank.(9)10.8†Subordination Agreement, dated November 14, 2014, by and among Collegium Pharmaceutical, Inc., SiliconValley Bank and the creditors named therein.(1)10.9†Subordination Agreement, dated December 2, 2014, by and among Collegium Pharmaceutical, Inc., SiliconValley Bank and the creditors named therein.(1)10.10+†Restricted Stock Award Agreement, dated June 13, 2012, by and between Collegium Pharmaceutical, Inc.and Michael T. Heffernan.(1)10.11+†Restricted Stock Award Agreement, dated July 18, 2012, by and between Collegium Pharmaceutical, Inc. andGino Santini.(1)10.12+†Restricted Stock Award Agreement, dated March 5, 2014, by and between Collegium Pharmaceutical, Inc.and Gino Santini.(1)10.13†Form of Confidentiality and Inventions Agreement.(1)93 Table of Contents10.14+†Offer Letter, dated January 29, 2015, by and between Collegium Pharmaceutical, Inc. and Garen Bohlin.(1)10.15†Series D Convertible Preferred Stock Purchase Agreement, dated March 6, 2015, by and among CollegiumPharmaceutical, Inc. and the purchasers thereto.(1)10.16†First Amendment to Lease, dated March 24, 2015, by and between Park at 95, LLC (as successor in interest to780 Dedham Street Holdings, LLC) and Collegium Pharmaceutical, Inc.(1)10.17+†2015 Employee Stock Purchase Plan.(3)10.18+†Performance Bonus Plan. (4)10.19(a)+†Amended and Restated 2014 Stock Incentive Plan. (3)10.19(b)+†Form of Incentive Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan. (3)10.19(c)+†Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2014 Stock IncentivePlan. (3)10.19(d)+†Form of Restricted Stock Award Agreement under the Amended and Restated 2014 Stock Incentive Plan. (3)10.20+†Restricted Stock Award Agreement, dated April 2, 2015, by and between Collegium Pharmaceutical, Inc. andMichael T. Heffernan. (4)10.21†Form of Indemnification Agreement. (4)10.22+†Employment Agreement, dated August 4, 2015, by and between Michael Heffernan and CollegiumPharmaceutical, Inc.(5)10.23+†Employment Agreement, dated August 4, 2015, by and between Paul Brannelly and CollegiumPharmaceutical, Inc.(5)10.24+†Employment Agreement, dated August 4, 2015, by and between Barry S. Duke and CollegiumPharmaceutical, Inc.(6)10.25*†License and Development Agreement, dated as of May 11, 2016, by and between Collegium Pharmaceutical,Inc. and BioDelivery Systems International, Inc.(7)10.26+† Employment Agreement, dated May 31, 2017, by and between Collegium Pharmaceutical, Inc. and JosephCiaffoni.(10)10.27*Commercialization Agreement, by and among, Depomed, Inc., Collegium Pharmaceutical, Inc. andCollegium NF, LLC, dated as of December 4, 2017.10.28Amendment dated January 9, 2018 to Commercialization Agreement by and among Depomed, Inc. andCollegium Pharmaceutical, Inc. and Collegium NF, LLC.21.1 Subsidiaries of Collegium Pharmaceutical, Inc.23.1 Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.23.2 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.31.1 Certifying Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of2002.31.2 Certifying Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of2002.32.1 Certifying Statement of the Chief Executive Officer pursuant to Section 1350 of Title 18 of the United StatesCode.32.2 Certifying Statement of the Chief Financial Officer pursuant to Section 1350 of Title 18 of the United StatesCode.101 The following financial information from this Annual Report on Form 10-K for the year ended December 31,2017, formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2017, 2016, (ii) ConsolidatedStatements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii) ConsolidatedStatements of Convertible Redeemable Preferred Stock and Shareholders' Equity (Deficit) for the YearsEnded December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Cash Flows for the years endedDecember 31, 2017, 2016 and 2015, and (v) Notes to Consolidated Financial Statements, tagged as blocks oftext. †Previously filed.+Indicates management contract or compensatory plan.94 Table of Contents* Subject to confidential treatment request.(1)Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1 (File No. 333-203208) filed with theCommission on April 2, 2015.(2)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on May 12, 2015.(3)Previously filed as an exhibit to the registrant’s Registration Statement on Form S-8 (File No. 333-207744) filed with theCommission on November 2, 2015.(4)Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1/A (File No. 333-203208) filed withthe Commission on April 27, 2015.(5)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on August 10,2015.(6)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,2015 filed with the Commission on August 12, 2015.(7)Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,2016 filed with the Commission on August 11, 2016.(8)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on December 1,2017.(9)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on January 10,2018.(10)Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on May 31,2017.95 Table of ContentsItem 16. Form 10-K Summary None. 96 Table of ContentsCOLLEGIUM PHARMACEUTICAL, INC.Index to Consolidated Financial Statements Audited Financial StatementsPagesReports of Independent Registered Public Accounting Firms F-2Consolidated Balance Sheets as of December 31, 2017 and 2016 F-4 Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016, and 2015F-5Consolidated Statements of Convertible Redeemable Preferred Stock and Shareholders' Equity (Deficit) for theYears Ended December 31, 2017, 2016 and 2015 F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015 F-7Notes to Consolidated Financial Statements F-8 F-1 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Collegium Pharmaceutical, Inc. and subsidiaries (the"Company") as of December 31, 2017 and 2016, the related consolidated statements of operations, convertible redeemablepreferred stock and shareholders' equity (deficit), and cash flows, for each of the two years in the period ended December 31,2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and theresults of its operations and its cash flows for each of the two years in the period ended December 31, 2017, in conformitywith accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinionon the Company's financial statements based on our audits. We are a public accounting firm registered with the PublicCompany Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to theCompany in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether dueto error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control overfinancial reporting. As part of our audits, we are required to obtain an understanding of internal control over financialreporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control overfinancial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whetherdue to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a testbasis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation ofthe financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Boston, MassachusettsMarch 7, 2018 We have served as the Company's auditor since 2016.F-2 Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and ShareholdersCollegium Pharmaceutical, Inc. We have audited the consolidated balance sheet of Collegium Pharmaceutical, Inc. and its subsidiary (the “Company”) as ofDecember 31, 2015 (not presented herein), and the related statements of operations, convertible redeemable preferred stockand shareholders’ equity (deficit), and cash flows for the year ended December 31, 2015. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements basedon our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting. Our audit included consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of Collegium Pharmaceutical, Inc. and its subsidiary as of December 31, 2015, and the results of their operations andtheir cash flows for the year ended December 31, 2015 in conformity with accounting principles generally accepted in theUnited States of America./s/ Grant Thornton LLP Boston, MassachusettsMarch 18, 2016 F-3 Table of Contents COLLEGIUM PHARMACEUTICAL, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share data) December 31, 2017 2016 Assets Current assets Cash and cash equivalents $118,697 $153,225 Accounts receivable 9,969 2,129 Inventory 1,813 1,316 Prepaid expenses and other current assets 3,005 1,905 Total current assets 133,484 158,575 Property and equipment, net 1,826 1,038 Intangible assets, net — 2,103 Restricted cash 97 97 Other long-term assets 161 204 Total assets $135,568 $162,017 Liabilities and shareholders' equity Current liabilities Accounts payable $5,684 $9,106 Accrued expenses 8,541 8,879 Accrued rebates, returns and discounts 15,784 — Deferred revenue — 4,944 Current portion of term loan payable 1,479 2,667 Total current liabilities 31,488 25,596 Lease incentive obligation — 34 Term loan payable, long-term — 1,479 Total liabilities 31,488 27,109 Commitments and contingencies (see Note 9) Shareholders’ equity: Preferred stock, $0.001 par value; authorized shares - 5,000,000 at December 31, 2017 andDecember 31, 2016; issued and outstanding shares - none at December 31, 2017 and December 31, 2016 — — Common stock, $0.001 par value; authorized shares - 100,000,000 at December 31, 2017 andDecember 31, 2016; issued and outstanding shares - 32,770,678 at December 31, 2017 and 29,364,100 atDecember 31, 2016 33 29 Additional paid-in capital 402,096 358,063 Accumulated deficit (298,049) (223,184) Total shareholders’ equity 104,080 134,908 Total liabilities and shareholders’ equity $135,568 $162,017 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of ContentsCOLLEGIUM PHARMACEUTICAL, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except share and per share data) Years ended December 31, 2017 2016 2015Product revenues, net$28,476 $1,711 $ —Costs and expenses Cost of product revenues 2,595 213 —Research and development 8,572 14,948 7,975Selling, general and administrative 92,756 80,632 18,932Total costs and expenses 103,923 95,793 26,907Loss from operations (75,447) (94,082) (26,907) Other income (expense) Interest income (expense), net 582 (94) (439)Gain on extinguishment of debt — — 91Total other income (expense), net 582 (94) (348) Net loss$(74,865) $(94,176) $(27,255) Loss per share - basic and diluted$(2.47) $(3.88) $(1.48)Weighted-average shares - basic and diluted 30,265,262 24,262,945 13,542,282The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of ContentsCOLLEGIUM PHARMACEUTICAL, INC.CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT)(In thousands, except share data) Series A Series B Series C Series D Convertible Convertible Convertible Convertible Total Redeemable Redeemable Redeemable Redeemable Additional Treasury Shareholders’ Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock Paid- In Stock, Accumulated Equity Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital at cost Deficit (Deficit)Balance atDecember 31, 20149,232,334 $12,781 27,324,237 $51,212 8,658,008 $13,114 — $ — 1,006,219 $ 1 $12,407 $(3) $(101,753) $(89,348)Exercise ofcommon stockoptions — — — — — — — — 173,251 — 517 — — 517Exercise ofwarrants — — — — — — — — 16,062 — 6 — — 6Issuance ofrestricted stockawards toemployees — — — — — — — — 194,694 — — — — —Issuance ofSeries Dconvertibleredeemablepreferred stock,net ofissuance costsof $193 — — — — — — 37,500,000 44,807 — — — — — —Conversion ofnotes to SeriesD convertibleredeemablepreferred stock — — — — — — 4,166,667 5,000 — — — — — —Extinguishmentof priorpreferred stockdividends — (3,733) — (23,341) — (4,110) — — — — 31,184 — — 31,184Accruals ofdividends andaccretion toredemptionvalue — 2,297 — 18,034 — 2,996 — 1,245 — — (24,572) — — (24,572)Conversion ofpreferred stockto commonstock(9,232,334) (11,345) (27,324,237) (45,905) (8,658,008) (12,000) (41,666,667) (50,000) 12,591,463 13 119,237 — — 119,250Initial PublicOffering, net ofissuance costsof $2,408 — — — — — — — — 6,670,000 7 72,022 — — 72,029Issuance ofcommon stockin payment ofSeries D accrueddividends — — — — — — — (1,052) 87,662 — 1,052 — — 1,052Stock-basedcompensationexpense — — — — — — — — — — 2,209 — — 2,209Net loss — — — — — — — — — — — — (27,255) (27,255)Balance atDecember 31, 2015 — — — — — — — — 20,739,351 21 214,062 (3) (129,008) 85,072Exercise ofcommon stockoptions — — — — — — — — 81,831 — 443 — — 443Issuance foremployee stockpurchase plan — — — — — — — — 42,918 — 442 — — 442Public offeringsof commonstock, net ofissuance costsof $845 — — — — — — — — 8,500,000 8 137,332 — — 137,340Retirement oftreasury stock — — — — — — — — — (3) 3 — —Stock-basedcompensation — — — — — — — — — — 5,787 — — 5,787Net loss — — — — — — — — — — — — (94,176) (94,176)Balance atDecember 31, 2016 — — — — — — — — 29,364,100 29 358,063 — (223,184) 134,908Exercise ofcommon stockoptions — — — — — — — — 158,801 1 735 — — 736Issuance foremployee stockpurchase plan — — — — — — — — 110,841 — 1,141 — — 1,141Vesting ofrestricted stockunits — — — — — — — — 14,757 — — — — —Shares withheldfor employeetaxes uponvesting ofrestricted stockunits — — — — — — — — (4,819) — (68) — — (68)Public offeringsof commonstock, net ofissuance costsof $1,253 — — — — — — — — 3,126,998 3 34,280 — — 34,283Stock-basedcompensation — — — — — — — — — — 7,945 — — 7,945Net loss — — — — — — — — — — — — (74,865) (74,865)Balance atDecember 31, 2017 — $ — — $ — — $ — — $ — 32,770,678 $33 $402,096 $ — $(298,049) $104,080 The accompanying notes are an integral part of these consolidated financial statements F-6 Table of ContentsCOLLEGIUM PHARMACEUTICAL, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Years ended December 31, 2017 2016 2015Operating activities Net loss$(74,865) $(94,176) $(27,255)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 594 655 171Non-cash impairment charges 1,845 — —Lease incentive obligation (34) (34) (34)Stock-based compensation expense 7,945 5,787 2,209Non-cash interest expense — — 6Changes in operating assets and liabilities: Accounts receivable (7,840) (2,129) —Inventories (497) (1,316) —Prepaid expenses and other assets (1,057) (923) (659)Refundable PDUFA fee — — 2,335Accounts payable (3,422) 5,569 1,298Accrued expenses (527) 6,570 362Accrued rebates, returns and discounts 15,784 — —Deferred revenue (4,944) 4,944 —Net cash used in operating activities (67,018) (75,053) (21,567)Investing activities Purchase of intangible assets — (2,500) —Purchases of property and equipment (990) (477) (362)Net cash used in investing activities (990) (2,977) (362)Financing activities Proceeds from issuances of common stock from public offerings, net of issuance costs of$1,198, $845 and $2,408, respectively 34,338 137,340 72,029Proceeds from issuances of common stock from employee stock purchase plans 1,141 442 —Proceeds from issuance of Series D convertible redeemable preferred stock, net of issuancecosts of $193 — — 44,807Repayment of term note (2,667) (2,667) (1,286)Repayment of lease note payable — — (59)Restricted cash — — (16)Proceeds from the exercise of stock options 736 443 517Payments made for employee restricted stock tax withholdings (68) — —Net cash provided by financing activities 33,480 135,558 115,992 Net (decrease) increase in cash and cash equivalents (34,528) 57,528 94,063Cash and cash equivalents at beginning of period 153,225 95,697 1,634Cash and cash equivalents at end of period$118,697 $153,225 $95,697 Supplemental disclosure of cash flow information Cash paid for offering costs$1,228 $ — $ —Cash paid for interest$139 $284 $353 Supplemental disclosure of non-cash activities Offering costs in accrued expenses$55 $ — $ —Acquisition of property and equipment in accrued expenses$216 $81 $ —Preferred stock conversion to common stock$ — $ — $120,302Extinguishment of preferred stock$ — $ — $31,184Accruals of dividends and accretion to redemption value$ — $ — $24,572Conversion of bridge note to preferred stock$ — $ — $5,000 The accompanying notes are an integral part of these consolidated financial statements.F-7 Table of ContentsCOLLEGIUM PHARMACEUTICAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share data) 1. NATURE OF BUSINESSOrganizationCollegium Pharmaceutical, Inc. (the “Company”) was incorporated in Delaware in April 2002 and then reincorporated inVirginia in July 2014. The Company has its principal operations in Canton, Massachusetts. The Company a specialtypharmaceutical company focused on becoming the leader in responsible pain management by developing andcommercializing innovative, differentiated products for patients suffering from pain. The Company’s first product, XtampzaER®, or Xtampza, is an abuse-deterrent, extended-release, oral formulation of oxycodone, a widely prescribed opioidmedication. In April 2016, the U.S. Food and Drug Administration (“FDA”) approved the Company’s new drug application(“NDA”) filing for Xtampza for the management of pain severe enough to require daily, around-the-clock, long-term opioidtreatment and for which alternative treatment options are inadequate. In June 2016, the Company announced the commerciallaunch of Xtampza.The Company’s operations are subject to certain risks and uncertainties. The principal risks include inability to successfullycommercialize products, changing market conditions for products and product candidates (including development ofcompeting products), changing regulatory environment and reimbursement landscape, negative outcome of clinical trials,inability or delay in completing clinical trials or obtaining regulatory approvals, the need to retain key personnel and protectintellectual property, patent infringement litigation and the availability of additional capital financing on terms acceptableto the Company.Public Offerings of Common StockIn May 2015, the Company closed an initial public offering (“IPO”) of its common stock, which resulted in the sale of6,670,000 shares of its common stock at a public offering price of $12.00 per share, including 870,000 shares of commonstock upon the exercise by the underwriters of their option to purchase additional shares at the public offering price. TheCompany received proceeds from the IPO of approximately $72,029 after deducting underwriting discounts, commissionsand expenses payable by the Company.In April 2015, in connection with preparing for the IPO, the Company’s board of directors and shareholders approved aone‑for‑6.9 reverse split of the Company’s common stock. All common stock share and per share amounts in the financialstatements have been retroactively adjusted for all periods presented to give effect to the reverse split of the Company’scommon stock, including reclassifying an amount equal to the reduction in par value to additional paid‑in capital.In connection with the closing of the IPO, all of the Company’s outstanding convertible preferred stock and accrueddividends automatically converted to common stock in May 2015, resulting in an additional 12,591,463 shares of commonstock of the Company becoming outstanding. The significant increase in common stock outstanding in May 2015 impactedthe year-over-year comparability of the Company’s net loss per share calculations.In January 2016, the Company issued and sold in a public offering an aggregate of 2,750,000 shares of its common stock at$20.00 per share. The Company received net proceeds from this public offering of approximately $51,174, after deduction ofunderwriting discounts and commissions and expenses payable by the Company. In October 2016, the Company issued and sold in a public offering an aggregate of 5,750,000 shares of its common stock at$16.00 per share. The Company received net proceeds from this public offering of approximately $86,166, after deduction ofunderwriting discounts and commissions and expenses payable by the Company.F-8 Table of ContentsControlled Equity Offering Sales AgreementIn March 2017, the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM Sales Agreement”), withCantor Fitzgerald & Co., as sales agent (“Cantor Fitzgerald”), pursuant to which the Company may issue and sell, from timeto time, through Cantor Fitzgerald, shares of the Company’s common stock, up to an aggregate offering price of $60,000 (the“ATM Shares”).Under the ATM Sales Agreement, Cantor Fitzgerald may sell the ATM Shares by methods deemed to be an “at-the-market”offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), includingsales made directly on The NASDAQ Global Select Market, on any other existing trading market for the ATM Shares or to orthrough a market maker. In addition, under the ATM Sales Agreement, Cantor Fitzgerald may sell the ATM Shares by anyother method permitted by law, including in privately negotiated transactions.The Company is not obligated to make any sales of the ATM Shares under the ATM Sales Agreement. The Company orCantor Fitzgerald may suspend or terminate the offering of ATM Shares upon notice to the other party and subject to otherconditions. The Company will pay Cantor Fitzgerald a commission of up to 3.0% of the gross proceeds from the sale of theATM Shares pursuant to the ATM Sales Agreement and has agreed to provide Cantor Fitzgerald with customaryindemnification and contribution rights.As of December 31, 2017, the Company had sold an aggregate of 3,126,998 ATM Shares under the ATM Sales Agreement atan average gross sales price of $11.36 per share generating net proceeds of $34,283 after deduction of underwriting discountsand commissions and expenses payable by the Company, all of which were sold during the year ended December 31, 2017.Basis of AccountingThe consolidated financial statements include the accounts of Collegium Pharmaceutical, Inc. (a Virginia corporation) aswell as the accounts of Collegium Securities Corp. (a Massachusetts corporation), incorporated in December 2015, andCollegium NF LLC (a Delaware limited liability company), incorporated in December 2017, both wholly owned subsidiariesrequiring consolidation. The consolidated financial statements are prepared in conformity with accounting principlesgenerally accepted in the United States of America. All intercompany balances and transactions have been eliminated inconsolidation.LiquidityThe Company has experienced net losses and negative cash flows from operating activities since its inception, and as ofDecember 31, 2017, had an accumulated deficit of $298,049. The Company expects to continue to incur net losses in thenear future. A successful transition to profitable operations is dependent upon achieving a level of revenues adequate tosupport the Company’s cost structure.The Company believes that its cash and cash equivalents at December 31, 2017, together with expected cash inflows fromsales of its products will enable the Company to fund its operating expenses, debt service, contractual obligations and capitalexpenditure requirements into 2020. The Company may never achieve profitability, and unless and until it does, theCompany will continue to need to raise additional cash. Management intends to fund future operations through additionalprivate or public debt or equity offerings, and may seek additional capital through arrangements with strategic partners orfrom other sources. If the Company is unable to obtain financing or increase profitability, the related lack of liquidity willhave a material adverse effect on the Company’s operations and future prospects. F-9 Table of Contents2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact thereported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in theCompany’s financial statements and accompanying notes. The most significant estimates in the Company’s financialstatements relate to revenue recognition, including the estimates of product returns, units prescribed, discounts andallowances related to commercial sales of Xtampza, estimates utilized in the valuation of inventory, accounting for stock-based compensation, contingencies and tax valuation reserves. The Company bases estimates and assumptions on historicalexperience when available and on various factors that it believes to be reasonable under the circumstances. The Companyevaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimatesunder different assumptions or conditions. Fair Value Measurements Disclosures of fair value information about financial instruments are required, whether or not recognized in the balance sheet,for financial instruments with respect to which it is practicable to estimate that value. The carrying amounts reported in theCompany’s financial statements for cash and cash equivalents, accounts payable, term loan payable and accrued liabilitiesapproximate their respective fair values because of the relative short‑term nature of these accounts.Fair value measurements and disclosures describe the fair value hierarchy based on three levels of inputs, of which the firsttwo are considered observable and the last unobservable, that may be used to measure fair value, as follows: Level 1 inputs:Quoted prices (unadjusted) in active markets for identical assets or liabilitiesLevel 2 inputs:Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, eitherdirectly or indirectlyLevel 3 inputs:Unobservable inputs that reflect the Company’s own assumptions about the assumptions marketparticipants would use in pricing the asset or liability Transfers are calculated on values as of the transfer date. There were no transfers between Levels 1, 2 and 3 during the yearsended December 31, 2017 and 2016. The following tables present the Company’s financial instruments carried at fair value using the lowest level input applicableto each financial instrument at December 31, 2017 and 2016. Significant Quoted Prices other Significant in active observable unobservable markets inputs inputs Description Total (Level 1) (Level 2) (Level 3) December 31, 2017 Money market funds, included in cashequivalents $81,225 $81,225 $ — $ — December 31, 2016 Money market funds, included in cashequivalents $125,515 $125,515 $ — $ — Concentration of Credit Risk Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily ofcash and cash equivalents and accounts receivable. The Company maintains its cash deposits primarily with one financialinstitution and in federally insured financial institutions in excess of federally insured limits. In addition, as of December 31,2017, the Company’s cash equivalents were invested in one money market fund. Three customers comprised 10% or more ofthe Company’s accounts receivable balance as of December 31, 2017. These customersF-10 Table of Contentscomprised 49%, 24% and 20% of the accounts receivable balance, respectively. Three customers comprised 10% or more ofthe Company’s revenue during the year ended December 31, 2017. These customers comprised 39%, 29% and 23% ofrevenue, respectively. The Company has not experienced any material losses in such accounts and management believes thatthe Company is not exposed to significant credit risk due to the financial position of the financial institutions in which thosedeposits are held. The Company has no financial instruments with off‑balance sheet risk of loss. Cash and Cash Equivalents Cash and cash equivalents include cash in readily available checking and savings accounts and money market funds. TheCompany considers all highly liquid investments with an original maturity of three months or less from the date of purchaseto be cash equivalents. The Company’s cash equivalents, which consist of money market funds, are measured at fair value on a recurring basis. As ofDecember 31, 2017 and 2016, the carrying amount of cash equivalents was $81,225 and $125,515, respectively, whichapproximates fair value and was determined based upon Level 1 inputs. Money market funds are valued using quoted marketprices with no valuation adjustments applied. Accordingly, these securities are categorized as Level 1. Inventory Inventories are stated at the lower of cost or net realizable value. Inventory costs consist of costs related to the manufacturingof Xtampza, which are primarily the costs of contract manufacturing. The Company determines the cost of its inventories on aspecific identification basis, and removes amounts from inventories on a first-in, first-out basis. If the Company identifiesexcess, obsolete or unsalable items, inventories are written down to their realizable value in the period in which theimpairment is identified. These adjustments are recorded based upon various factors, including the level of productmanufactured by the Company, the level of product in the distribution channel, current and projected demand and theexpected shelf-life of the inventory components. As of December 31, 2017, cumulative estimates of excess inventoryrecorded as a component of cost of product revenues were immaterial. Inventories that are not expected to be used within oneyear are recorded as a non-current asset. The Company outsources the manufacturing of Xtampza to a sole contract manufacturer that produces the finished product.In addition, the Company currently relies on a sole supplier for the active pharmaceutical ingredient for Xtampza.Accordingly, the Company has concentration risk associated with its commercial manufacturing of Xtampza. Prior to the approval of Xtampza by the FDA in April 2016, the Company recorded all costs incurred related to themanufacturing of Xtampza as research and development expense. Subsequent to approval, the Company began capitalizingthese costs as inventory as they are incurred. The Company has capitalized $1,813 of inventory as of December 31, 2017. The Company expects sales of the capitalizedunits to occur during the next twelve months. Property and Equipment Property and equipment are recorded at historical cost. Maintenance and repair costs are expensed as incurred. Costs whichmaterially improve or extend the lives of existing assets are capitalized. The Company provides for depreciation andamortization using the straight‑line method over the estimated useful lives of the assets, which are as follows: Asset Category Estimated Useful Life Machinery and equipment 5 years Computers and office equipment 3- 5 years Furniture and fixtures 7 years Leasehold improvements Lesser of remaining lease term and estimated useful life F-11 Table of ContentsUpon retirement or sale, the cost of assets disposed and the related accumulated depreciation are removed from the accountsand any resulting gain or loss is recorded in the statements of operations. Intangible Assets Intangible assets that are deemed to have a definite life are amortized over their useful lives and are evaluated separately forimpairment at least annually or whenever events or circumstances indicate that the carrying amount of an asset may not berecoverable (See Note 7). Amortization of intangible assets is recognized on a straight-line basis. Restricted Cash Restricted cash represents cash held in a depository account at a financial institution to collateralize a conditional stand‑byletter of credit related to the Company’s Canton, Massachusetts facility lease agreement. Restricted cash is reported asnon‑current unless the restrictions are expected to be released in the next twelve months. Revenue Recognition Revenue for product sales is recognized when there is persuasive evidence of an arrangement, title and risk of loss havepassed to the customer, which generally occurs upon delivery; when estimated provisions for chargebacks, rebates, salesincentives and allowances, distribution service fees, and returns are reasonably determinable; and when collectability isreasonably assured. Product sales are recorded net of estimated chargebacks, rebates, sales incentives and allowances,distribution service fees, as well as estimated product returns. Beginning in the third quarter of 2017, the Company determined that it had sufficient experience with sales of Xtampza toestimate its returns at time of shipment. The Company sells its products primarily to distributors (“customers”), which in turnsell the product to pharmacies for the treatment of patients. The Company provides the right of return to its customers for alimited time before and after its expiration date. As a result of its experience to date with Xtampza sales, the Companydetermined that it can reasonably estimate the amount of future product returns. This determination has enabled theCompany to recognize revenue earlier on the sell-in method, net of a provision for estimated returns, because the Companycan record revenue once sold to the customer rather than waiting until the product is sold to the end user on a sell-throughmethod. The Company recorded a one-time $4,377 increase to revenues during the three months ended September 30, 2017as a result of the Company’s change to the sell-in method in the third quarter of 2017. The following table summarizes activity in each of the Company’s product revenue provision and allowance categories forthe year ended December 31, 2017: Rebates and Product Trade Allowances and Incentives (1) Returns (2) Chargebacks (3)Balance at December 31, 2016 $ - $ - $ -Provision related to current period sales 23,505 3,523 6,476Adjustment related to prior period sales 179 - (140)Credits/payments made (11,037) (386) (4,080)Balance at December 31, 2017 $12,647 $3,137 $2,256 (1)Rebates and discounts includes managed care rebates, government rebates, co-pay program incentives, and salesincentives and allowances. Provisions for rebates and discounts are deducted from gross revenues at the time revenuesare recognized and are included in accrued rebates, returns and discounts in the Company’s Consolidated BalanceSheets.F-12 Table of Contents (2)Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are included inaccrued rebates, returns and discounts in the Company’s Consolidated Balance Sheets. (3)Trade allowances and chargebacks includes fees for distribution service fees, prompt pay discounts, and chargebacks.Trade allowances and chargebacks are deducted from gross revenue at the time revenues are recognized and are recordedas a reduction to accounts receivable in the Company’s Consolidated Balance Sheets. Research and Development Costs Research and development costs are charged to expense as incurred and consist of costs incurred to further the Company’sresearch and development activities including salaries and employee related costs, costs associated with market research anddesign, costs associated with conducting preclinical, clinical and regulatory activities including fees paid to third‑partyprofessional consultants and service providers, costs incurred under clinical trial agreements, costs for laboratory supplies,costs to acquire, develop and manufacture preclinical study and clinical trial materials, facilities, depreciation and otherexpenses including allocated expenses for rent and maintenance of facilities. Patent Costs Costs related to filing and pursuing patent applications are recorded as selling, general and administrative expense asincurred since the recoverability of such expenditures is uncertain. Advertising and Product Promotion Costs Advertising and product promotion costs are included in selling, general and administrative expenses and were $11,019 and$16,328 in the years ended December 31, 2017 and 2016, respectively. Advertising and product promotion costs areexpensed as incurred. Stock‑Based Compensation The Company accounts for grants of stock options, restricted stock awards and restricted stock units to employees, includingmembers of the board of directors, based on their grant date fair value and recognizes compensation expense over theirvesting period. The Company estimates the fair value of stock options as of the date of grant using the Black‑Scholes optionpricing model and restricted stock awards and restricted stock units based on the fair value of the underlying common stockas determined by management or the value of the services provided, whichever is more readily determinable. Stock‑based compensation expense represents the cost of the grant date fair value of employee stock option grantsrecognized over the requisite service period of the awards (usually the vesting period) on a straight‑line basis, net ofestimated forfeitures. The expense is adjusted for actual forfeitures as they occur. Income Taxes The Company accounts for income taxes under the liability method, which requires the recognition of deferred tax assets andliabilities for the expected future tax consequences of events that have been included in the financial statements. Under thismethod, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements andtax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse.The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes theenactment date. The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than notto be realized. In making such a determination, management considers all available positive and negative evidence,including future reversals of existing taxable temporary differences, projected future taxable income, tax‑planningF-13 Table of Contentsstrategies and the absence of carryback available from results of recent operations. If management determines that theCompany would be able to realize its deferred tax assets in the future, in excess of its net recorded amount, managementwould make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions on the basis of a two‑step process whereby (i) management determines whetherit is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) forthose tax positions that meet the more likely than not recognition threshold, management recognizes the largest amount oftax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. TheCompany will recognize interest and penalties related to uncertain tax positions within income tax expense. Any accruedinterest and penalties will be included within the related tax liability. As of December 31, 2017 and 2016, the Company hadno accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’sstatements of operations. Net Loss per Common Share Basic net loss per common share is calculated by dividing the net loss attributable to common shareholders by theweighted‑average number of shares of common stock outstanding during the period, without consideration for potentiallydilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common shareholders bythe weighted‑average number of shares of common stock and potentially dilutive securities outstanding for the period. Forpurposes of the diluted net loss per share calculation, stock options, warrants, redeemable convertible preferred stock andunvested restricted stock are considered potentially dilutive securities. Because the Company has reported a net loss for theyears ended December 31, 2017, 2016 and 2015, diluted net loss per common share is the same as basic net loss per commonshare for those periods. Diluted earnings per share is computed using the more dilutive of (i) the two‑class method, or (ii) the if‑converted method.The Company allocates earnings first to preferred shareholders based on dividend rights and then to common and preferredshareholders based on ownership interests. The weighted‑average number of common shares included in the computation ofdiluted earnings (loss) gives effect to all potentially dilutive common equivalent shares, including outstanding stockoptions, warrants, convertible redeemable preferred stock and the potential issuance of stock upon the conversion of theCompany’s convertible notes. Common stock equivalent shares are excluded from the computation of diluted earnings (loss)per share if their effect is antidilutive. Recently Issued Accounting Pronouncements In August 2015, FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of theEffective Date ("ASU 2015-14"). ASU 2015-14 defers by one year the effective date of ASU No. 2014-09, Revenue fromContracts with Customers ("ASU 2014-09"). The deferral results in ASU 2014-09 being effective for fiscal years, and interimperiods within those fiscal years, beginning after December 15, 2017. The main provision of ASU 2014-09 is to recognizerevenue when control of the goods or services transfers to the customer, as opposed to the existing guidance of recognizingrevenue when the risks and rewards transfer to the customer. Companies may use either a full retrospective or a modifiedretrospective approach to adopt ASU 2014-09. The Company adopted ASU 2014-09 effective January 1, 2018, using themodified retrospective approach. Prior periods were not retrospectively adjusted. The implementation of this guidance didnot have a material impact on its consolidated financial statements for the reasons discussed in detail below. Currently, the Company’s only source of revenue is derived through the sales of Xtampza. The Company sells its productsprimarily to customers, which in turn sell the product to pharmacies for the treatment of patients. Under current GAAP,revenue for product sales is recognized when there is persuasive evidence of an arrangement, title and risk of loss have passedto the customer, which generally occurs upon delivery, and when estimated provisions for chargebacks, rebates, salesincentives and allowances, distribution service fees, and returns are reasonably determinable, and when collectability isreasonably assured. Product sales are recorded net of estimated chargebacks, rebates, sales incentives and allowances,distribution service fees, as well as estimated product returns. Beginning in the third quarter of 2017, the Companydetermined that it had sufficient experience with sales of Xtampza to estimate its returns at time of shipment,F-14 Table of Contentsresulting in the Company recognizing revenue once sold to customers. Under Topic 606, revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurswhen control of the promised products or services is transferred to customers. Revenue is measured as the amount ofconsideration the Company expects to receive in exchange for transferring products or services to a customer (“transactionprice”). Incidental items that are immaterial in the context of the contract are recognized as expense. To the extent that thetransaction price includes variable consideration, the Company is required to estimate the amount of variable considerationthat should be included in the transaction price utilizing the expected value method or most likely amount method to whichthe Company expects to be entitled. Variable consideration is included in the transaction price if, in the Company’sjudgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimatesof variable consideration and the determination of whether to include estimated amounts in the transaction price are basedlargely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted)that is reasonably available. Sales taxes and other taxes collected on behalf of third parties are excluded from revenue. All ofthe Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time.Revenue will be recognized at the time the related performance obligation is satisfied by transferring control of a promisedgood or service to a customer. As a result of the considerations discussed above, the Company concluded that it had sufficient information to conclude thatthe transaction price was fixed or determinable under current GAAP and would record revenue once sold to customers undereither Topic 605 or Topic 606. The Company determined that the cumulative effect adjustment will have an immaterialimpact to the Company’s opening balance of retained earnings. The Company’s adoption of ASU 2014-09 did not have amaterial impact on the Company’s consolidated financial position, results of operations, equity or cash flows as of theadoption date or for periods beginning January 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 most significantly impacts lesseeaccounting and disclosures. First, this guidance requires lessees to identify arrangements that should be accounted for asleases. Under ASU 2016-02, for lease arrangements exceeding a 12-month term, a right-of-use asset and lease obligation isrecorded by the lessee for all leases, whether operating or financing, while the income statement will reflect lease expense foroperating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existingleases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the dateof adoption. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leasestoday. In addition, ASU 2016-02 requires the use of the modified retrospective method, which will require adjustment to allcomparative periods presented in the consolidated financial statements. This guidance is effective for public companies forfiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted forall entities. The Company has not chosen early adoption for this ASU and is currently evaluating its effect on the Company’sconsolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, and inNovember 2016, the FASB issued ASU 2016-18, Restricted Cash. The amendments in these updates are effective for publicbusiness entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. TheCompany will adopt these standards in the first quarter of 2018 using the retrospective transition method as required withrespect to each period presented. The Company does not expect the adoption of these standards to have a material impact onits consolidated financial statements for the years ended December 31, 2017 or December 31, 2016. 3. NET LOSS PER COMMON SHAREFor the years ended December 31, 2017, 2016 and 2015, the securities discussed below were anti‑dilutive due to the netlosses in those periods and, therefore, the number of shares used to compute basic and diluted earnings per share are the samefor of those periods.F-15 Table of ContentsThe following table presents the computations of basic and dilutive net loss per share: Years ended December 31, 2017 2016 2015Net loss$(74,865) $(94,176) $(27,255)Extinguishment of preferred stock - see Note 11 — — 31,806Accretion and dividends of prior preferred stock - See Note 11 — — (23,327)Accretion and dividends of Series D preferred stock — — (1,245)Loss attributable to common shareholders — basic and diluted$(74,865) $(94,176) $(20,021)Weighted-average number of common shares used in net loss per share -basic and diluted 30,265,262 24,262,945 13,542,282Loss per share - basic and diluted$(2.47) $(3.88) $(1.48) The following potentially dilutive securities outstanding have been excluded from the computations of dilutedweighted‑average shares outstanding because such securities have an antidilutive impact due to losses reported (in commonstock equivalent shares): Years ended December 31, 2017 2016 2015Outstanding stock options3,037,690 2,326,801 1,452,149Warrants2,445 2,445 2,445Unvested restricted stock31,943 82,512 75,718Restricted stock units218,872 41,741 — (1) - Includes shares of unvested restricted stock remaining from the early exercise of stock options. 4. INVENTORY Inventory consisted of the following: As of December 31, As of December 31, 2017 2016Raw materials $616 $294Work in process 322 67Finished goods 875 955Total inventory $1,813 $1,316 As of December 31, 2017, the aggregate charges to date related to excess inventory were immaterial. These expenses wererecorded as a component of cost of product revenues. F-16 (1)Table of Contents5. PREPAID EXPENSES AND OTHER CURRENT ASSETSPrepaid expenses and other current assets consisted of the following: As of December 31, 2017 2016 Prepaid regulatory fees $1,434 $512 Prepaid development costs 526 485 Prepaid insurance 310 328 Other prepaid expenses 279 276 Other current assets 456 304 Prepaid expenses and other current assets $3,005 $1,905 6. PROPERTY AND EQUIPMENTProperty and equipment consisted of the following: As of December 31, 2017 2016 Machinery and equipment $1,447 $863 Computers and office equipment 702 590 Leasehold improvements 700 700 Construction-in-process 528 100 Furniture and fixtures 117 117 Total property and equipment 3,494 2,370 Less: accumulated deprecation (1,668) (1,332) Property and equipment, net $1,826 $1,038 Depreciation expense related to property and equipment amounted to $336, $258 and $171 for the years endedDecember 31, 2017, 2016 and 2015, respectively. 7. INTANGIBLE ASSETS In May 2016, the Company entered into an agreement with BioDelivery Sciences International, Inc. (“BDSI”) to license therights to develop, manufacture, and commercialize Onsolis® (fentanyl buccal soluble film), or Onsolis, in the United States.Onsolis is a Transmucosal Immediate-Release Fentanyl (“TIRF”) film indicated for the management of breakthrough pain incertain cancer patients. During the term of the License Agreement, milestone payments in the aggregate amount of $21,000may become payable by the Company subject to the satisfaction of certain commercialization, intellectual property, and netsales milestones, including $4,000 upon the first commercial sale of the product in the U.S. Finally, the Company will berequired to pay royalties in the upper teens based on annual net sales of the product in the U.S. As of December 31, 2017, theCompany has not satisfied the criteria of any milestones or royalties payable under the License Agreement and has notrecognized any liabilities for such milestones or royalties payable in its consolidated financial statements. During the year ended December 31, 2016, the Company made an upfront payment of $2,500 and was contractuallycommitted to reimburse BDSI up to a maximum of $2,000 for its out-of-pocket expenses incurred in connection with themanufacturing transfer. On December 8, 2017, the Company, after a review of its product portfolio, provided written notice toBDSI of termination of the License and Development Agreement. The termination will be effective pursuant to the terms ofsuch agreement on March 8, 2018. Upon such termination of the License Agreement, the Company’s rights to develop andcommercialize Onsolis will revert to BDSI. As a result of this notice of termination, the Company determined that thecarrying amount of the intangible asset was not recoverable and that the carrying amount exceeded its fair value. As such, animpairment loss of $1,845 was recognized and included as a component of sales, general andF-17 Table of Contentsadministrative expense during the year ended December 31, 2017 and the net intangible asset is zero as of December 31,2017. 8. ACCRUED EXPENSESAccrued expenses consisted of the following: As ofDecember 31, As ofDecember 31, 2017 2016 Accrued bonuses$2,940 $2,210 Accrued incentive compensation 1,790 1,160 Accrued payroll and related benefits 1,382 1,217 Accrued sales and marketing 624 801 Accrued development costs 517 2,485 Accrued audit and legal 405 416 Accrued interest 6 18 Accrued other operating costs 877 572 Total accrued expenses$8,541 $8,879 9. COMMITMENTS AND CONTINGENCIESLegal Proceedings Xtampza Litigation The Company filed the NDA for Xtampza as a 505(b)(2) application, which allows the Company to reference data from anapproved drug listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known asthe Orange Book), in this case OxyContin OP. The 505(b)(2) process requires that the Company certifies to the FDA andnotify Purdue, as the holder of the NDA and any other Orange Book-listed patent owners, that the Company does not infringeany of the patents listed for OxyContin OP in the Orange Book, or that the patents are invalid. The Company made suchcertification and provided such notice on February 11, 2015 and such certification documented why Xtampza does notinfringe any of the 11 Orange Book listed patents for OxyContin OP, five of which have been invalidated in courtproceedings. Under the Hatch-Waxman Act of 1984, Purdue had the option to sue us for infringement and receive a stay of upto 30 months before the FDA could issue a final approval for Xtampza ER, unless the stay was earlier terminated. Purdue exercised its option and elected to sue the Company for infringement in the District of Delaware on March 24, 2015asserting infringement of three of Purdue’s Orange Book-listed patents (Patent Nos. 7,674,799, 7,674,800, and 7,683,072)and a non-Orange Book-listed patent (Patent No. 8,652,497), and accordingly, received a 30-month stay of FDA approval. The Delaware court transferred the case to the District of Massachusetts. After the Company filed a partial motion forjudgment on the pleadings relating to the Orange Book-listed patents, the District Court of Massachusetts ordered judgmentin the Company’s favor on those three patents, and dismissed the claims asserting infringement of those patents withprejudice. Upon dismissal of those claims, the 30-month stay of FDA approval was lifted. As a result, the Company was ableto obtain final approval for Xtampza ER and launch the product commercially. In November 2015, Purdue filed a follow-on suit asserting infringement of another patent, Patent No. 9,073,933, which waslate-listed in the Orange Book and therefore could not trigger any stay of FDA approval. In June 2016, Purdue filed anotherfollow-on suit asserting infringement of another non-Orange Book listed patent, Patent No. 9,155,717. In April 2017, Purduefiled another follow-on suit asserting infringement of another patent, Patent No. 9,522,919, which was late-F-18 Table of Contentslisted in the Orange Book and therefore could not trigger any stay of FDA approval. Then, in September 2017, Purdue filedanother follow-on suit asserting infringement of another non-Orange Book listed patent, Patent No. 9,693,961. In October 2017, and in response to the filing of the Company’s Supplemental NDA (“sNDA”) seeking to update the drugabuse and dependence section of the Xtampza label, Purdue filed another suit asserting infringement of the ʼ933 and ʼ919patent. The Company filed a motion to dismiss that action, and the Court granted its motion on January 16, 2018. The current suits have been consolidated by the District of Massachusetts, where Purdue continues to assert infringement offive patents: the ʼ497 patent, the ʼ933 patent, the ʼ717 patent, the ʼ919 patent, and the ʼ961 patent. None of these suits areassociated with any stay of FDA approval for the Xtampza drug product. Purdue has made a demand for monetary relief buthas not quantified their alleged damages. Purdue has also requested a judgment of infringement and an injunction on the saleof the Company’s products accused of infringement. The Company has denied all claims and seeks a judgment that thepatents are invalid and/or not infringed by the Company; the Company is also seeking a judgment that the case isexceptional, with an award to the Company of its fees for defending the case. The parties are in the early stages of fact discovery. Written discovery has commenced with depositions expected tocommence during the second half of 2018. A claim construction and summary judgment hearing was held on June 1, 2017.On November 21, 2017, the Court issued its claim construction ruling, construing certain claims of the ʼ933, ʼ497, and ʼ717patents. At this time, the Motion for Summary Judgment, which asserted that claims of the ’933, ’497, and ’717 patents areinvalid and not infringed, remains pending. The Company is not able to predict with certainty when the Court will decide theCompany’s motion. The Scheduling Order has been amended to stay the close of fact discovery until after the Court decidesour Motion for Summary Judgment. No trial date has been scheduled. The Company is, and plans to continue, defending this case vigorously. At this stage, the Company is unable to evaluate thelikelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any. Nucynta Litigation On February 7, 2018, Purdue filed a patent infringement suit against Collegium NF, LLC and Collegium Pharmaceutical, Inc.in the District of Delaware. Specifically, Purdue argues that the Company’s sale of immediate release and extended releaseNucynta infringes U.S. Patent Nos. 9,861,583, 9,867,784, and 9,872,836. Purdue has made a demand for monetary relief inthe Complaint but has not quantified its alleged damages. The Company’s response to the Complaint is currently due April9, 2018. The Company plans to defend this case vigorously. At this stage, the Company is unable to evaluate the likelihood of anunfavorable outcome or estimate the amount or range of potential loss, if any. Teva Litigation The Company filed the NDA for Xtampza as a 505(b)(2) application, which allows the Company to reference data from anapproved drug listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known asthe Orange Book), in this case OxyContin OP. The Company has twelve patents listed in the FDA Orange Book as coveringthe Company’s abuse-deterrent product and methods of using it to treat patients: Patents Nos. 7,399,488; 7,771,707;8,449,909; 8,557,291; 8,758,813; 8,840,928; 9,044,398; 9,248,195; 9,592,200; 9,682,075; 9,737,530 and 9,763,883. Teva Pharmaceuticals USA filed a Notice Letter of Patent Certification against all twelve listed patents, alleging that theywere invalid and/or not infringed by the proposed oxycodone product that is the subject of Teva’s ANDA. On February 22,2018—within the 45-day period that gives the Company a 30-month stay on FDA approval of Teva’s ANDA while theparties have an opportunity to litigate—the Company sued Teva in the District of Delaware on eleven of the patents listed inthe Orange Book. The case was assigned to the Hon. Judge Stark. F-19 Table of ContentsThe Company plans to assert and defend its intellectual property vigorously in this case. At this stage, the Company isunable to evaluate the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any. Operating LeasesThe Company leases its office and research facility in Canton, Massachusetts under a non‑cancellable operating lease (the“Canton Facility Lease”). Terms of the agreement provide for an initial two‑month rent‑free period and future rent escalation,and provide that in addition to minimum lease rental payments, the Company is responsible for a pro‑rata share of operatingexpenses and taxes. In March 2015, the Company amended its lease to include an additional 9,660 square feet of space for atotal of 19,335 square feet. In addition, the lease term was extended and now terminates on August 30, 2020. At theCompany’s election, the lease term may be extended for an additional 5-year term.Aggregate minimum annual lease commitments of the Company under its non‑cancellable operating lease as ofDecember 31, 2017 are as follows: 2018 $234 2019 241 2020 164 Total minimum lease payments $639 Rent expense under the operating lease agreement amounted to approximately $194, $182 and $112 for the years endedDecember 31, 2017, 2016 and 2015, respectively. In addition, the Company maintained a stand‑by letter of credit inconnection with the Canton Facility Lease of $97 at December 31, 2017 and December 31, 2016. This amount is classified asrestricted cash in the Consolidated Balance Sheets.Amounts provided by the lessor related to tenant improvements are considered inducements to enter into the lease. TheCompany has recorded these costs in the Consolidated Balance Sheets as leasehold improvements, with the correspondingliabilities as deferred lease incentive and lease note payable. These liabilities are amortized on a straight‑line basis over theterm of the lease. 10. TERM LOAN PAYABLEOn August 28, 2012, the Company entered into a loan agreement (“Original Term Loan”) with Silicon Valley Bank (“SVB”)to borrow up to a maximum amount of $1,000. In August 2012, October 2012 and February 2013, the Company borrowed$250, $250 and $500, respectively. The Original Term Loan bore interest at a rate per annum of 2.25% above the prime ratefixed at the time of advance of the Original Term Loan (5.50%). The Original Term Loan provided for interest‑only paymentsfor the first 12 months based on the date of each borrowing, and, thereafter, 36 monthly payments of principal and interest. Inconnection with the Original Term Loan, the Company granted SVB a warrant to purchase 11,850 shares of common stock atan exercise price of $0.07 per share (See Note 11).In January 2014, the Original Term Loan was amended (“Amendment No. 1”) to provide for the following: borrowings of upto $6,000, repayment in full of the Original Term Loan balance outstanding, and an adjustment of the variable interest ratefrom 2.25% above the prime rate to 1.75% above the prime rate. In February 2014, the Company borrowed $2,000. Theproceeds from the initial borrowing were used to pay down the Original Term Loan balance outstanding resulting in theCompany receiving $1,056. Borrowings under Amendment No. 1 bore interest at a rate of 5.0%. Amendment No. 1 providedfor interest‑only payments for the first 12 months based on the date of each borrowing, and thereafter, 36 monthly paymentsof principal and interest. In connection with Amendment No. 1, the Company granted to SVB a warrant to purchase 14,430shares of common stock with an exercise price of $0.05 per share (See Note 11).In August 2014 the Original Term Loan was further amended (“Amendment No. 2”) to provide for total borrowings of up to$8,000. In August 2014 and September 2014 the Company drew down $3,000 and $3,000, respectively. PursuantF-20 Table of Contentsto Amendment No. 2, interest‑only payments are to be made for the first 12 months based on the date of each borrowing;thereafter, 36 monthly payments of principal and interest are to be made. Borrowings under Amendment 2 bear interest at therate of 5.0%. The warrant agreement contains a performance clause that the Company met, resulting in additional financingextended and issuance of a warrant to purchase 86,580 additional shares of common stock with an exercise price of $0.05 pershare (See Note 11).In September 2014, the Original Term Loan was further amended (“Amendment No. 3”) to extend the loan draw period.In November and December of 2014 the Company entered into a Note Purchase Agreement (the “Bridge Notes”) allowing forthe issuance of $5,000 of convertible promissory notes to a group of investors (the “Holders”) bearing interest at a rate perannum of 6.0%. The Holders are related parties of the Company. In March 2015, in connection with the Series D convertiblepreferred stock financing, the Bridge Notes converted into 4,166,667 shares of Series D convertible preferred stock. Upon theconversion, the Company recognized a gain on extinguishment of $91. The accrued interest on the Bridge Notes waswaived. In June 2015, SVB exercised all of its warrants. As of December 31, 2017, future payments under the Company’s term loan are $1,479 and are due in the year endedDecember 31, 2018. 11. EQUITYCommon StockAs of December 31, 2017 and 2016, the Company had reserved the following shares of common stock for the issuance ofcommon stock for the exercise of stock options and warrants and the issuance of shares under the 2015 Employee StockPurchase Plan: As of December 31, 2017 2016Options to purchase common stock 4,153,055 3,348,310Employee stock purchase plan 547,276 364,476Warrants 2,445 2,445Total 4,702,776 3,715,231 WarrantsIn November 2010, the Company issued a warrant to Comerica Bank. The warrant represents the right to purchase 2,445shares of common stock with an exercise price of $12.27. The warrant expires in May 2018. As of December 31, 2017 and 2016, the 2,445 warrants issued to Comerica Bank were the Company’s only outstandingwarrants.Series A, B, C and Series D Redeemable Convertible Preferred StockAs of December 31, 2014, 54,481,000 shares of preferred stock were authorized, designated as Series A, Series B and Series CPreferred Stock of which 9,232,334, 27,324,237 and 8,658,008 were issued and outstanding, respectively.In March 2015, the Company sold 41,666,667 shares of Series D convertible preferred stock for aggregate consideration of$50,000, comprised of $45,000 in cash and conversion of $5,000 in convertible notes with related parties. The convertiblenotes converted into 4,166,667 shares of Series D convertible preferred stock. The accrued interest on the convertible noteswas waived. In this financing, the mandatory conversion for all series of preferred stock was modifiedF-21 Table of Contentsso as to occur upon an initial public offering with gross proceeds in excess of $50,000. 12. STOCK‑BASED COMPENSATIONStock Options, Restricted Stock Awards and Restricted Stock UnitsIn May 2015, the Company adopted the Amended and Restated 2014 Stock Incentive Plan (the “Plan”), under which anaggregate of 2,700,000 shares of common stock were authorized for issuance to employees, officers, directors, consultantsand advisors of the Company, plus an annual increase to be added on the first day of each fiscal year until the expiration ofthe Plan equal to 4% of the total number of outstanding shares of common stock on December 31 of the immediatelypreceding calendar year (or a lower amount as otherwise determined by the board of directors prior to January 1). As ofDecember 31, 2017, 1,134,495 shares of common stock were available for issuance pursuant to the Plan. The Plan providesfor granting of both Internal Revenue Service qualified incentive stock options (“ISOs”) and non‑qualified options (“NQs”),restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). Stock options generally vest over a four year period ofservice; however, certain options contain performance conditions. The options generally have a ten year contractual life and,upon termination, vested options are generally exercisable between one and three months following the termination date,while unvested options are forfeited immediately.Stock option activity under the Plan is summarized as follows: Weighted- Weighted- Average Average Remaining Aggregate ExercisePrice Contractual Intrinsic Shares per Share Term (inyears) Value Outstanding at December 31, 2016 2,326,801 $13.07 8.7 $7,927 Granted 1,380,123 12.30 Exercised (158,801) 4.63 Cancelled (510,433) 14.04 Outstanding at December 31, 2017 3,037,690 $13.00 8.4 $16,829 Exercisable at December 31, 2017 1,025,252 $12.86 7.6 $5,871 Vested and expected to vest at December 31, 2017 2,920,652 $13.00 8.3 $16,183 The total intrinsic value of stock options exercised for the year ended December 31, 2017 was $1,100. As ofDecember 31, 2017, the unrecognized compensation cost related to outstanding options was $14,829, and is expected to berecognized as expense over approximately 2.5 years.As of December 31, 2017, the weighted-average grant date fair value of vested options was $8.69. The weighted-averagegrant date fair value of options granted during the year ended December 31, 2017 was $7.86. The weighted-average grantdate fair value of options that vested during the year ended December 31, 2017 was $9.62.Restricted stock awards under the Plan are summarized as follows: Weighted-Average Purchase Price Shares per ShareUnvested at December 31, 2016 43,265 $5.73Granted — —Vested (32,449) 5.73Unvested at December 31, 2017 (1) 10,816 $5.73(1) Excludes 21,127 shares of unvested restricted stock remaining from the early exercise of stock options as ofDecember 31, 2017.F-22 ststTable of ContentsThe total fair value of restricted stock awards vested during the years ended December 31, 2017, was $186. As ofDecember 31, 2017, the unrecognized compensation cost related to restricted stock awards was $47, and is expected to berecognized as expense over approximately 0.2 years. Restricted stock units under the Plan are summarized as follows: Weighted-Average Shares Grant Date FairValueOutstanding at December 31, 2016 41,741 $16.15Granted 211,018 12.45Settled (14,757) 16.15Forfeited (19,130) 15.52Outstanding at December 31, 2017 218,872 $12.64As of December 31, 2017, the unrecognized compensation cost related to restricted stock units was $2,218, and is expectedto be recognized as expense over approximately 3.1 years. Employee Stock Purchase Plan The Company’s 2015 Employee Stock Purchase Plan allows employees as designated by the Company’s Board of Directorsto purchase shares of the Company’s common stock. The purchase price is equal to 85% of the lower of the closing price ofour common stock on (1) the first day of the purchase period or (2) the last day of the purchase period. The first purchaseperiod commenced in the year ended December 31, 2016. The expense for the years ended December 31, 2017 and 2016 was$380 and $457, respectively. Stock‑Based Compensation ExpenseThe Company granted stock options to employees for the years ended December 31, 2017, 2016 and 2015. The Companyestimates the fair value of stock options as of the date of grant using the Black‑Scholes option pricing model and restrictedstock awards and restricted stock units based on the fair value of the award. Stock options and restricted stock issued tonon‑board member, non‑employees are accounted for using the fair value approach and are subject to periodic revaluationover their vesting terms.Stock‑based compensation for all stock options, restricted stock awards, restricted stock units and for the employee stockpurchase plan are reported within: Year Ended December 31, 2017 2016 2015Research and development expenses$888 $638 $223Selling, general and administrative expenses 7,057 5,149 1,986Total stock-based compensation expense$7,945 $5,787 $2,209 The weighted‑average assumptions used in the Black‑Scholes option pricing model to determine the fair value of theemployee stock option grants were as follows: Year ended December 31, 2017 2016 2015Risk-free interest rate2.0% 1.5% 1.7%Volatility71.0% 76.3% 77.0%Expected term (years)6.01 6.02 6.20 Expected dividend yield —% —% —%F-23 Table of ContentsRisk‑free Interest Rate. The risk‑free interest rate assumption is based on observed interest rates appropriate for the expectedterm of the stock option grants.Expected Volatility. Due to the Company’s limited operating history and lack of company‑specific historical or impliedvolatility, the expected volatility assumption is based on historical volatilities of a peer group of similar companies whoseshare prices are publicly available. The peer group was developed based on companies in the biotechnology andpharmaceutical industries. In evaluating similarity, we consider factors such as industry, stage of life cycle and size.Expected Term. The expected term represents the period of time that options are expected to be outstanding. Because theCompany does not have historical exercise behavior, through December 31, 2017 it determined the expected life assumptionusing the simplified method, which is an average of the contractual term of the option and its vesting period.Expected Dividend Yield. The expected dividend yield assumption is based on the fact that the Company has never paidcash dividends and has no present intention to pay cash dividends. 13. INCOME TAXES For the years ended December 31, 2017, 2016 and 2015, the Company did not record a current or deferred income taxexpense or (benefit) due to current and historical losses incurred by the Company. The Company's losses before income taxesconsist solely of losses from domestic operations. The enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017, as further described below, resulted in aremeasurement of the Company’s net deferred tax asset due to the reduction in corporate rates from 35% to a 21% flat tax,which is included in the Company’s 2017 rate reconciliation. A reconciliation of income tax expense (benefit) computed atthe statutory federal income tax rate to income taxes as reflected in the consolidated financial statements is as follows: As of December 31, 2017 2016 2015 Federal income tax expense at statutory rate 34.00% 34.00% 34.00%(Increase) decrease income tax (benefit) resulting from: State income tax, net of federal benefit 3.93 3.43 5.29 Permanent differences (2.49) (1.45) (1.70) U.S. - TCJA (43.32) — — Research and development credit 0.53 0.27 0.89 Change in valuation allowance 7.35 (36.25) (38.48) Effective income tax rate 0.00% 0.00%0.00% Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement andincome tax purposes. The significant components of the Company’s deferred tax assets and liabilities are comprised of thefollowing: As of December 31, 2017 2016 2015 Deferred tax assets: U.S. and state net operating loss carryforwards $62,715 $71,049 $38,405 Research and development credits 3,892 3,712 3,421 Accruals and other 3,615 1,541 144 Depreciation and amortization 145 261 94 Total deferred tax assets 70,367 76,563 42,064 Valuation allowance (70,367) (76,563) (42,064) Net deferred tax assets $ — $ — $ — F-24 Table of Contents The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. As ofDecember 31, 2017 and 2016, based on the Company's history of operating losses, the Company has concluded that it is notmore likely than not that the benefit of its deferred tax assets will be realized. Accordingly, the Company has provided a fullvaluation allowance for deferred tax assets as of December 31, 2017 and 2016. The valuation allowance decreased $6,196primarily due to the enacted change in the corporate income tax rate from the enactment of TCJA signed into law inDecember 2017. The valuation allowance increased $34,499 during the years ended December 31, 2016 due primarily to netoperating losses generated. As of December 31, 2017, 2016, and 2015, the Company had U.S. federal net operating loss carryforwards of $249,511,$190,926, and $104,888, respectively, which may be available to offset future income tax liabilities. TCJA will generallyallow losses incurred after 2017 to be carried over indefinitely, but will generally limit the NOL deduction to the lesser of theNOL carryover or 80% of a corporation’s taxable income (subject to Code Section 382/383). Also there will be no carrybackfor losses incurred after 2017. Losses incurred prior to 2018 will generally be deductible to the extent of the lesser of acorporation’s NOL carryover or 100% of a corporation’s taxable income, and be available for twenty years from the periodthe loss was generated. The Company has not finalized its review of the impact of TCJA on the NOL rules, and the impact, ifany, to the Company’s ability to utilize and carryover net operating losses. As of December 31, 2017, 2016, and 2015, the Company also had U.S. state net operating loss carryforwards of $205,074,$145,902, and $59,875 respectively, which may be available to offset future income tax liabilities and expire at various datesthrough 2037. As of December 31, 2017, 2016 and 2015, the Company had federal research and development tax credit carryforwards ofapproximately $3,426, $3,367, and $3,110, respectively, available to reduce future tax liabilities which expire at variousdates through 2037. As of December 31, 2017, 2016 and 2015 the Company had state research and development tax creditcarryforwards of approximately $589, $522, and $469, respectively, available to reduce future tax liabilities which expire atvarious dates through 2032. The TCJA was enacted in December 2017. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35percent to 21 percent beginning in 2018. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which providesguidance on accounting for enactment effects of the TCJA. SAB 118 provides a measurement period of up to one year fromthe TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to theextent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine areasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine aprovisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of theprovisions of the tax laws that were in effect immediately before the enactment of the TCJA. In connection with the Company’s initial analysis of the impact of the enactment of the TCJA, the Company recorded no taxexpense. For various reasons that are discussed more fully below, including the issuance of additional technical andinterpretive guidance, the Company has not completed its accounting for the income tax effects of certain elements of theTCJA. However, with respect to the following, the Company was able to make reasonable estimates of the TCJA’s effects: Remeasurement of deferred tax assets/liabilities and other impacts: The Company remeasured its deferred tax assets andliabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent under theTCJA. The impact of the remeasurement of the Company’s deferred tax assets and liabilities is included in the ratereconciliation above. Code Section 162(m) Limitations: Employers can generally deduct reasonable compensation for personal services as anordinary and necessary business deduction. Internal Revenue Code Section 162(m) limits the ability to deduct compensationexpenses of certain “covered” employees of a publicly held corporation. TCJA has modified these rules by expanding thedefinition of “covered” employee and repealed the performance-based compensation and commissions exceptions of Section162(m). The Company is still analyzing this issue to determine what impact, if any, this changeF-25 Table of Contentsmay have on the Company’s ability to deduct performance-based compensation to its employees, and at this time cannotdetermine a provisional estimate to be included in its financial statements in accordance with SAB 118. The Company is still analyzing certain aspects of the TCJA, considering additional technical guidance, and refining itscalculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred taxamounts. Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to reviewand possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax creditcarryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownershipinterest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 ofthe Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes thatcan be utilized annually to offset future tax liabilities. The amount of the annual limitation is determined based on the valueof the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitationin future years. The Company has completed numerous financings as well as its IPO since its inception which may haveresulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a changein control in the future. The Company files income tax returns in the United States and in several states. The federal and state income tax returns aregenerally subject to tax examinations for the tax years ended December 31, 2014 through December 31, 2017. To the extentthe Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted uponexamination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period. The Company’s2015 return is currently under examination with the IRS, and as a result the IRS is challenging certain positions on its returnthat may result in a decrease to the Company’s NOL carryover. The Company is protesting the matter with the IRS, but hasreduced the NOL deferred tax asset for the amount of contested deductions. This is included in the tabular rollforward belowof gross unrecognized tax benefits. Since a full valuation allowance has been provided against the Company’s net operatingloss carryover, the reduction in the gross deferred tax asset established for net operating losses does not result in any financialstatement impact. For all years through December 31, 2017, the Company generated research credits but has not conducted a study todocument the qualified activities. This study may result in an adjustment to the Company’s research and development creditcarryforwards. The Company has reduced its deferred tax asset for its estimate of credits that could be reduced, and that isincluded in the tabular rollforward of uncertain tax positions. Since a full valuation allowance has been provided against theCompany’s research and development credits the reduction in the gross deferred tax asset established for the research anddevelopment credit carryforwards does not result in any financial statement impact. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (UTB) is as follows: Federal, State and Foreign Tax As of December 31, 2017 2016Gross UTB Balance at January 1 $ — $ —Additions based on tax positions related to the current year 57 —Additions for tax positions of prior years 1,307 —Reductions for tax positions of prior years — —Settlements — —Reductions due to lapse of applicable statute of limitations — — Gross UTB Balance at December 31 1,364 — Net UTB impacting the effective tax rate at December 31 (included in thechange in the valuation allowance in rate reconciliation) $680 $ — F-26 Table of Contents14. EMPLOYEE BENEFITSThe Company has a retirement savings plan, which is qualified under section 401(k) of the Code, for its employees. The planallows eligible employees to defer, at the employee’s discretion, pretax compensation up to the Internal Revenue Serviceannual limits. Employees become eligible to participate starting on the first day of the first full month of employment. TheCompany is not required to contribute to this plan. Total expense for contributions made by the Company for the yearsended December 31, 2017, 2016 and 2015 was $969, $613 and $44 respectively. 15. UNAUDITED QUARTERLY OPERATING RESULTSThe following is a summary of unaudited quarterly results of operations for the years ended December 31, 2017 and 2016: First Second Third FourthYear ended December 31, 2017 Quarter Quarter Quarter (1) QuarterProduct revenues, net $2,172 $3,560 $11,950 $10,794 Costs and expenses Cost of product revenues 371 577 553 1,094Research and development 2,130 2,179 2,069 2,194Selling, general and administrative 22,847 22,062 22,758 25,089Total costs and expenses 25,348 24,818 25,380 28,377 Loss from operations $(23,176) $(21,258) $(13,430) $(17,583)Interest income (expense), net 98 137 167 180Net loss $(23,078) $(21,121) $(13,263) $(17,403) Weighted-average shares - basic and diluted 29,350,268 29,441,514 29,753,043 32,485,572Loss per share - basic and diluted $(0.79) $(0.72) $(0.45) $(0.54) First Second Third FourthYear ended December 31, 2016 Quarter Quarter Quarter QuarterProduct revenues, net $ - - 408 1,303 Costs and expenses Cost of product revenues - - 29 184Research and development 4,062 4,301 3,254 3,331Selling, general and administrative 11,525 20,173 23,567 25,367Total costs and expenses 15,587 24,474 26,850 28,882 Loss from operations $(15,587) $(24,474) $(26,442) $(27,579)Interest (expense) income, net (66) (46) (2) 20Net loss $(15,653) $(24,520) $(26,444) $(27,559) Weighted-average shares - basic and diluted 23,130,153 23,417,378 23,460,340 27,100,231Net loss $(0.68) $(1.05) $(1.13) $(1.02) (1) - In the third quarter of 2017, the Company recorded a one-time $4,377 increase to revenues as a result of the Company’s change to the sell-in method in the third quarter of 2017. 16. SUBSEQUENT EVENTS Consummation of Commercialization Agreement In December 2017, the Company and its wholly owned subsidiary, Collegium NF, LLC (“Collegium NF”), entered into aCommercialization Agreement with Depomed, Inc. (“Depomed”), pursuant to which Depomed agreed to grant a sublicense ofcertain of its intellectual property related to Nucynta ER and IR products (the “Nucynta Products”) to Collegium NF forcommercialization of the Nucynta Products in the United States, the District of Columbia and Puerto Rico. On January 9,2018 (the “Closing Date”), the parties amended the Commercialization Agreement (as amended, theF-27 Table of Contents“Commercialization Agreement”) and consummated the transactions contemplated thereby. Pursuant to the Commercialization Agreement, the Company paid a one-time non-refundable license fee (the “License Fee”)of $10,000 to Depomed at the closing of the Commercialization Transaction, plus $6,200 for transferred inventory. Duringthe term of the Commercialization Agreement and through December 2021, the Company will be required to pay (i) aminimum royalty of $135,000 per year, payable in quarterly payments of $33,750, plus (ii) 25% of annual net sales of theNucynta Products between $233,000 and $258,000, plus (iii) 17.5% of annual net sales of the Nucynta Products above$258,000. After the first anniversary of the Closing Date, the Company may terminate the Commercialization Agreement forany reason upon one (1) year prior written notice to Depomed, provided that, if the effective date of termination designatedin such notice is prior to the fourth anniversary of the Closing Date, then such termination will be contingent upon thepayment by the Company to Depomed of a termination fee in the amount of $25,000. Beginning January 2022 and for each year of the Commercialization Agreement term thereafter, the Company will continueto pay royalties on annual net sales of the Nucynta Products, but without a guaranteed minimum. The Company will pay toDepomed: (i) 58% of annual net sales of the Nucynta Products up to $233,000, payable quarterly within 45 days of the end ofeach calendar quarter, plus (ii) 25% of annual net sales of the Nucynta Products between $233,000 and $258,000, plus (iii)17.5% of annual net sales of the Nucynta Products above $258,000. If Depomed or its contract manufacturers are unable todeliver a certain percentage of ordered quantities for a period of two months or longer in calendar year 2018, then Depomedmay be required to make a payment (or offset the minimum royalties) to ensure that the Company receives a minimum levelof gross profit of $40,000 for 2018 for the Nucynta Products. Consent and Sixth Amendment to Loan and Security Agreement In connection with, and as a condition to, consummation of the transactions contemplated by the CommercializationAgreement, the Company entered into a Consent and Sixth Amendment to Loan and Security Agreement (the “Consent andAmendment”) with SVB to amend the Original Term Loan. The Consent and Amendment provided the Company with a newterm loan facility in an original principal amount of $11,500 (the “New Term Loan”), which replaces the Company’s existingterm loan facility (the “Existing Term Loan”) and the proceeds of which were used by the Company to finance certainpayment obligations under the Commercialization Agreement and to repay the balance of the Existing Term Loan. TheConsent and Amendment also provided SVB’s consent with respect to transactions contemplated by the CommercializationAgreement, including the delivery by SVB of a standby letter of credit in an aggregate amount of $33,750. The New Term Loan bears interest at a rate per annum of 0.75% above the prime rate (as defined in the Consent andAmendment). The Company will repay the New Term Loan in equal consecutive monthly installments of principal plusmonthly payments of accrued interest, commencing in July 2019, provided that, if the Company achieves EBITDA (asdefined in the Consent and Amendment) in excess of $2,500 for two (2) consecutive calendar quarters prior to June 2019,such payments will commence in January 2020. All outstanding principal and accrued and unpaid interest under the NewTerm Loan, and all other outstanding obligations with respect to the New Term Loan, are due and payable in full inDecember 2022. The Company may prepay the New Term Loan, in full but not in part, with a prepayment fee of (i) 3.0% ofthe outstanding principal balance prior to the first anniversary of the Consent and Amendment, (ii) 2.0% of the outstandingprincipal balance following the first anniversary of the Consent and Amendment and prior to the second anniversary of theConsent and Amendment and (iii) 1.0% of the outstanding principal balance following the second anniversary of theConsent and Amendment, plus, in each case, a final payment fee of $719. Under the Consent and Amendment, the Company will be required to maintain a liquidity ratio of at least 2.0 to 1.0. Anyamounts outstanding during the continuance of any event of default under the Consent and Amendment will bear additionalinterest at the per annum rate of 5.0%. F-28 Table of ContentsINDEX TO EXHIBITSExhibit NumberExhibit Description 10.27*Commercialization Agreement, by and among, Depomed, Inc., Collegium Pharmaceutical, Inc.and Collegium NF, LLC, dated as of December 4, 2017.10.28Amendment dated January 9, 2018 to Commercialization Agreement by and among Depomed, Inc. andCollegium Pharmaceutical, Inc. and Collegium NF, LLC.21.1Subsidiaries of Collegium Pharmaceutical, Inc.23.1Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.23.2Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.31.1Certifying Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of2002.31.2Certifying Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of2002.32.1Certifying Statement of the Chief Executive Officer pursuant to Section 1350 of Title 18 of the UnitedStates Code.32.2Certifying Statement of the Chief Financial Officer pursuant to Section 1350 of Title 18 of the UnitedStates Code.101The following financial information from this Annual Report on Form 10-K for the year ended December31, 2017, formatted in XBRL: (i) Consolidated Balance Sheets as of December 31, 2017 and 2016, (ii)Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii)Consolidated Statements of Convertible Redeemable Preferred Stock and Shareholders' Equity (Deficit)for the Years Ended December 31, 2017, 2016 and 2015, (iv) Consolidated Statements of Cash Flows forthe years ended December 31, 2017, 2016 and 2015, and (v) Notes to Consolidated Financial Statements,tagged as blocks of text. * Subject to confidential treatment request.101 Table of Contents SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. COLLEGIUM PHARMACEUTICAL, INC. By: /s/ Michael T. Heffernan, R.Ph. Michael T. Heffernan, R.Ph. President and Chief Executive Officer Signature Title Date /s/ Michael T. Heffernan, R.Ph.Michael T. Heffernan, R.Ph. President and Chief ExecutiveOfficer (Principal Executive Officer)and Director March 7, 2018/s/ Paul BrannellyPaul Brannelly Executive Vice President and ChiefFinancial Officer (Principal Financialand Accounting Officer) March 7, 2018/s/ Garen G. BohlinGaren G. Bohlin Director March 7, 2018/s/ John A. Fallon, M.D.John A. Fallon, M.D. Director March 7, 2018/s/ John G. Freund, M.D.John G. Freund, M.D. Director March 7, 2018/s/ David Hirsch, M.D., Ph.D.David Hirsch, M.D., Ph.D. Director March 7, 2018/s/ Gwen MelincoffGwen Melincoff Director March 7, 2018/s/ Gino SantiniGino Santini Director March 7, 2018/s/ Theodore R. SchroederTheodore R. Schroeder Director March 7, 2018 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report hasbeen signed by the following persons in the capacities and on the dates indicated102Exhibit 10.27 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***].COMMERCIALIZATION AGREEMENTby and amongDEPOMED, INC.,COLLEGIUM PHARMACEUTICAL, INC.andCOLLEGIUM NF, LLCDated as of December 4, 2017 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. TABLE OF CONTENTS PageARTICLE 1 DEFINITIONS1ARTICLE 2 GRANTS AND TRANSFERS; CLOSING19Section 2.1 Licenses19Section 2.2 Enforcement Rights and Sublicenses20Section 2.3 Transfers21Section 2.4 Records22Section 2.5 Limitation on Competing Products23Section 2.6 Retention of Rights23Section 2.7 Negative Covenants23Section 2.8 Allocation of Purchase Price of Transferred Assets24Section 2.9 Certain Taxes24Section 2.10 Risk of Loss; Casualty25Section 2.11 Certain Costs25Section 2.12 Closing26ARTICLE 3 TRANSITION PLAN29Section 3.1 Transition Plan29Section 3.2 Manufacture and Supply Arrangements29ARTICLE 4 PRODUCT COMMERCIALIZATION35Section 4.1 Diligence35Section 4.2 Commercial Terms35Section 4.3 Representations to Customers36Section 4.4 Staffing; Training36Section 4.5 Promotional Materials; Educational Materials36Section 4.6 Medical Inquiries36Section 4.7 Trademarks37Section 4.8 Domain Names and Website37Section 4.9 Election by Depomed to Detail in the Territory37ARTICLE 5 REGULATORY AFFAIRS39Section 5.1 Authorized Agent39Section 5.2 Regulatory Approvals40Section 5.3 Compliance with Regulatory Requirements41Section 5.4 Communications with Regulatory Authorities41Section 5.5 Healthcare Compliance42Section 5.6 Advertising and Promotion Compliance42Section 5.7 Product Complaints43Section 5.8 Adverse Drug Experience Reports43Section 5.9 Recalls or Other Corrective Action44Section 5.10 Regulatory Inspections or Audits45Section 5.11 Review of Regulatory Compliance46i Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. PageSection 5.12 Assistance47ARTICLE 6 SALES AND PRICING47Section 6.1 Sales47Section 6.2 Pricing47ARTICLE 7 COMPENSATION47Section 7.1 Payment for Transferred Inventory47Section 7.2 Upfront Payment48Section 7.3 Payments on Annual Net Sales48Section 7.4 Maintenance of Records54Section 7.5 Allocation of Prepaid Business Expenses55Section 7.6 Payments55Section 7.7 Security55Section 7.8 Other Fees57ARTICLE 8 TRANSITION MATTERS57Section 8.1 Customer Notifications57Section 8.2 NDC Numbers58Section 8.3 Product Returns, Rebates and Chargebacks58Section 8.4 Collegium Use of Depomed Names60Section 8.5 Customer Service61ARTICLE 9 TERM AND TERMINATION61Section 9.1 Term61Section 9.2 Early Termination61Section 9.3 Termination for Cause62Section 9.4 Termination for Bankruptcy.63Section 9.5 Termination for Failure to Obtain HSR Clearance63Section 9.6 Termination for Failure to Close63Section 9.7 Effects of Termination64ARTICLE 10 REPRESENTATIONS AND WARRANTIES67Section 10.1 Representations and Warranties of Depomed67Section 10.2 Representations and Warranties of Collegium and Newco74Section 10.3 Warranty Disclaimer77ARTICLE 11 INTELLECTUAL PROPERTY MATTERS77Section 11.1 Acuform Patent Prosecution and Maintenance77Section 11.2 Acuform Patent Infringement77Section 11.3 ANDA Litigation77 ii Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. PageSection 11.4 Grünenthal Patent Infringement78ARTICLE 12 INDEMNIFICATION78Section 12.1 Indemnification by Depomed78Section 12.2 Indemnification by Collegium and Newco79Section 12.3 Notice of Claims80Section 12.4 Third Party Claims80Section 12.5 Expiration81Section 12.6 Certain Limitations81Section 12.7 Sole Remedy/Waiver82Section 12.8 Right to Offset82Section 12.9 Indemnity Payments82Section 12.10 Calculation of Damages82Section 12.11 No Consequential Damages83ARTICLE 13 CONFIDENTIALITY AND PUBLICITY83Section 13.1 Proprietary Information83Section 13.2 Disclosures Required by Law83Section 13.3 Publicity84Section 13.4 Survival84ARTICLE 14 COVENANTS84Section 14.1 HSR Act Filing84Section 14.2 Conduct of Business85Section 14.3 Ancillary Agreements85Section 14.4 Grünenthal Consent Agreement86Section 14.5 No Negotiation86Section 14.6 Resale Exemption Certificates87Section 14.7 Depomed Responsibility for Retained Post-Marketing Commitments87Section 14.8 Collegium Minimum Cash Balance87Section 14.9 Newco Operations and Liabilities87Section 14.10 Affiliates90Section 14.11 Further Assurances90ARTICLE 15 NOTICES90Section 15.1 Notices90ARTICLE 16 INSURANCE92Section 16.1 Insurance92 iii Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. PageARTICLE 17 MISCELLANEOUS92Section 17.1 Headings92Section 17.2 Severability92Section 17.3 Entire Agreement92Section 17.4 Amendments93Section 17.5 Counterparts93Section 17.6 Waiver93Section 17.7 Force Majeure93Section 17.8 Successors and Assigns94Section 17.9 Assignment94Section 17.10 Construction95Section 17.11 Governing Law; Jurisdiction; No Jury Trial.95Section 17.12 Dispute Resolution96Section 17.13 Equitable Relief98Section 17.14 Relationship Between Parties98Section 17.15 Tax Treatment98Section 17.16 Bulk Transfer Laws99Section 17.17 Forward Looking Statements99 LIST OF EXHIBITS Exhibit A: Domain Name AssignmentExhibit B: Trademark License AgreementExhibit C: Bill of SaleExhibit D: Newco operating agreementExhibit E: Collateral AgreementExhibit F: Pledge AgreementExhibit G: Collegium Sublicense iv Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. COMMERCIALIZATION AGREEMENTThis Commercialization Agreement (this “Agreement”) is made as of December 4, 2017 (the “Effective Date”),by and among Depomed, Inc., a California corporation (“Depomed”), Collegium Pharmaceutical, Inc., a Virginiacorporation (“Collegium”), and Collegium NF, LLC, a Delaware limited liability company and wholly ownedsubsidiary of Collegium (“Newco”). Each of Depomed, Collegium and Newco is referred to herein individually as a“party” and collectively as the “parties.”WHEREAS, the parties desire for Depomed to grant to Collegium certain rights to commercialize the Productsand Line Extensions in the Territory (as such terms are defined below), upon the terms and subject to the conditions setforth in this Agreement.NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained, theparties, intending to be legally bound, hereby agree as follows:ARTICLE 1DEFINITIONSAs used in this Agreement, the following terms shall have the following meanings:Section 1.1 “AbbVie” has the meaning set forth in Section 2.11(b).Section 1.2 “Account Proceeds” has the meaning set forth in Section 7.7(b)(i).Section 1.3 “Acuform Patent Action” has the meaning set forth in Section 11.2.Section 1.4 “Adverse Drug Experience” means any “adverse drug experience,” as defined or contemplatedby 21 C.F.R. 314.80 or 312.32, associated with a Payment-Bearing Product.Section 1.5 “Adverse Drug Experience Report” means any oral, written or electronic report of any AdverseDrug Experience transmitted to any Person.Section 1.6 “Affiliate” means, with respect to any Person, any other Person that directly or indirectlycontrols, is controlled by or is under common control with such first Person, but only for so long as such controlexists. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,”“controlled by” and “under common control with”), as applied to any Person, means the possession, directly orindirectly, of the power to direct or cause the direction of the management and policies of that Person, whether throughthe ownership of voting securities, by contract or otherwise.Section 1.7 “Agreement” has the meaning set forth in the preamble to this Agreement.1 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.8 “Allocation” has the meaning set forth in Section 2.8.Section 1.9 “Ancillary Agreements” has the meaning set forth in Section 14.3.Section 1.10 “ANDA” means an Abbreviated New Drug Application.Section 1.11 “ANDA Litigation” means the Legal Proceedings set forth on Schedule 1.11.Section 1.12 “ANDA Settlement Distributor” means a Third Party, who, in connection with the settlement ofthe ANDA Litigation under the Hatch-Waxman Act and Medicare Prescription Drug, Improvement andModernization Act of 2003, as amended, has been licensed or otherwise permitted by Depomed, as applicable (subjectto Section 11.3), to sell a Generic Version of a Product in the Territory.Section 1.13 “Annual Net Sales” means total Net Sales of the applicable Payment-Bearing Products in aparticular calendar year.Section 1.14 “API” means the composition of matter, tapentadol, used as an active pharmaceutical ingredientin Products and Line Extensions.Section 1.15 “Assumed Liabilities” means the following Liabilities relating to the Products and theTransferred Assets, in each case other than the Retained Liabilities:(a) all Liabilities arising solely out of or relating to Legal Proceedings commenced on or after theClosing, irrespective of the legal theory asserted, arising from the development, Commercialization, Manufacture or useof the Products or the use of the Transferred Assets, in each case, (i) other than by Depomed or its Affiliates pursuantto this Agreement and (ii) solely to the extent relating to the period of time on or after the Closing;(b) all Liabilities arising out of or relating to products liability claims to the extent relating to theProducts Manufactured and Commercialized on or after the Closing, including claims alleging defects in the Productsand claims involving the death of or injury to any individual relating to the Products;(c) all Liabilities to Third Party customers, Third Party suppliers or other Third Parties, solely to theextent relating to the Products or the Transferred Assets and ordered in the ordinary course of business (or at theexpress request of Collegium) on or after the Closing;(d) all other Liabilities arising out of or relating to the Products or the Transferred Assets, to theextent relating to the period of time on or after the Closing, other than Liabilities arising out Depomed’s activitiespursuant to Section 3.2 or Section 4.9;2 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (e) all Taxes apportioned to Collegium pursuant to Section 2.9; and(f) all Liabilities arising out of or relating to the return of the Products sold by Collegium on or afterthe Closing.Section 1.16 “Authorized Generic” means a Generic Version sold by or on behalf of a party in the Territorywithout the NUCYNTA® trademark, including by an Authorized Generic Distributor, but excluding by any ANDASettlement Distributor.Section 1.17 “Authorized Generic Distributor” means a Third Party who has been contracted by Collegium toCommercialize a Generic Version on behalf of Collegium in the Territory, but excluding any ANDA SettlementDistributor.Section 1.18 “Business” means the business of researching, developing, manufacturing or having made,packaging, importing, marketing, promoting, distributing, selling and commercializing the Products, in each of theforegoing cases, in the Territory, as conducted by the Depomed Entities.Section 1.19 “Business Day” means any day other than a Saturday, a Sunday or a day on which banks inNew York City, New York are authorized or obligated by law or executive order to close.Section 1.20 “CDAPCA” means the Comprehensive Drug Abuse Prevention and Control Act of 1970, asamended.Section 1.21 “Change of Control” means, with respect to a party, (a) a merger, reorganization orconsolidation of such party with a Third Party which results in the voting securities of such party outstandingimmediately prior thereto ceasing to represent at least fifty (50%) of the combined voting power of the surviving entityimmediately after such merger, reorganization or consolidation, (b) a Third Party becoming the beneficial owner offifty (50%) or more of the combined voting power of the outstanding securities of such party, or (c) the sale or othertransfer to a Third Party of all or substantially all of such party’s business or assets to which this Agreement relates.Section 1.22 “Chargeback Claims” has the meaning set forth in Section 8.3(d)(i).Section 1.23 “Claim” has the meaning set forth in Section 12.3.Section 1.24 “Claim Amount” has the meaning set forth in Section 7.7(a)(ii).Section 1.25 “Claim Notice” has the meaning set forth in Section 7.7(a)(ii).Section 1.26 “Closing” means the consummation of the Transactions pursuant to the terms of this Agreement.3 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.27 “Closing Date” has the meaning set forth in Section 2.12(a).Section 1.28 “CMO” has the meaning set forth in Section 3.2(a).Section 1.29 “CMO Supply Agreements” means each agreement and all related material documents,including exhibits, attachments and amendments thereto, entered into by Depomed with a CMO prior to or during theTerm pertaining to the Manufacture, production or supply of any Product Materials or Supplied Products. The CMOSupply Agreements in existence as of the Effective Date are listed in Schedule 1.29.Section 1.30 “Code” means the Internal Revenue Code of 1986, as amended.Section 1.31 “COGS” means, for a particular period, the applicable party’s cost of goods sold (calculated inaccordance with Section 7.4(b)) for the Products in the Territory for such period.Section 1.32 “Collateral Agreement” has the meaning set forth in Section 14.3.Section 1.33 “Collateral Agreements” means the Pledge Agreement, Collateral Agreement, any ControlAgreement and any other document delivered by Collegium or Newco that creates or purports to create a Lien securingthe obligations of Collegium and Newco under this Agreement.Section 1.34 “Collegium” has the meaning set forth in the Preamble to this Agreement.Section 1.35 “Collegium Indemnitees” has the meaning set forth in Section 12.1(a).Section 1.36 “Collegium Material Adverse Event” has the meaning set forth in Section 10.2(a).Section 1.37 “Collegium Prepaid Business Expense Allocation” has the meaning set forth in Section 7.5.Section 1.38 “Collegium Products” has the meaning set forth in Section 10.2(i)(i).Section 1.39 “Collegium Regulatory Inspection” has the meaning set forth in Section 5.10(a).Section 1.40 “Collegium Sales Force” means the field force of Sales Representatives employed or engagedby Collegium, including field-based sales force management such as regional and district sales managers.Section 1.41 “Collegium Sublicense” has the meaning set forth in Section 2.2(c).4 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.42 “Collegium Trademarks” means the trademarks set forth on Schedule 1.42, including the“Collegium” trademark and associated design and logo.Section 1.43 “Commercial Agreement” has the meaning set forth in Section 8.3(h).Section 1.44 “Commercial Rebates” has the meaning set forth in Section 8.3(b).Section 1.45 “Commercialization Transaction” has the meaning set forth in Section 14.5.Section 1.46 “Commercialize,” “Commercialization” or “Commercializing” means to Promote, distribute andsell Payment-Bearing Products in the Territory, including all activities incident thereto and contemplated by the termsof this Agreement.Section 1.47 “Commercially Reasonable Efforts” means, with respect to Commercialization of the Productsby Collegium, those efforts and resources customarily used in the pharmaceutical business by a global pharmaceuticalcompany for a product owned by such company or to which such company has rights, which product is of a marketpotential similar to the market potential of the applicable Product and at a similar stage of its product life as suchProduct, taking into account all relevant factors, including, without limitation, the risks inherent in theCommercialization of such Product, the competitiveness of the marketplace, the proprietary position of such Product incomparison to other products in a party’s product portfolio, the regulatory status of such Product (including pricing andreimbursement status), the actual and potential profitability of such Product, and the general economic conditions of themarketplace, as well as other relevant factors.Section 1.48 “Competing Product” means any product (other than a Product or Line Extension) in anydosage form, formulation, presentation or package configuration which contains a compound which is a centrallyacting opioid analgesic of the benzenoid class with a dual mode of action as an agonist of the μ-opioid receptor and asa norepinephrine reuptake inhibitor, excluding any such product undergoing development or Commercialization byany Person acquiring Depomed or Collegium in a Change of Control prior to the closing of such Change of Control orthat is developed or Commercialized by such Person after the closing of such Change of Control of Depomed orCollegium without the use of any Depomed Product Know-How or any Know-How Controlled by Collegium,respectively.Section 1.49 “Competition Laws” means the Legal Requirements of any jurisdiction that are designed orintended to prohibit, restrict or regulate actions that may have the purpose or effect of creating a monopoly, lesseningcompetition or restraining trade, including the HSR Act.Section 1.50 “Confidentiality Agreement” means that certain Confidentiality Agreement, dated as ofSeptember 27, 2017, between Depomed and Collegium.Section 1.51 “Consent Agreement” has the meaning set forth in Section 14.4.5 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.52 “Control” or “Controlled” means, with respect to Patents, Know-How or other IP Rights of anykind, the possession by a party of the ability to grant a license or sublicense of such rights as contemplated by thisAgreement, without violating the terms of any agreement or other arrangement with any Third Party.Section 1.53 “Control Agreement” has the meaning set forth in Section 7.7(b)(i).Section 1.54 “Co-Pay Card Discounts” has the meaning set forth in Section 8.3(e).Section 1.55 “Co-Pay Card Program” has the meaning set forth in Section 8.3(e).Section 1.56 “Covered Action” means any suit, action or proceeding, whether at law or in equity, whether incontract or in tort or otherwise arising out of, or relating to, the Transactions and (a) brought against a party or anAffiliate of such party by the other party or an Affiliate of the other party, or (b) supported, by means of direct financialsupport or voluntary cooperation with any request for support from the Third Party bringing the suit, action orproceeding, by one party or an Affiliate of such party against the other party or an Affiliate of such other party.Section 1.57 “CPR Mediation Procedure” has the meaning set forth in Section 17.12(a).Section 1.58 “CPR Rules” has the meaning set forth in Section 17.12(b)(i).Section 1.59 “CSA” means the Controlled Substances Act, as amended.Section 1.60 “Customers” means Third Party wholesalers, retailer pharmacies, mail-order pharmacies, grouppurchasing organizations or other organizations similar to those that purchase the Products from Depomed in theTerritory as of the Effective Date.Section 1.61 “Data Room” means the electronic data room containing documents and materials relating to theTransferred Assets as of 5:00 P.M. Pacific Standard Time on December 3, 2017, as well as the computer containingdocuments and materials relating to the Transferred Assets made available to Collegium and/or its representatives priorto the Effective Date.Section 1.62 “DEA” means the United States Drug Enforcement Agency or any successor agencyperforming comparable functions in the Territory.Section 1.63 “Depo NF” means Depo NF Sub, LLC.Section 1.64 “Depomed” has the meaning set forth in the preamble to this Agreement.Section 1.65 “Depomed Acuform Patents” means the patents listed in Schedule 1.65.6 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.66 “Depomed Corporate Trademark” means any trademarks, trade names, corporate names,corporate logos, domain names, or other names or marks used or registered by Depomed or its Affiliates to identifyitself, including the Depomed® trademark.Section 1.67 “Depomed Entities” means, collectively, Depomed and Depo NF.Section 1.68 “Depomed Indemnitees” has the meaning set forth in Section 12.2(a).Section 1.69 “Depomed Names” means the names and logos of Depomed and its Affiliates.Section 1.70 “Depomed Product Expiration Date” means the expiration date of the last Product in the channelbearing Depomed’s NDC Number on a Product-by-Product basis.Section 1.71 “Depomed Product Know-How” means, collectively, all Know-How that is Controlled byDepomed and its Affiliates as of the Closing Date or any time during the Term that is related to the Business, theProducts or the Transferred Assets and is (a) necessary or otherwise used or held for use in the conduct of the Business(including the Manufacture of the Line Extensions) or (b) necessary for Collegium to perform its obligations under thisAgreement or any Ancillary Agreement, excluding Know-How within the Grünenthal IP Rights; provided, however,that Depomed Product Know-How excludes any Know-How of any Person acquiring Depomed in a Change ofControl that was Controlled by such Person prior to the closing of such Change of Control or that was generated bysuch Person without the use of any Depomed Product Know-How unless (i) such Know-How is actually used by suchPerson at any time during the Term of this Agreement in the Manufacture of any Line Extensions, or theCommercialization of any of the Products or (ii) such Know-How was already licensed to Collegium under Section2.1(a) hereof prior to the closing of the Change of Control.Section 1.72 “Depomed Promotional Materials” has the meaning set forth in Section 4.9(b)(ii).Section 1.73 “Depomed Responsibility Period” means the period through and including the Closing Date.Section 1.74 “Depomed Regulatory Inspection” has the meaning set forth in Section 5.10(b).Section 1.75 “Depomed Sales Force” means the field force of Sales Representatives employed or contractedby Depomed.Section 1.76 “Depomed Technology Trademark” means the Trademarks listed on Exhibit A of theTrademark License Agreement, including the ACUFORM® Trademark.7 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.77 “Detail” means an in-person, face-to-face sales presentation of a Product or Line Extensionmade by a Sales Representative to a Professional.Section 1.78 “Dispute” has the meaning set forth in Section 17.12.Section 1.79 “Domain Name Assignment” means a domain name assignment, in the form attached hereto asExhibit A, dated as of the Closing Date.Section 1.80 “Effective Date” has the meaning set forth in the preamble to this Agreement.Section 1.81 “Environmental Laws” means all Legal Requirements related to the protection of theenvironment or human health and safety or the release, presence of, exposure to, or the management, manufacture, use,containment, storage, recycling, reclamation, monitoring, reuse, treatment, generation, discharge, transportation,processing, production, disposal, leaching, migration, emission or remediation of any contaminant or pollutant, toxic,radioactive or hazardous waste, chemical, substance, material or constituent.Section 1.82 “ER/LA Opioid Analgesics REMS” has the meaning set forth in Section 5.3(a).Section 1.83 “Excluded Assets” means, other than the Transferred Assets, all of the assets of Depomed andits Affiliates.Section 1.84 “Expiration Date” has the meaning set forth in Section 7.7(a)(iii).Section 1.85 “Expired Product” has the meaning set forth in Section 7.3(c).Section 1.86 “FDA” means the United States Food and Drug Administration or any successor agencyperforming comparable functions in the Territory.Section 1.87 “Financial Institution” has the meaning set forth in Section 7.7(a)(i).Section 1.88 “Food and Drug Act” means the Federal Food, Drug, and Cosmetic Act of 1938, as amended.Section 1.89 “Force Majeure Event” has the meaning set forth in Section 17.7.Section 1.90 “Forward-Looking Statements” has the meaning set forth in Section 17.17.Section 1.91 “Fundamental Representations” mean the representations and warranties (a) of Depomedcontained in Section 10.1(a) (Organization), Section 10.1(b) (Authority; Binding Effect), Section 10.1(h)(i)(Contracts), Section 10.1(j) (Brokers), and Section 10.1(k) (Transferred Assets) and (b) of Collegium contained inSection 10.2(a) (Organization), Section 10.2(b) (Authority; Binding Effect), and Section 10.2(e) (Brokers).8 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.92 “GAAP” means accounting principles and practices generally accepted in the United States ofAmerica, as in effect on the Effective Date.Section 1.93 “Generic Drug Act” means the Generic Drug Enforcement Act of 1992, as amended.Section 1.94 “Generic Entry” means, with respect to a Product, the initiation of sales to wholesale or retailcustomers of one or more Generic Versions of such Product (other than an Authorized Generic) in the Territory by aThird Party, including an ANDA Settlement Distributor, but excluding any Authorized Generic Distributor.Section 1.95 “Generic Version” means, with respect to a Product, any pharmaceutical product which(a) contains the same active ingredient(s) in the same dosage(s) and dosage form as such Product, (b) is approved inreliance on, and by reference to, the Product NDA, or is approved under the Product NDA, and (c) in the case ofproducts approved by reference to, rather than under, the Product NDA, has been issued a therapeutic equivalencecode of AB (as such term is used in the Approved Drug Products with Therapeutic Equivalence Evaluations publishedby the FDA Center for Drug Evaluation and Research or any successor publication) by the FDA with respect to suchProduct.Section 1.96 “Government Rebates” has the meaning set forth in Section 8.3(c)(i).Section 1.97 “Governmental Authority” means any court, agency, authority, department, regulatory body orother instrumentality of any government or country or of any national, federal, state, provincial, regional, county, cityor other political subdivision of any such government or any supranational organization of which any such country is amember, which has competent and binding authority to decide, mandate, regulate, enforce, or otherwise control theactivities of the parties contemplated by this Agreement.Section 1.98 “GPO” has the meaning set forth in Section 8.3(d)(i).Section 1.99 “Grünenthal” means Grünenthal GmbH.Section 1.100 “Grünenthal IP Rights” means the IP Rights out-licensed by Grünenthal under the GrünenthalLicense Agreement, including the Grünenthal Patents.Section 1.101 “Grünenthal License Agreement” means that certain License Agreement (U.S.) dated January13, 2015 among Grünenthal, Janssen Pharmaceuticals, Inc. and Janssen Research & Development, LLC, as assignedto Depomed and amended pursuant to that certain Assignment and Consent Agreement dated January 13, 2015 amongGrünenthal, Janssen Pharmaceuticals, Inc., Janssen Research & Development, LLC and Depomed.Section 1.102 “Grünenthal Patent Action” has the meaning set forth in Section 11.4.9 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.103 “Grünenthal Patents” has the meaning set forth in Section 10.1(i)(iv).Section 1.104 “Health Laws” means any Legal Requirement the stated purpose of which is to ensure thesafety, efficacy and quality of medicines by regulating the quality, identity, strength, purity, safety, efficacy, testing,sale or distribution, sale, import or export, good laboratory practices, good clinical practices, investigational use,product marketing authorization, manufacturing compliance and approval, good manufacturing practices, labeling,advertising, safety surveillance, including the relevant provisions of the CDAPCA, CSA, PPACA, Food, Drug, andCosmetic Act, and applicable regulations promulgated thereunder by the FDA, DEA or other applicable GovernmentalAuthority.Section 1.105 “HSR Act” means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, asamended, and the rules and regulations promulgated thereunder.Section 1.106 “HSR Clearance Date” means, with respect to the transactions contemplated under thisAgreement, the earliest date on which the parties have actual knowledge that all applicable waiting periods haveexpired or have been terminated under the HSR Act.Section 1.107 “Indemnified Party” has the meaning set forth in Section 12.3.Section 1.108 “Indemnifying Party” has the meaning set forth in Section 12.3.Section 1.109 “Indebtedness” means, with respect to any Person at any date of determination (withoutduplication), (a) all indebtedness of such Person for borrowed money or other similar monetary obligations, (b) allobligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations ofsuch Person as an account party in respect of letters of credit or other similar instruments (including reimbursementobligations with respect thereto), (d) all the obligations of such Person to pay the deferred and unpaid purchase price ofproperty or services (other than trade payables reflecting expenses payable or reimbursable to service providers), whichpurchase price is due more than ninety (90) days after the date of purchasing such property or service or taking deliveryand title thereto or the completion of such services, and payment deferrals arranged primarily as a method of raisingfunds to acquire such property or service, (e) all monetary obligations of such Person and its Subsidiaries under anyleasing or similar arrangement that have been (or, in accordance with GAAP, should be) classified as capitalizedleases, (f) all guarantees of such Person in respect of any of the foregoing, (g) all monetary obligations of such Personwith respect to any interest rate hedge, cap, floor, swap, option or other interest rate hedge agreement, (h) allIndebtedness (as defined in clauses (a) through (g) of this definition) of other Persons secured by a lien on any asset ofsuch Person, whether or not such Indebtedness is assumed by such Person, and (i) all Indebtedness (as defined inclauses (a) through (g) of this definition) of other Persons Guaranteed by such Person.10 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.110 “Infringement” means direct or indirect infringement, misappropriation or other unauthorized useof any IP Rights (including unfair trade practice or unfair competition under applicable Legal Requirements).Section 1.111 “Intercreditor Agreement” has the meaning set forth in Section 14.3.Section 1.112 “IND” means any “investigational new drug application” (as such term is used under the Foodand Drug Act) filed or acquired by a party or its Affiliate with the FDA with respect to a Product or Line Extensionand all subsequent submissions, supplements and amendments thereto (including the Product INDs with respect toProducts).Section 1.113 “IP Rights” means all (a) utility and design patents, design registrations, industrial designs,utility models, invention disclosures, certificates of invention and statutory invention registrations, including any and allapplications and registrations, provisionals, divisions, continuations, continuations in part, extensions, substitutions,renewals, registrations, revalidations, reversions, reexaminations, reissues or additions, of or to any of the foregoingitems, and all rights and priorities afforded under any applicable Legal Requirements with respect thereto (collectively,“Patents”); (b) trademark, brand features, domain names, logos, name, service marks, trade names, or goodwill fromsuch, and other distinctive brand features; (c) copyrights, all applications, registrations and renewals therefor, and allcode, technical or nontechnical documentation, schematics, drawings, hardware designs, diagrams, or implementations,as well as any original works of authorship, including any modifications, additions, or derivative works from anexisting work (collectively, “Copyrights”) (d) domain names, and all registrations and pending applications forregistrations therefor (collectively, “Domain Names”; and (e) trade secrets, information, marketing know-how,knowledge, data, designs, ideas, concepts, methods, techniques, inventions, discoveries, trade secrets, formulae,compositions, expertise, experimental (whether clinical or not) data and other results of trials, studies or investigations,and processes, whether patentable or not, and whether or not capable of separate or precise definition or identification,whether acquired through trial and error, experience or other means, including regulatory information submitted toGovernmental Authorities, Product specifications (and with regard to IP Rights of Collegium, Line Extensionspecifications), and information relating to the testing (including quality control standards, assay methods and stabilitystudies), storage, manufacturing and use of the Products (and with regard to IP Rights of Collegium, Line Extensions),or the manufacturing, marketing or sale of the Products (and with regard to IP Rights of Collegium, Line Extensions)(collectively, “Know-How”).Section 1.114 “Janssen” has the meaning set forth in Section 2.11(b).Section 1.115 “JMC” has the meaning set forth in Section 3.2(e).Section 1.116 “Joinder Agreement” has the meaning set forth in Section 14.4.11 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.117 “Joint Litigation Agreement” means that certain Joint Litigation Agreement dated January 3,2013 among Grünenthal, Janssen Pharmaceuticals, Inc. and Janssen Research & Development, LLC, as assumed byDepomed and amended pursuant to that certain Assignment and Consent Agreement dated January 13, 2015 amongGrünenthal, Janssen Pharmaceuticals, Inc., Janssen Research & Development, LLC and Depomed.Section 1.118 “Knowledge of Collegium” means the actual knowledge of any of the individuals listed onSchedule 1.118, in each case, after due inquiry of such named individual’s files and records and of those employees ofCollegium who are such named individuals’ direct reports.Section 1.119 “Knowledge of Depomed” means the actual knowledge of any of the individuals listed onSchedule 1.119, in each case, after due inquiry of such named individual’s files and records and of those employees ofDepomed who are such named individuals’ direct reports.Section 1.120 “Legal Proceeding” means any claim, action, suit, case, litigation, proceeding, investigation,charge, criminal prosecution, judicial, governmental or regulatory investigation, or arbitration, mediation or alternativedispute resolution proceeding.Section 1.121 “Legal Requirements” means laws, rules and regulations of any Governmental Authority in theTerritory.Section 1.122 “Letter of Credit” has the meaning set forth in Section 7.7(a)(i).Section 1.123 “Letter of Credit Documents” has the meaning set forth in Section 7.7(a)(i).Section 1.124 “Liabilities” means any and all debts, liabilities, costs, guarantees, commitments, assessments,expenses, claims, losses, damages, deficiencies and obligations, whether accrued or fixed, known or unknown,liquidated or unliquidated, asserted or unasserted, absolute or contingent, matured or unmatured, determined ordeterminable, accrued or not accrued, due or to become due, direct or indirect, whenever or however arising (includingwhether arising out of any contract, common law or tort based on negligence or strict liability) and whether or not thesame would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto.Section 1.125 “Licensed IP Rights” means the Depomed Product Know-How, the Depomed Acuform Patents,the Grünenthal IP Rights and the Licensed Trademarks.Section 1.126 “Licensed Trademarks” means the Product Trademarks and the Depomed TechnologyTrademark.12 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.127 “Lien” means, with respect to any property or asset, any lien, security interest, mortgage, pledge,assessment, restriction, adverse claim, levy, charge, hypothecation, easement, restriction, title retention clause,encumbrance or other similar claim of any kind, character or description, whether of record or not, or any contract togive any of the foregoing, in respect of such property or asset.Section 1.128 “Limited License Period” has the meaning set forth in Section 8.4(a).Section 1.129 “Line Extension” means any modified form of a Product developed by or on behalf ofCollegium or any of its Affiliates or any other Sublicensees during the Term, including new dosage forms or changesto the formulation or presentation of such Product (e.g., without limitation, to make it tamper-resistant, to extend therelease period of the active pharmaceutical ingredient or to make it harder to abuse), or combinations of such Productwith any other product or device.Section 1.130 “Long Term Collaboration Agreement” has the meaning set forth in Section 14.3.Section 1.131 “Losses” mean losses, liabilities, claims, damages, deficiencies, costs, expenses, penalties,assessments, fines, fees, suits, actions, causes of action, judgments, Taxes and awards directly incurred or suffered(and, if applicable, reasonable attorneys’ fees associated therewith).Section 1.132 “Manufacture,” “Manufactured” and “Manufacturing” mean all operations involved in themanufacture, receipt, incoming inspection, storage and handling of raw materials, and the manufacture, processing,purification, packaging, labeling, warehousing, quality control testing (including in-process release and stabilitytesting), shipping and release of Products and Line Extensions.Section 1.133 “Manufacturing Tech Transfer Plan” has the meaning set forth in Section 2.11(b).Section 1.134 “Master Letter of Credit Agreement” has the meaning set forth in Section 7.7(a)(i).Section 1.135 “Material Supply Failure” means any failure (other than a failure caused directly by Collegium orits Affiliates or other Sublicensees) by the applicable CMO to deliver to Customers, over the course of any two (2)consecutive calendar months, such quantity of Nucynta® ER ordered by Collegium in the ordinary course and inaccordance with this Agreement and the applicable CMO Supply Agreement(s) which, if such Product was to be soldby such Customers in the ordinary course, would generate at least [***] in gross sales, which gross sales thresholdshall be increased ratably to reflect any price increases taken by Collegium with respect to Nucynta® ER after theClosing Date.13 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.136 “Material Supply Failure Notice” has the meaning set forth in Section 7.3(f).Section 1.137 “Maximum Stated Value” has the meaning set forth in Section 7.7(a)(i).Section 1.138 “Minimum Cash Balance” means Eighty Million Dollars ($80,000,000).Section 1.139 “Minimum Quarterly Payment” has the meaning set forth in Section 7.3(a).Section 1.140 “NDA” means any “new drug application” (as such term is used under the Food and Drug Act)filed or acquired by a party or its Affiliate with the FDA with respect to a Product or Line Extension and all subsequentsubmissions, supplements and amendments thereto (including the Product NDAs with respect to Products).Section 1.141 “NDC Number” means, with respect to a Product, the National Drug Code, which is the eleven(11)-digit code registered by a party with the FDA with respect to such Product.Section 1.142 “Net Sales” means the gross amount billed, as of the date of invoicing, by or on behalf ofCollegium or an Affiliate of Collegium or other Sublicensee(s) or assignee(s) for sales of a Payment-Bearing Productto a Third Party less, to the extent actually allowed or taken for the Territory: (a) normal and customary discounts,including cash discounts, discounts to managed care or similar organizations or government organizations, rebates paid,credited, accrued or actually taken, including government rebates such as Medicaid chargebacks or rebates, andretroactive price reductions or allowances actually allowed or granted from the billed amount, and commerciallyreasonable and customary fees paid to distributors (other than to a distributor that is an Affiliate of Collegium); (b)credits or allowances actually granted upon claims, rejections or returns of such sales of Payment-Bearing Product,including recalls, regardless of Collegium requesting such recalls; (c) freight, postage, shipping and insurance chargespaid for delivery of such Payment-Bearing Product, to the extent billed separately on the invoice and paid by the buyer;(d) taxes, duties or other governmental charges levied on or measured by the billing amount when included in billing,as adjusted for rebates, charge-backs and refunds to the extent actually paid or allowed by the selling party; and (e)actual uncollectible accounts receivables determined in accordance with GAAP, consistently applied. For furtherclarity, Collegium shall not deduct from Net Sales any amounts for which Depomed bears financial responsibilityunder Section 8.3. In no event shall any particular amount identified above be deducted more than once in calculatingNet Sales (i.e., no “double counting” of deductions). Collegium will not, and will not authorize or permit its Affiliatesor Sublicensees to sell any Payment-Bearing Product to select Customers at a price below its minimum profit marginfor the purpose of stimulating commercial sales of other more profitable pharmaceutical products (i.e., a “loss-leader”). For clarity, sales of Payment-Bearing Product at a price below its minimum profit margin in connection with Medicaidwill not be deemed to be sales of Payment-Bearing Product as a loss leader.14 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.143 “Newco” has the meaning set forth in the Preamble to this Agreement.Section 1.144 “Newco Deposits” has the meaning set forth in Section 7.7(b)(i).Section 1.145 “Nucynta® ER” means NUCYNTA extended release tablets, in strengths of 50 mg, 100 mg,150 mg, 200 mg and 250 mg as described in New Drug Application 200533.Section 1.146 “OPDP” means FDA’s Office of Prescription Drug Promotion or any successor agencyperforming comparable functions in the Territory.Section 1.147 “Orange Book” means the FDA publication entitled “Approved Drug Products with TherapeuticEquivalence Evaluations” or any replacement thereof established or approved by the FDA.Section 1.148 “Orange Book-Listed Patent” means, with respect to the applicable Product or Line Extension, aPatent listed for such Product or Line Extension in the Orange Book.Section 1.149 “Order” means any award, decision, injunction, judgment, decree, order, ruling, or verdictentered, issued, made, or rendered by any Governmental Authority or by any arbitrator.Section 1.150 “Payment-Bearing Product” means (a) any Product or (b) any Line Extension.Section 1.151 “Payment Term” has the meaning set forth in Section 7.3(c).Section 1.152 “Permitted Lien” means (a) all Liens set forth on Schedule 1.152 (b) statutory Liens arising outof operation of law with respect to a Liability incurred in the ordinary course of business and which is not delinquent;(c) Liens, other than Liens securing Indebtedness for borrowed money, that, individually and in the aggregate, do notand would not reasonably be expected to materially detract from the value or impair the use of the property subjectthereto or make such property unmarketable; (d) Liens for Taxes not yet due, payable, delinquent or subject topenalties for nonpayment, or which are being contested in good faith through proper proceedings, in each case, withsufficient reserves maintained in accordance with GAAP; and (e) mechanics’, materialmens’, carriers’, workmens’,warehousemens’, repairmens’, landlords’ or other like Liens and security obligations that are incurred in the ordinarycourse of business and are not delinquent.Section 1.153 “Person” means any individual, corporation (including any non-profit corporation), general orlimited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or otherentity or Governmental Authority.15 ®Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.154 “Post-Marketing Development” means, with respect to any Product, the conduct of any phaseIV clinical studies, quality of life assessments or pharmacoeconomic, label expansion or other post-marketing studies,in each case other than the Retained Post-Marketing Commitments.Section 1.155 “PPACA” means the Patient Protection and Affordable Care Act of 2010, as amended by theHealth Care Education and Reconciliation Act of 2010.Section 1.156 “Prepaid Business Expenses” means the expenses with respect to the Business that were prepaidby Depomed prior to the Closing as set forth on Schedule 1.156.Section 1.157 “Product Complaints” means any report concerning the possible failure of a Product to meet anyof its specifications, such as quality, purity, quantity, weight, pharmacologic activity, labeling, identity or appearance.Section 1.158 “Product INDs” means Depomed’s Investigational New Drug Applications filed with the FDAwith respect to Products set forth on Schedule 1.158, including all supplements and amendments thereto.Section 1.159 “Product Materials” has the meaning set forth in Section 3.2(a).Section 1.160 “Product NDAs” means the NDAs filed with the FDA with respect to Products set forth onSchedule 1.160, including all supplements and amendments thereto.Section 1.161 “Product Trademarks” means (a) the Trademarks listed on Exhibit B of the Trademark LicenseAgreement, including the NUCYNTA® Trademark, and (b) such other Trademarks owned by Depomed as of theClosing Date that are used exclusively for Commercialization of the Products in the Territory as of the Closing Date.Section 1.162 “Products” means the products set forth on Schedule 1.162 or any Authorized Generic thereof.Section 1.163 “Professional” means a physician or other health care practitioner who is permitted by law toprescribe Products or Line Extensions.Section 1.164 “Promote,” “Promotional” and “Promotion” mean, with respect to a Product or Line Extension,any activities undertaken to encourage sales or use of such Product or Line Extension, including Details, productsampling, detail aids, drop-offs, coupons, discount cards, journal advertising, direct mail programs, direct-to-consumeradvertising, convention exhibits and all other forms of marketing, advertising, public relations or promotion.Section 1.165 “Promotional Materials” has the meaning set forth in Section 4.5(a).16 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.166 “Proprietary Information” means any proprietary or confidential information communicated fromone party to the other in connection with or relating to this Agreement or the Confidentiality Agreement (whetherbefore or after the Effective Date), which is identified as confidential or proprietary, or which the other party knows orhas reason to know is confidential or proprietary, including financial, marketing, business, technical and scientificinformation or data and, in the case of Depomed, the Depomed Product Know-How, whether communicated inwriting, orally or electronically. Proprietary Information shall not include information that the receiving party can showthrough written documentation:(a) at the time of disclosure, is publicly known;(b) after the time of disclosure, becomes part of the public domain, except by breach of anagreement between the disclosing party or any Affiliate thereof and the receiving party or any Affiliate thereof;(c) is or was in the possession of the receiving party or any Affiliate thereof at the time of disclosureby the disclosing party and was not acquired directly or indirectly from the disclosing party or any Affiliate thereof orfrom any other party under an agreement of confidentiality to the disclosing party or any Affiliate thereof; or(d) is or was developed by the receiving party or its Affiliates without use of or reference to theother party’s Proprietary Information.Section 1.167 “Protocol” has the meaning set forth in Section 17.12(b)(vi).Section 1.168 “Quarterly Shortfall” has the meaning set forth in Section 7.7(a)(i).Section 1.169 “Regulatory Approval” means any and all consents or other authorizations or approvals by theFDA or any other Regulatory Authority in the Territory that are required to develop, test, manufacture, market and sella Product or Line Extension in the Territory, whether existing on the Closing Date or filed thereafter, including but notlimited to, Product NDAs and Product INDs; but excluding (a) Third Party drug master files with respect to API orProducts, (b) state licenses, and (c) any form of reimbursement approval.Section 1.170 “Regulatory Authority” means any Governmental Authority, including FDA, in the Territorythat is involved in granting approvals for the manufacturing, clinical testing, marketing, sale, reimbursement and/orpricing of pharmaceutical products.Section 1.171 “Regulatory Communications” means, collectively, whether existing before or after the ClosingDate: (a) all written or electronic filings or submissions made with Regulatory Authorities in satisfaction of applicableregulatory and notification requirements with respect to Products in the Territory (including, without limitation, AnnualPeriodic Reports, Serious Adverse Drug Experience Reports, Adverse Drug Experience Reports, and filings andsubmissions regarding recalls); (b) all written or electronic correspondence to or from the FDA17 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. with respect to any of the foregoing; (c) minutes of any meeting between a party and the FDA regarding theRegulatory Approvals, or Manufacture or Commercialization of the Products in or for the Territory; and (d) writtensummaries of oral communications between a party and the FDA that would impact, or would reasonably be expectedto be material to, the development, Manufacture or commercialization of the Products.Section 1.172 “Regulatory Data” means (a) all processes and analytical methodologies used in development,testing, analysis and manufacture of Products and (b) all in vivo, clinical, pharmacology, toxicology, safety, efficacyand other scientific data and results relating to Products, that, in each case (clauses (a) and (b)), are either (i) containedin the Product NDAs or (ii) if not contained in the Product NDAs, are known to a party and required to be submitted tothe FDA in support of the Product NDAs.Section 1.173 “Representatives” has the meaning set forth in Section 14.5.Section 1.174 “Retained Liabilities” means the following Liabilities (excluding the Assumed Liabilities) ofDepomed:(a) all Liabilities arising out of or relating to any Retained Post-Marketing Commitments;(b) all Liabilities arising out of or relating to any ANDA Litigation;(c) all Liabilities arising out of or relating to Legal Proceedings commenced prior to the Closing,irrespective of the legal theory asserted, arising from the development, Commercialization, Manufacture or use of theProducts or the use of the Transferred Assets, in each case, (i) other than by Collegium or its Affiliates pursuant to thisAgreement and (ii) solely to the extent relating to the period of time prior to the Closing;(d) all Liabilities arising out of or relating to products liability claims to the extent relating to theProducts Commercialized prior to the Closing, including claims alleging defects in the Products and claims involvingthe death of or injury to any individual relating to the Products;(e) all Liabilities to Third Party customers, Third Party suppliers or other Third Parties relating tothe Products and delivered in the ordinary course of business prior to the Closing;(f) all other Liabilities arising out of or relating to the Products or the Transferred Assets, to theextent relating to the period of time prior to the Closing;(g) all Taxes apportioned to Depomed pursuant to Section 2.9; and18 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (h) all Liabilities arising out of or relating to the return of the Products sold by Depomed prior to theClosing.Section 1.175 “Retained Post-Marketing Commitments” means the ongoing clinical and/or post-marketingstudies set forth on Schedule 1.175.Section 1.176 “Sales Account” has the meaning set forth in Section 7.7(b)(i).Section 1.177 “Sales Representatives” means sales representatives employed by Collegium or Depomed, or aThird Party engaged by Collegium or Depomed, to Detail the Products and/or Line Extensions, as applicable, whohave been trained and equipped to Detail the Products (and with respect to Collegium, Line Extensions) in accordancewith this Agreement.Section 1.178 “SEC” has the meaning set forth in Section 13.3.Section 1.179 “Senior Executives” means, together, the Chief Executive Officer of Collegium and the ChiefExecutive Officer of Depomed.Section 1.180 “Serious Adverse Drug Experience” means any Adverse Drug Experience, including thosesubject to expedited reporting as defined in the regulations cited below, that is fatal or life-threatening, requireshospitalization or prolongation of existing hospitalization, results in persistent or significant disability or incapacity, is acongenital anomaly/birth defect, or is of comparable medical significance or any other event which would constitute a“serious” Adverse Drug Experience pursuant to the terms of 21 C.F.R. 314.80 or 312.32.Section 1.181 “Serious Adverse Drug Experience Report” means any Adverse Drug Experience Report thatinvolves a Serious Adverse Drug Experience.Section 1.182 “Solvent” has the meaning set forth in Section 10.2(g).Section 1.183 “Straddle Period” has the meaning set forth in Section 2.9(c).Section 1.184 “Subcontracting” means subcontracting Collegium’s rights or obligations hereunder (a) pursuantto which a Third Party will Manufacture any Line Extension on behalf of Collegium; or (b) pursuant to which a ThirdParty Sales Representative is engaged to Promote any Product or Line Extension on behalf of Collegium;“Subcontract” has the correlative meaning. “Subcontractor” means the Third Party with whom the Subcontractingagreement is entered.Section 1.185 “Sublicensee” has the meaning set forth in Section 2.2(c).Section 1.186 “Supplied Products” has the meaning set forth in Section 3.2(a).19 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.187 “Tax” or “Taxes” mean all taxes, including income, corporation, gross receipts, transfer, excise,property, sales, use, value-added, goods and services, license, payroll, withholding, social security and franchise orother governmental taxes, in each case, imposed by any Governmental Authority (including any interest, penalties oradditional tax attributable thereto).Section 1.188 “Tax Return” means any return, report, declaration, information return, statement or otherdocument filed or required to be filed with any Taxing Authority in connection with the determination, assessment orcollection of any Tax or the administration of any Legal Requirements relating to any Tax.Section 1.189 “Taxing Authority” means any Governmental Authority exercising any authority to impose,regulate or administer the imposition of Taxes.Section 1.190 “Term” has the meaning set forth in Section 9.1.Section 1.191 “Territory” means the United States of America, the District of Columbia and Puerto Rico.Section 1.192 “Third Party” means any Person other than Collegium or Depomed or their respective Affiliates.Section 1.193 “Third Party Claim” has the meaning set forth in Section 12.3.Section 1.194 “Third Party Sales Representative” has the meaning set forth in Section 2.2.Section 1.195 “Trademark License Agreement” means a trademark license agreement, in the form attachedhereto as Exhibit B, dated as of the Closing Date.Section 1.196 “Transaction Documents” means, collectively, this Agreement, the Ancillary Agreements andthe certificates and other documents delivered pursuant hereto or thereto.Section 1.197 “Transactions” means, collectively, the transactions contemplated by this Agreement and theAncillary Agreements.Section 1.198 “Transfer Taxes” mean any federal, state, county, local, foreign and other sales, use, transfer,value added, conveyance, documentary transfer, stamp duty, recording or other similar Tax imposed in connectionwith the Transactions or the recording of any sale, transfer or assignment of property (or any interest therein) effectedpursuant to this Agreement.Section 1.199 “Transferred Asset Purchase Price” has the meaning set forth in Section 2.8.20 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 1.200 “Transferred Assets” has the meaning set forth in Section 2.3(a).Section 1.201 “Transferred Domain Names” means the domain names listed on Schedule 1.201.Section 1.202 “Transferred Inventory” means Depomed’s inventory of finished Products, in each case with atleast twelve (12) months of remaining expiration dating as of the Closing Date.Section 1.203 “Transferred Inventory Cost” means the amount equal to the aggregate COGS of theTransferred Inventory, as set forth on the Transferred Inventory Cost Statement.Section 1.204 “Transferred Inventory Cost Statement” has the meaning set forth in Section 7.1(b).Section 1.205 “Transferred IP Rights” means the Transferred Domain Names and the Transferred Websites.Section 1.206 “Transferred Websites” means the Websites located at the domain names listed on Schedule1.206.Section 1.207 “Transition Lots” means those lots of a Product for which Product was partially sold prior to theClosing Date and partially sold on or after the Closing Date.Section 1.208 “Transition Plan” has the meaning set forth in Section 3.1.Section 1.209 “Transition Services Agreement” has the meaning set forth in Section 14.3.Section 1.210 “Transition Team” has the meaning set forth in Section 3.1.Section 1.211 “United States Bankruptcy Code” means the U.S. Bankruptcy Code, 11 U.S.C. §§ 101, et seq.Section 1.212 “UPC” means Universal Product Code.Section 1.213 “Upfront Payment” has the meaning set forth in Section 7.2.Section 1.214 “Website” means the content of a website located at a specified domain name and all copyrightsin such content, excluding trademarks and corporate names, content owned by Third Parties (such as stockphotographs used in such website) and content unrelated to any Product or Line Extension.21 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. ARTICLE 2GRANTS AND TRANSFERS; CLOSINGSection 2.1 Licenses(a) License Grants. During the Term, subject to the terms and conditions of this Agreement,Depomed hereby grants to Newco, and Newco hereby accepts:(i) a non-exclusive license under the Depomed Acuform Patents and the Depomed ProductKnow-How to Commercialize and conduct Post-Marketing Development activities with respect to the Payment-Bearing Products solely in the Territory.(ii) a non-exclusive license under the Depomed Acuform Patents and the Depomed ProductKnow-How to Manufacture and have Manufactured Line Extensions solely in the Territory for Commercialization.(iii) an exclusive sublicense under Depomed’s rights in and to the Grünenthal IP Rightsunder the Grünenthal License Agreement to Commercialize and conduct Post-Marketing Development activities withrespect to the Payment-Bearing Products solely in the Territory. Such license shall be exclusive even as to Depomedsolely with respect to Commercialization and Post-Marketing Development of the Payment-Bearing Products in theTerritory, subject to the Retained Post-Marketing Commitments, the responsibilities of Depomed under the TransitionPlan and Depomed’s rights under this Agreement, including Section 4.9, Section 11.3 and Section 14.7.(iv) an exclusive sublicense under Depomed’s rights in and to the Grünenthal IP Rightsunder the Grünenthal License Agreement to Manufacture and have Manufactured Line Extensions solely in theTerritory for Commercialization. Such license shall be exclusive even as to Depomed solely with respect to theManufacture of Line Extensions in the Territory for Commercialization in the Territory, subject to Section 11.3.(v) the licenses granted pursuant to the Trademark License Agreement.(b) Generic Versions. For clarity, the parties agree that Newco shall have the exclusive (even as toDepomed) right to Commercialize Generic Versions of Products in the Territory, either directly or indirectly throughAuthorized Generic Distributors; provided, however, that, unless otherwise agreed by the parties, Newco shall not bepermitted to ship, or authorize an Authorized Generic Distributor to ship, any Generic Version, including any Authorized Generic, to Customers before Generic Entry for such Product.22 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 2.2 Enforcement Rights and Sublicenses(a) Subject to the terms and conditions of this Agreement, including Section 11.3, Depomed herebygrants and delegates to Newco, and Newco hereby accepts, all of Depomed’s rights to enforce the Grünenthal Patentsin any Legal Proceedings involving the Products or Line Extensions solely in the Territory during the Term (atNewco’s sole cost and expense), in accordance with Section 11.4, to the extent set forth in and limited by theGrünenthal License Agreement and the Joint Litigation Agreement, and to the extent authorized by Grünenthalpursuant to the Consent Agreement. Upon request of Collegium, Depomed shall cause Grünenthal to join any suchLegal Proceeding initiated by Collegium as a party plaintiff if reasonably determined by Collegium, based on advice ofits outside counsel, to be required for standing purposes. No other enforcement rights with respect to IP Rights aregranted hereunder, except to the extent Newco or Collegium cooperates with Depomed in a Depomed Acuform PatentAction pursuant to Section 11.2. Newco shall have the right, in its sole discretion, to delegate its rights under thisSection 2.2(a), in whole or in part, to Collegium.(b) Subject to Section 2.2(c), Newco is entitled to grant sublicenses to the rights granted to it underSection 2.1 to Collegium or other Affiliates of Newco or Third Parties (each, a “Sublicensee”). All sublicenseagreements granted by Newco hereunder shall be consistent with the terms and conditions of this Agreement, and shallprovide that the Sublicensee shall be bound by and subject to all applicable terms and conditions of this Agreement inthe same manner and to the same extent as Newco is bound hereby. Newco shall provide an unredacted copy of eachsuch sublicense agreement to Depomed, including the sublicense agreement with Collegium. Newco shall remainresponsible for the performance of its Sublicensees hereunder including Collegium. The term of any such sublicensewill terminate upon the expiration or the termination of this Agreement.(c) Subject to the terms and conditions of this Agreement, Newco shall not, and Collegium shallcause Newco not to, sublicense any of its rights or obligations under Section 2.1(a) without the express written consentof Depomed (and, in the case of sublicenses granted under Section 2.1(a)(iii) and Section 2.1(a)(iv), without theexpress written consent of Grünenthal), unless such sublicense is to Collegium (the “Collegium Sublicense”). Collegium shall not grant further sublicenses, unless Depomed provides prior written consent.(d) Collegium and Newco shall not, and Collegium shall cause Newco not to, Subcontract any oftheir rights or obligations under Section 2.1(a) without the express written consent of Depomed, unless suchsubcontract is in connection with the use of Third Party sales representatives or distributors (each, a “Third Party SalesRepresentative”) to Commercialize the Products and Line Extensions solely in the Territory, provided that Newco andCollegium shall at all times be responsible and liable to Depomed for any breach of this Agreement by any such ThirdParty Sales Representatives.23 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 2.3 Transfers(a) Assets. Subject to the terms and conditions of this Agreement, effective as of the Closing,Depomed shall, and shall cause Depo NF to, transfer, convey and assign to Newco, and Newco shall, and Collegiumshall cause Newco to, accept and obtain from Depomed and Depo NF, free and clear of all Liens (other than PermittedLiens), all of Depomed’s and Depo NF’s rights, titles and interests in, to or under the properties, rights, interests andassets set forth below (collectively, the “Transferred Assets”):(i) the Transferred Inventory;(ii) the Transferred Domain Names; and(iii) the Transferred Websites.Notwithstanding anything to the contrary in this Agreement, the Transferred Inventory shall be delivered toCollegium, rather than to Newco. For clarity, Depomed and its Affiliates shall retain ownership of the ExcludedAssets.(b) Liabilities. Subject to the terms and conditions of this Agreement, effective as of the Closing,Newco agrees, and Collegium shall cause Newco, to assume and to timely satisfy and discharge the AssumedLiabilities, in each case other than the Retained Liabilities. For clarity, Depomed and its Affiliates shall retainresponsibility for the Retained Liabilities.Section 2.4 RecordsTo the extent not already made available in the Data Room, within ten (10) Business Days of the Closing Date,Depomed shall provide Collegium, at no additional charge, with copies of all of the following records in the possessionof Depomed or any of its Affiliates, whether in hard copy format, electronic format or otherwise, but excluding recordsor files not reasonably separable from documents or databases that do not relate exclusively to the Products or theTransferred Assets (collectively, the “Product Records”):(a) Regulatory Communications relating to the Products between Depomed and a RegulatoryAuthority (or, to the extent in the possession and Control of Depomed, between a Third Party and a RegulatoryAuthority);(b) Regulatory Data;(c) Current manufacturing, stability and release testing documentation for Product Manufactured forthe Territory, which shall include, to the extent in the possession of Depomed, representative master and executedmanufacturing batch records, test methods,24 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. stability protocols, stability results, manufacturing guides, conformance guides and specifications for the Products;(d) a list of suppliers and vendors relating to the Products;(e) a list of Customer and Professional targets of Depomed and Details relating to the Products;(f) a list of distributors relating to the Products;(g) pricing lists, history, calculations and submissions relating to the Products;(h) Promotional Materials relating to the Products;(i) development, quality control and pharmacovigilance records relating to the Products; and(j) historical sales and marketing data and analyses relating to the Products.With respect to the preceding clause (g), the Product Records shall exclude any responsive items which arerelated to government programs identified in the Long Term Collaboration Agreement and for the period of time priorto the Closing Date (except where the terms of the Long Term Collaboration Agreement expressly provide for thetransfer of such items). Depomed will notify Collegium at the time it provides the Product Records to Collegiumwhether Depomed is in possession or control of any of the records or files of the types described in (a)-(j) which arenot reasonably separable from documents or databases that do not relate exclusively to the Products or the TransferredAssets, including a summary of the information contained in such records and files. Upon the request of Collegium,the parties will work in good faith to find a way for Depomed to provide Collegium with a copy of or access to theportions of such records or files relating exclusively to the Products or Transferred Assets which Collegium reasonablydetermines are necessary or useful for the exercise of its rights or performance of its obligations hereunder. In addition,upon the reasonable request of Collegium, Depomed will provide Collegium with a copy of or access to ProductRecords or other Regulatory Data related to the Retained Post-Marketing Commitments.Section 2.5 Limitation on Competing ProductsNewco and its Affiliates shall not, directly or indirectly, develop, manufacture, promote, market, distribute, sellor offer for sale any Competing Product in the Territory during the Term of this Agreement, other than Payment-Bearing Products as contemplated by this Agreement.25 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 2.6 Retention of Rights(a) Depomed hereby expressly reserves the exclusive right (as between the parties) to practice, andto grant licenses under, the Depomed Acuform Patents and the Depomed Product Know-How for any and allpurposes.(b) Except as expressly set forth herein, nothing contained herein shall be deemed to grant Newcoor any of its Affiliates and Sublicensees, including Collegium or its Affiliates, by implication, estoppel or otherwise, alicense or other right or interest in any patent, trademark or other similar property or IP Rights of Depomed or itsAffiliates. Except as expressly set forth herein, nothing contained herein shall be deemed to grant Depomed or any ofits Affiliates, by implication, estoppel or otherwise, a license or other right or interest in any patent, trademark or othersimilar property or IP Rights of Collegium or any its Affiliates.(c) Depomed hereby expressly reserves the exclusive right (as between the parties) to list allOrange Book-Listed Patents with respect to Products. Collegium shall have the exclusive right (as between the parties)to list any Patents, not otherwise retained by Depomed in the preceding sentence, in the Orange Book with respect toLine Extensions. To the extent any Patent may be listed in the Orange Book for both Products and Line Extensions,Depomed shall have the sole right to list such Patent in the Orange Book, and the parties will cooperate with respect tolisting any such Patent.Section 2.7 Negative Covenants(a) Newco and Collegium, on behalf of themselves and their Affiliates, hereby covenant not topractice, and not to authorize or cause any Sublicensee or other Third Party to practice, any Depomed AcuformPatents, Depomed Product Know-How, or Grünenthal IP Rights for any purpose other than as expressly authorized inthis Agreement. Unless otherwise agreed by the parties, Newco and Collegium, on behalf of themselves and theirAffiliates, hereby further covenant not to Commercialize, and not to authorize or cause any Sublicensee or other ThirdParty to Commercialize a Generic Version, including an Authorized Generic, in the Territory, either directly orindirectly through a Third Party, until permitted under Section 2.1(b).(b) Except as otherwise contemplated in the Transition Plan with respect to Detailing by Depomed, Depomed, on behalf of itself and its Affiliates, hereby covenants not to Commercialize, and not to authorize or causeany licensee, sublicensee or other Third Party to Commercialize, a Generic Version or any Competing Product in theTerritory, either directly or indirectly through a Third Party.Section 2.8 Allocation of Purchase Price of Transferred AssetsThe parties will allocate the purchase price (including assumed liabilities) paid for the Transferred Assets forTax purposes (the “Transferred Asset Purchase Price”) in the manner set26 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. forth in Schedule 2.8 (the “Allocation”). The parties covenant and agree (a) to report for Tax purposes the allocationof the Transferred Asset Purchase Price among the Transferred Assets in a manner entirely consistent with theAllocation, as it may be amended upon any adjustment to the calculation of the Transferred Asset Purchase Price, except upon a final determination (within the meaning of Section 1313(a) of the Code) by an applicable TaxingAuthority, (b) that the parties will cooperate with each other in connection with the preparation, execution and filing ofall Tax Returns related to such allocation and will take no position inconsistent with such allocation in the filing of anyTax Return, except upon a final determination (within the meaning of Section 1313(a) of the Code) by an applicableTaxing Authority and (c) that the parties will use commercially reasonable efforts to advise each other regarding theexistence of any Tax audit, controversy or litigation related to such allocation.Section 2.9 Certain Taxes(a) All Transfer Taxes payable in connection with the transfer of the Transferred Assets to Newcounder this Agreement and the Transactions shall be borne and paid one-half by Depomed (or its applicable Affiliate)and one-half by Collegium, provided that Collegium shall be responsible for any such Transfer Taxes resulting fromthe failure to comply with Section 14.5. Such Transfer Taxes shall be paid when due in compliance with applicableTransfer Tax laws by the party that is required by applicable Legal Requirements to pay them, and the other partyshall, subject to receipt of satisfactory evidence of payment thereof, promptly reimburse the other party fifty percent(50%) of the amount. Each party shall reasonably cooperate with the other parties in minimizing the amount of, andobtaining any applicable exemptions with respect to, any such Transfer Taxes.(b) All Tax Returns and other documentation with respect to any Transfer Taxes shall be filed, orcaused to be filed, by the party required to file such Tax Returns or other documentation under applicable LegalRequirements.(c) Any property or similar ad valorem Taxes levied with respect to the Transferred Assets for ataxable period that includes (but does not end on) the Closing Date (“Straddle Period”), if any, shall be apportionedbetween the pre-closing portion of the Straddle Period and the post-closing portion of the Straddle Period based on thenumber of days of such taxable period included in the pre-closing portion of the Straddle Period and the post-closingportion of the Straddle Period. Depomed shall be liable for the amounts of such taxes apportioned to the pre-closingportion of the Straddle Period, and Collegium and Newco shall be liable for the amounts of such Taxes apportioned tothe post-closing portion of the Straddle Period. Within a reasonable period, the parties shall present a statement to theothers setting forth the amount of reimbursement to which each is entitled under this Section 2.9(c), together with suchsupporting evidence as is reasonably necessary to calculate the proration amount. The proration amount shall be paidby the party owing it to the other party within ten (10) days after delivery of such statement.27 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (d) The parties shall reasonably cooperate, and shall cause their respective Affiliates to reasonablycooperate, in filing all Tax Returns and in resolving all examinations, audits, actions and other proceedings relating tothe Business and the Transferred Assets. Newco, Collegium and their Affiliates shall provide Depomed access to(including the right to make copies of), and retain in their possession until the expiration of the applicable statute oflimitations, such books and records relating to Taxes for which Depomed is liable under this Agreement or otherwise.Section 2.10 Risk of Loss; CasualtyPrior to the Closing, any loss or damage to the Transferred Inventory from fire, casualty or otherwise shall bethe sole responsibility of Depomed. Thereafter, any such loss or damage shall be the sole responsibility of Collegium.Section 2.11 Certain Costs(a) All out-of-pocket costs and expenses associated with shipping the Transferred Inventory to alocation designated by Collegium shall be borne and paid by Collegium; provided, however, that if any out-of-pocketcosts or expenses should be incurred by Depomed in connection with shipping any of the Transferred Inventory to alocation designated by Collegium, Collegium shall, subject to receipt of satisfactory evidence of Depomed’s incurrencethereof, promptly pay Depomed its reasonable, customary and documented out-of-pocket costs and expenses.(b) Subject to the terms and conditions of the applicable CMO Supply Agreement, all out-of-pocketcosts, expenses and Liabilities incurred directly by or on behalf of Depomed or AbbVie Ltd. (“AbbVie”) in connectionwith the transfer of all technology and equipment related to the Manufacture of Nucynta® ER from the currentmanufacturer (Janssen Ortho LLC and Janssen Pharmaceuticals, Inc. (collectively, “Janssen”)) to AbbVie, ascontemplated in Exhibit B to that certain Development and Manufacturing Services Agreement, by and betweenDepomed and AbbVie, dated as of June 15, 2016 (the “Manufacturing Tech Transfer Plan”) (including all of suchcosts and expenses associated with the following (regardless of whether or not they are expressly contemplated in theManufacturing Tech Transfer Plan): removing and moving any equipment, materials or technology from Janssen’scurrent manufacturing facility in Puerto Rico to AbbVie’s designated location in Puerto Rico, implementation of theaforementioned technology in AbbVie’s facilities and the associated requirements imposed by any RegulatoryAuthority (e.g., to perform bioequivalence studies)) will be borne and paid by Depomed when due, and all Liabilitiesarising in connection therewith shall be borne by Depomed; provided, however, that if Depomed incurs any costs,expenses or Liabilities in excess of the costs and expenses associated with the aforementioned activities as a result ofany modifications or additions made to the Manufacturing Tech Transfer Plan at the request of Collegium after theClosing Date, then Collegium shall, subject to receipt of satisfactory evidence of Depomed’s incurrence thereof,promptly pay Depomed such incremental28 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. amounts. For clarity, the parties agree and acknowledge that any modifications of the Manufacturing Tech TransferPlan made at the request of Collegium shall be subject to the prior written consent of Depomed, which consent shallnot be unreasonably withheld, conditioned or delayed.Section 2.12 Closing(a) The Closing shall take place at 12:01 A.M. Pacific Standard Time on January 1, 2018, or suchother date as mutually agreed by the parties in writing (the “Closing Date”), provided that, as of the Closing Date: (i)the parties have actual knowledge that all applicable waiting periods have expired or have been terminated under theHSR Act, and (ii) the actions and conditions set forth in Section 2.12(b) and Section 2.12(c) have been completed, orfulfilled, as applicable. The Closing shall take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page MillRoad, Palo Alto, California (including any Persons connected by remote access to the Closing) or at such otherlocation as the parties may mutually agree in writing.(b) At the Closing, Depomed shall deliver, or cause to be delivered, to Collegium the followinginstruments and documents:(i) A good standing certificate from the Secretary of State of California for Depomed;(ii) A certificate executed by an authorized officer of Depomed certifying that (A) therepresentations and warranties of Depomed contained in the Agreement are true and correct on and as of the ClosingDate as though made on and as of the Closing Date (other than representations and warranties made as of a specifieddate, which shall be true and correct as of the date specified), except for breaches and inaccuracies of suchrepresentations and warranties (without giving effect to any limitation as to “materiality” or “material adverse effect” setforth therein, but giving effect to any dollar threshold specified therein) that would not reasonably be expected to havea material adverse effect on the ability of Depomed to consummate the Transactions, and (B) Depomed shall haveperformed and complied in all material respects with all of its covenants and agreements under the Agreement and theother Transaction Documents to be complied with and performed by Depomed at or before the Closing.(iii) A certificate executed by an authorized officer of Depo NF certifying that the rights andlicenses necessary to grant and delegate the rights and licenses contemplated in this Agreement (excluding the rightsand licenses not applicable to Depo NF) have been granted by Depo NF to Depomed.(iv) A certificate of the Secretary or an Assistant Secretary of Depomed enclosing a copy of(A) its articles of incorporation certified by the Secretary of State of California, (B) its bylaws and (C) if applicable,board of director resolutions authorizing29 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Depomed to enter into this Agreement and the other Transaction Documents and to consummate the Transactions;(v) A bill of sale, in substantially the form attached hereto as Exhibit C (the “Bill of Sale”),dated as of the Closing Date, executed by Depomed;(vi) A Domain Name Assignment, executed by Depomed;(vii) A Trademark License Agreement, executed by Depomed;(viii) The Consent Agreement, executed by Grünenthal and Depomed;(ix) The Control Agreement, dated as of the Closing Date, executed by Depomed;(x) The Master Letter of Credit Agreement, dated as of the Closing Date, executed byDepomed;(xi) The Long Term Collaboration Agreement, dated as of the Closing Date, executed byDepomed;(xii) The Collateral Agreement, dated as of the Closing Date, executed by Depomed; and(xiii) The Transition Services Agreement, dated as of the Closing Date, executed byDepomed.(c) At the Closing, Collegium or Newco, as applicable, shall (1) deliver to Depomed theTransferred Inventory Cost, the Upfront Payment and the Collegium Prepaid Business Expense Allocation by wiretransfer of immediately available funds, in accordance with written instructions given by Depomed to Collegium notless than two (2) Business Days prior to the Closing Date, and (2) deliver, or cause to be delivered, to Depomed thefollowing instruments and documents:(i) A good standing certificate from the Secretary of the Commonwealth of Virginia forCollegium;(ii) A good standing certificate from the Secretary of State of Delaware for Newco;(iii) A certificate executed by an authorized officer of Collegium certifying that (A) therepresentations and warranties of Collegium and Newco contained in the Agreement are true and correct on and as ofthe Closing Date as though made on and as of the Closing Date (other than representations and warranties made as of aspecified date, which shall30 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. be true and correct as of the date specified), except for breaches and inaccuracies of such representations andwarranties (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth therein, butgiving effect to any dollar threshold specified therein) that would not reasonably be expected to have a material adverseeffect on the ability of Collegium to consummate the Transactions, and (B) Collegium and Newco shall haveperformed and complied in all material respects with all of its covenants and agreements under the Agreement and theother Transaction Documents to be complied with and performed by Collegium at or before the Closing.(iv) A certificate of the Secretary or an Assistant Secretary of Collegium enclosing a copy of(A) its articles of incorporation certified by the Secretary of the Commonwealth of Virginia, (B) its bylaws and (C) ifapplicable, board of director resolutions authorizing Collegium to enter into this Agreement and the other TransactionDocuments and to consummate the Transactions;(v) A certificate of the Secretary or an Assistant Secretary of Newco enclosing a copy of(A) its certificate of formation certified by the Secretary of the State of Delaware, (B) its operating agreement, insubstantially the form attached hereto as Exhibit D, and (C) if applicable, board of director resolutions and the memberconsent, authorizing Newco to enter into this Agreement and the other Transaction Documents and to consummate theTransactions;(vi) The Bill of Sale, dated as of the Closing Date, executed by Newco;(vii) The Domain Name Assignment dated as of the Closing Date, executed by Newco;(viii) The Trademark License Agreement, dated as of the Closing Date, executed by Newco;(ix) The Joinder Agreement, executed by Newco;(x) The Control Agreement, dated as of the Closing Date, executed by Newco andCollegium;(xi) The Master Letter of Credit Agreement dated as of the Closing Date, executed byNewco and the Financial Institution;(xii) The Letter of Credit, dated as of the Closing Date, executed by Newco and theFinancial Institution;(xiii) The Long Term Collaboration Agreement, dated as of the Closing Date, executed byCollegium and Newco;31 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (xiv) The Collateral Agreement, dated as of the Closing Date, executed by Collegium andNewco;(xv) The Pledge Agreement, dated as of the Closing Date, executed by Collegium andNewco;(xvi) The Transition Services Agreement, dated as of the Closing Date, executed byCollegium;(xvii) The Collegium Sublicense, dated as of the Closing Date, executed by Collegium andNewco;(xviii) The Intercreditor Agreement, dated as of the Closing Date, executed by Collegium,Newco and Silicon Valley Bank; and(xix) Executed exemption certificates identified by Depomed prior to the Closing.ARTICLE 3TRANSITION PLANSection 3.1 Transition PlanNo later than five (5) Business Days following the Effective Date, a Transition Team shall be established bythe parties (the “Transition Team”) and shall be comprised of six (6) members, three (3) of whom shall be appointed byNewco and Collegium and three (3) of whom shall be appointed by Depomed. The Transition Team shall discuss, andto the extent necessary and mutually agreed by the parties, meet in person, to develop and draft a Transition Plan thatoutlines and facilitates the processes and mechanisms for transferring the Products and the Transferred Assets fromDepomed to Newco and Collegium, in accordance with this Agreement, on mutually agreeable terms and conditionsconsistent with the terms of this Agreement (the “Transition Plan”). The parties agree that the Transition Plan shallprovide that Depomed’s services provided thereunder shall be at no charge to Collegium; provided that Collegium shallreimburse Depomed for any reasonable, documented out-of-pocket costs and expenses incurred by Depomed withrespect to such services. The parties agree to (a) formulate the Transition Plan as soon as reasonably practical and notlater than the Closing Date and (b) use commercially reasonable efforts to perform their respective obligations as setforth in the Transition Plan within the timelines set forth therein. The Transition Plan shall provide, without limitation,for Depomed to continue supporting the Products on a limited basis dependent upon the then-current Depomed SalesForce, to be described in the Transition Plan, until January 19, 2018. The parties will discuss in good faith anychanges to the Transition Plan that become required or advisable. Except as otherwise set forth in the Transition Plan,the Ancillary Agreements or elsewhere in this Agreement, each party shall be responsible for its respective costs andexpenses incurred in performing the Transition Plan. In connection with developing or implementing the Transition32 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Plan, the parties may elect to enter into additional agreements on mutually acceptable terms as the parties deemreasonably necessary or advisable.The parties acknowledge that implementation of the Transition Plan will require the cooperation and/or consentof Third Parties as indicated therein, and, as a result, the timing of such implementation is not within the sole control ofthe parties.Section 3.2 Manufacture and Supply Arrangements(a) Manufacture by CMO. Subject to Section 2.1(b), all Manufacturing of the Products (excludingLine Extensions and NUCYNTA® oral solution, which is not currently Commercialized in the Territory) (the“Supplied Products”) (including the components, intermediates and active pharmaceutical ingredients of such SuppliedProducts, collectively, the “Product Materials”) for Commercialization in the Territory will be performed by one ormore established, generally reliable Third Party contract manufacturers of pharmaceutical products engaged byDepomed (each, a “CMO”).(b) Notice by Depomed. Depomed shall promptly inform Collegium in the event that, prior to theClosing Date, Depomed becomes aware of any matters which would reasonably be expected to have an adverseimpact on the ability of the applicable CMO to supply Supplied Products for Commercialization in the Territory in atimely manner.(c) Supply by Depomed. Depomed has obtained and will continue to use commercially reasonableefforts to obtain supply of the Supplied Products for Commercialization in the Territory pursuant to one or more CMOSupply Agreements, and from and after the Closing Date shall supply the Supplied Products in finished goods form toCollegium on a pass-through basis, under the terms and conditions applicable to the supply of the Supplied Products,as applicable, to Depomed under the applicable CMO Supply Agreements. Collegium and its Affiliates and any otherSublicensees shall purchase all of their Supplied Product requirements for Commercialization in the Territory fromDepomed in accordance with the terms and conditions of the applicable CMO Supply Agreements, unless otherwiseagreed to by Collegium and Depomed. Collegium and its Affiliates agree that all Supplied Products suppliedhereunder will be solely for Commercialization in the Territory by or on behalf of Collegium and its Affiliates and anyother Sublicensees, as permitted hereunder and in accordance with applicable Legal Requirements. Depomed shallobtain such supply for Collegium and its Affiliates and any other Sublicensees from the applicable CMO(s) and shallcooperate reasonably to extend to Collegium, its Affiliates and any other Sublicensees all of the benefits of such CMOSupply Agreements with respect to such supply, including with respect to forecasting, ordering, delivery, inspectionand audit rights, warranties, specifications and (subject to Section 3.2(c)(viii) below) changes thereto, subject toCollegium’s compliance with the corresponding provisions of such CMO Supply Agreements. In addition, Depomedshall use commercially reasonable efforts to pursue any rights and remedies Depomed may have under the CMOSupply Agreements for the benefit of Collegium or any of its Affiliates or any other33 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Sublicensees with respect to supply of the Product Materials or Supplied Products for Commercialization in theTerritory, as reasonably requested by Collegium in writing in its sole discretion, provided that Collegium shallreimburse Depomed for any reasonable, documented out-of-pocket expenses incurred by Depomed with respect topursuit of such rights and remedies. Any such written request by Collegium to Depomed must be delivered within theapplicable time frame provided for Depomed to exercise such rights or remedies in the applicable CMO SupplyAgreement. To the extent Depomed is permitted to do so under a CMO Supply Agreement, Depomed will delegate orassign to Collegium the right to enforce the terms of a CMO Supply Agreement against the applicable CMO to theextent such enforcement is related to any Supplied Product ordered by Collegium under such CMO SupplyAgreement. In connection with such supply:(i) Collegium shall provide Depomed with all forecasts and purchase orders for anyProduct Materials or Supplied Products in the form and content, and at least five (5) Business Days prior to theapplicable deadline, specified in the applicable CMO Supply Agreement, which forecasts and purchase orders shall bebinding upon Collegium to the extent the same are binding on Depomed as provided in the applicable CMO SupplyAgreement, and Depomed shall forward the same to the applicable CMO not later than such applicable deadline.(ii) Promptly following Collegium’s receipt of its own NDC Numbers for the Products, andin any event not later than October 31, 2018, Collegium shall provide to Depomed a new label and package insert foreach Product bearing Collegium’s name and such NDC Numbers, in compliance with applicable Legal Requirementsand in such electronic format as requested by Depomed or the applicable CMO.(iii) The price charged by Depomed for the Manufacture and supply of each SuppliedProduct in finished goods form hereunder shall equal the sum of the transfer price charged for such Supplied Productby the applicable CMOs plus any shipping and packaging expenses, insurance expenses, Taxes, duties, imposts andother amounts charged specifically for such Supplied Product by the applicable CMOs pursuant to the applicable CMOSupply Agreements, plus any other Taxes, duties, imposts or similar charges or fees incurred by Depomed inconnection with the Manufacture and supply of such Supplied Product.(iv) The price charged by Depomed for the manufacture and supply of any other ProductMaterial purchased separately hereunder, including for use in the Manufacture of any Supplied Product, such as API,shall equal the sum of the transfer price charged for such Product Material by the applicable CMOs plus any shippingand packaging expenses, insurance expenses, Taxes, duties, imposts and other amounts charged specifically for suchProduct Material by the applicable CMOs pursuant to the applicable CMO Supply Agreements, plus any other Taxes,duties, imposts or similar charges or fees incurred by Depomed in connection with the manufacture and supply of suchProduct Material.34 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (v) Collegium shall have financial responsibility for any other amounts due pursuant to theCMO Supply Agreements with respect to the Manufacture and supply of Supplied Products for Commercialization inthe Territory, including any minimum purchase obligations, provided that any Supplied Products Manufactured andsupplied for Commercialization outside the Territory pursuant to the CMO Supply Agreements will be included in thecalculation of any minimum purchase obligations.(vi) Collegium shall pay the foregoing amounts referenced in subsections (iii), (iv) and (v) ofthis Section 3.2(c) with five (5) Business Days following receipt of any invoice therefor from Depomed, whichamounts will be paid in U.S. Dollars, by wire transfer, pursuant to the instructions of Depomed. Collegium shall alsopay to Depomed any interest assessed on late payments (to the extent attributable to Collegium’s failure to payDepomed within the aforementioned time period) under the applicable CMO Supply Agreements.(vii) Collegium shall inspect all shipments of Product Materials and Supplied Products andprovide Depomed with written notice of any defects or other non-conformities at least five (5) Business Days prior tothe applicable deadline specified in the applicable CMO Supply Agreement, and Depomed shall forward the same tothe applicable CMO not later than such applicable deadline. Any disputes regarding any defects or other non-conformities of Product Materials or Supplied Products will be resolved in accordance with the provisions of theapplicable CMO Supply Agreement.(viii) To the extent permitted under the applicable CMO Supply Agreement, title to theSupplied Products ordered hereunder by or on behalf of Collegium shall transfer to Collegium or its designatedrecipient upon fulfillment of the applicable CMO’s delivery obligation pursuant to the applicable CMO SupplyAgreement (which delivery is directed to Collegium or its designated recipient) and at no time shall title to suchSupplied Products transfer to Depomed.(ix) If Collegium requests that modifications be made to any Supplied Product or ProductMaterials supplied by the applicable CMO that do not apply to such Supplied Product or Product Materials supplied foruse by Depomed (or the manufacture, storage or other aspects of such Supplied Product or Product Materials), thenDepomed shall cooperate reasonably with Collegium in Collegium’s efforts to cause such CMO to implement suchmodifications for Collegium’s benefit, and to supply such modified Supplied Product or Product Materials toCollegium under a separate supply agreement to be negotiated between Collegium and such CMO, provided thatCollegium shall reimburse Depomed for any reasonable, documented out-of-pocket costs incurred by Depomed inproviding such assistance.(x) Depomed has provided to Collegium a complete and correct copy of each CMO SupplyAgreement existing as of the Effective Date, and will provide to Collegium a complete and correct copy of any newCMO Supply Agreements entered into by Depomed and35 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. a CMO during the Term within thirty (30) days after the execution thereof, provided all such CMO SupplyAgreements will be treated as Depomed’s Proprietary Information under this Agreement. Depomed shall not, and shallnot permit or authorize its Affiliates to, amend, modify, terminate or cause to be terminated any CMO SupplyAgreement or release or waive its rights under any CMO Supply Agreement in any manner that would reasonably beexpected to be materially adverse to Collegium’s rights or obligations under this Agreement without the prior writtenconsent of Collegium, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstandinganything herein to the contrary, Depomed shall not assign any CMO Supply Agreement, other than to an Affiliate ofDepomed or otherwise in connection with an assignment of this Agreement in accordance with Section 17.9, withoutCollegium’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Prior toentering into any new CMO Supply Agreement, Depomed shall provide Collegium with reasonable advance noticethat such new agreement is being negotiated as well as a draft copy to Collegium and consider in good faith anyreasonable comments or suggestions with respect to the provisions thereof that Collegium may provide (it beingunderstood that Depomed is not obligated to obtain Collegium’s approval of any such new CMO Supply Agreementor the provisions thereof, unless such new CMO Supply Agreement includes any terms or conditions that provide forany material increase in the price of any Supplied Products or Product Materials or that otherwise would materiallyaffect the overall price of any Supplied Products (e.g., minimum purchase commitments), which Collegium reasonablydetermines would reasonably be expected to be materially adverse to its interests under this Agreement, in which caseCollegium’s prior written approval will be required). Depomed shall, and shall cause its Affiliates to, fulfill all of itsobligations, including payment obligations, under any CMO Supply Agreement. Depomed shall promptly notifyCollegium of any default under or breach of any CMO Supply Agreement by Depomed or any of its Affiliates. In theevent that Depomed, or any of its Affiliates, shall fail to make any payment when due or any other default or breacharises under any CMO Supply Agreement, Collegium shall have the right (but not the obligation) to make suchpayment or otherwise cure such default or breach on behalf of Depomed or its Affiliate. In such event, Depomed shallpromptly reimburse Collegium any such amounts paid and/or costs and expenses incurred by Collegium or, atCollegium’s election, Collegium may offset such amounts paid and/or costs and expenses incurred by Collegiumagainst any amounts payable to Depomed hereunder.(xi) Except in the event of Material Supply Failure as set forth in Section 7.3(f), and withoutlimiting any of Depomed’s obligations under Section 3.2(c), Depomed will not be liable for any default or failure ofsupply of any Supplied Product or other Product Material to the extent due to a default or failure of supply of theapplicable CMO.(xii) The objective of this Section 3.2 is that Collegium be able to obtain supply of theSupplied Products produced by the applicable CMO in sufficient quantities, on such timelines, at such prices andotherwise as is reasonably necessary and customary in the pharmaceutical industry for Collegium to Commercialize theSupplied Products in the Territory in accordance with and as contemplated by this Agreement. If for any reasonCollegium or36 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Depomed believes that the provisions of this Section 3.2 are insufficient for purposes of such supply (e.g., in substanceor clarity), the parties shall bring such matter to the attention of the JMC for discussion and, if requested either byDepomed or Collegium following such discussion, Depomed and Collegium shall negotiate in good faith and enterinto a supplemental agreement containing such provisions as are appropriate and reasonable to fulfill such objective.(d) Coordination. From and after the Closing Date, Collegium shall coordinate its purchase ordersfor the Supplied Products so as to transition to Collegium’s NDC Numbers as soon as practicable after the ClosingDate, and in any event not later than October 31, 2018. Depomed and Collegium will cooperate to submit SuppliedProduct labels bearing Collegium’s NDC Numbers to the FDA as soon as practicable after the Closing Date, ascontemplated by the Transition Plan.(e) Joint Manufacturing Committee. In order to coordinate the detailed activities of Depomed andCollegium under the Transition Plan, including with regard to the Manufacturing Tech Transfer Plan, and to oversee,coordinate and manage the parties’ respective rights and obligations with regard to the Manufacture and supply of allProducts, Line Extensions and Product Materials hereunder, Depomed and Collegium shall form a joint manufacturingcommittee (“JMC”) within thirty (30) days after the Closing Date. The JMC shall consist of four (4) members, withDepomed and Collegium each designating two (2) members, each of whom shall be an employee of such party (otherthan a party’s respective Senior Executives). Each party may replace any or all of its member representatives on theJMC at any time upon written notice to the other party. Depomed and Collegium may designate a substitute employeeto temporarily attend and perform the functions of such party’s designee at any meeting of the JMC. The JMC shallremain in existence for as long as Depomed is responsible for supplying all Products or Line Extensions under thisAgreement.(i) Responsibilities. The JMC shall perform the following functions:(1) Review and discuss the progress of manufacturing activities with respect to theProduct Materials, Products and Line Extensions, including any significant production, quality or timing difficultiesencountered or anticipated to be encountered by Depomed, Collegium or any CMO in connection therewith;(2) Review and attempt to determine and resolve with the applicable CMO the rootcause of any Material Supply Failure;(3) Review and discuss any feedback from Collegium with regards to anyproduction or quality issues related to the Products or Line Extensions at the CMO level, including challenges faced byCollegium in obtaining supply of the Products or Line Extensions produced by the CMOs in sufficient quantities, onsuch timelines, at such prices and otherwise as is reasonably necessary and customary for Collegium to Commercializethe Products and Line Extensions in the Territory;37 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (4) Assess the need for, and review the details of, any proposed amendments to theManufacturing Tech Transfer Plan;(5) Review and discuss the regulatory strategy and interactions with RegulatoryAuthorities, including Regulatory Communications, with respect to the Products and Line Extensions as it relates toManufacturing activities, including the results of any inspections by any Regulatory Authority of any CMO facility;(6) Assess the need to conduct any inspections of CMO facilities for purposes ofvalidating and ensuring required quality and legal requirements are met by the applicable CMO;(7) Review any changes in circumstances or market conditions which are negativelyaffecting or are reasonably likely to negatively affect Collegium’s ability to meet the minimum purchase obligationcontained in any CMO Supply Agreement; and(8) Assess the need for establishing any alternative or back-up sources of supply ofany Products, Product Materials or Line Extensions.(ii) Meetings. The JMC shall convene in person or remotely via electronic means at leastonce each calendar quarter, and more frequently (A) as mutually agreed between Depomed and Collegium and (B) asrequired to resolve disputes or disagreements between the parties concerning matters within the JMC’s purview;provided that Depomed and Collegium shall endeavor to have the first meeting of the JMC not later than thirty (30)days after its establishment.(iii) Decisions. The JMC may make decisions with respect to any subject matter within theJMC’s responsibility and functions as set forth in Section 3.2(e)(i). All such decisions shall be decided by unanimousresolution at the JMC; provided that, (A) in the event of deadlock at the JMC, such matter shall be escalated to theSenior Executives for resolution and (B) in the event that Depomed and Collegium are unable to resolve such deadlockthrough diligent review and deliberation by the Senior Executives within thirty (30) days from the day that the issuewas first referred to them, then Depomed shall have final decision-making authority with regard to the matter subject tothe deadlock.(iv) COLLEGIUM, ON BEHALF OF ITSELF AND ITS AFFILIATES AND ANYPERMITTED SUBLICENSEES, HEREBY ACKNOWLEDGES AND AGREES THAT ITS RIGHTS ANDREMEDIES WITH RESPECT TO THE SUPPLY OF PRODUCT MATERIALS AND PRODUCTS FORCOMMERCIALIZATION IN THE TERRITORY HEREUNDER SHALL BE LIMITED TO THE RIGHTS ANDREMEDIES OF DEPOMED UNDER THE CMO SUPPLY AGREEMENTS, AS APPLICABLE, ANDDEPOMED’S MAXIMUM LIABILITY FOR ANY REASON WHATSOEVER UNDER THIS AGREEMENTFOR SUPPLYING PRODUCT MATERIALS AND PRODUCTS FOR COMMERCIALIZATION IN THETERRITORY TO COLLEGIUM AND ITS AFFILIATES38 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. AND PERMITTED SUBLICENSEES, OTHER THAN AS A RESULT OF DEPOMED’S GROSSLYNEGLIGENT OR WILLFUL ACTS OR OMISSIONS IN CONNECTION WITH ANY APPLICABLE CMOSUPPLY AGREEMENTS, SHALL NOT EXCEED THE TOTAL LIABILITY OF THE CMO UNDER THEAPPLICABLE CMO SUPPLY AGREEMENT.(v) Cooperation. In the event that (A) (1) a CMO breaches its obligations pursuant to theapplicable CMO Supply Agreement such that Depomed is unable to fulfill its obligations to supply the applicableSupplied Product(s) to Collegium at any time during the Term, and (2) Depomed exercises its right to terminate suchCMO Supply Agreement based upon such breach or (B) Collegium requests that Depomed establish an alternative orback-up CMO to supply the Supplied Product hereunder, then Depomed will, at Collegium’s cost and expense,cooperate with Collegium to identify such a CMO and, at the reasonable direction of Collegium, shall qualify andengage directly (i.e., as the contracting party) an alternative CMO to supply such Supplied Product(s) on commerciallyreasonable terms, in accordance with Section 3.2(c)(x) (as such section pertains to new CMO Supply Agreements). For the avoidance of doubt, the establishment of any alternative or back-up CMO pursuant to this Section 3.2(e)(v)and Collegium’s purchase of any Supplied Product(s) from such CMO will not relieve Collegium of any of itsobligations (including any minimum purchase obligations) under any other existing CMO Supply Agreement.ARTICLE 4PRODUCT COMMERCIALIZATIONSection 4.1 DiligenceDuring the Term, Collegium, either directly or through its Affiliates or any other Sublicensees, shall useCommercially Reasonable Efforts to Commercialize the Products in the Territory. Collegium will cause the CollegiumSales Force and Collegium employees and agents acting on Collegium’s behalf to comply with this Agreement and allapplicable Legal Requirements in connection with the Commercialization of the Products. It is understood, andCollegium agrees, that it will be accountable for the acts or omissions of the Collegium Sales Force and its employeesand agents.Section 4.2 Commercial TermsSubject to the terms and conditions of this Agreement, including Section 4.1, Section 4.9, Section 6.2 andSection 9.7(b), from and after the Closing Date, Collegium shall have sole authority over and control of theCommercialization of the Products and Line Extensions in the Territory, including all matters relating to the Promotion,sale, distribution and pricing (including the negotiation of pricing with Regulatory Authorities and other Third Parties,as applicable) and other terms of sale of the Products and Line Extensions. It is understood, and Collegium agrees,39 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. that Depomed will not provide medical science liaison (MSL) support for Collegium’s Commercialization of theProducts or Line Extensions in the Territory.Section 4.3 Representations to CustomersCollegium will not make any representations to Professionals, customers or others regarding Depomed or theProducts which Collegium knows are false or misleading and will not make any representations, warranties orguarantees with respect to the specifications, features or capabilities of the Products that are not consistent with theapplicable then-current FDA approved labeling and package insert. Collegium agrees to undertake timely andcomplete corrective action for any deviations from this Section 4.3.Section 4.4 Staffing; TrainingAs between the parties, Collegium shall be solely responsible for all costs and expenses of compensating itsSales Representatives. Consistent with applicable Legal Requirements, Collegium shall pay incentive compensation toits Sales Representatives with respect to the Products which are consistent with Collegium’s incentive compensationplan for Collegium’s other products. Collegium shall periodically provide training to each of its Sales Representatives,and shall update its training materials as appropriate.Section 4.5 Promotional Materials; Educational Materials(a) Collegium and its Affiliates shall, at its and their own expense, have the right to create, develop,produce or otherwise obtain, and utilize sales, promotional, advertising, marketing, educational and training materials(“Promotional Materials”) to support the Promotion and sales of the Products and Line Extensions, including the rightto modify and create derivative works of the Promotional Materials used by Depomed in connection with the Productsprior to the Closing Date, provided that any such modified and derivative forms do not include any DepomedNames. Such Promotional Materials may include, by way of example, detailing aids; leave behind items; journaladvertising; educational programs; formulary binders; appropriate reprints and reprint carriers; product monographs;patient support kits; convention exhibit materials; direct mail; market research surveys and analysis; training materials;and scripts for telemarketing and teleconferences. All Promotional Materials created and used by, or on behalf of,Collegium and its Affiliates shall be in strict compliance with all applicable Legal Requirements, including but notlimited to FDA’s regulations and guidelines related to prescription drug promotion.(b) Collegium shall own all copyrights to all Promotional Materials that are created during the Termof this Agreement in connection with and to the extent relating to the Promotion of the Products or Line Extensions.40 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 4.6 Medical Inquiries(a) The parties acknowledge that each may receive requests for medical information concerning theProduct and Line Extensions from members of the medical and paramedical professions and consumers regarding theProduct and Line Extensions.(b) From and after the Closing Date, any such requests will be referred to Collegium’s medicaldepartment, and, as between the parties, Collegium shall be solely responsible for responding to such requests incompliance with all applicable Legal Requirements and the Product NDAs. Collegium shall be obligated for any costsassociated with its responsibilities pursuant to this Section 4.6.Section 4.7 Trademarks(a) Subject to this Section 4.7 and applicable Legal Requirements, Collegium shall have the right touse the Collegium Trademarks, and include the name “Collegium” or any variation thereof in connection with itsCommercialization activities and any materials related thereto.(b) During the Term, subject to the terms and conditions of this Agreement, Collegium herebygrants to Depomed a non-assignable, non-sublicensable (except to any Third Party Sales Representatives), non-exclusive, royalty-free right and license to use the Collegium Trademarks in the Territory solely in connection withDepomed’s Detailing of the Products in the Territory in accordance with this Agreement in the event Depomed electsto Detail the Products as set forth in Section 4.9. Depomed recognizes that Collegium owns the entire right, title andinterest in and to the Collegium Trademarks and shall not at any time, during or after the Term, do or knowingly sufferto be done any act or thing which will in any way impair the rights of Collegium in or to the CollegiumTrademarks. Depomed acknowledges and agrees that it shall not acquire and shall not claim any right (except asexpressly granted under this Section 4.7(b) or Section 4.9), title or interest in or to the Collegium Trademarks by virtueof the rights granted under this Agreement or through Depomed’s use of the Collegium Trademarks, and the partiesagree that all goodwill and improved reputation associated with the Collegium Trademarks arising out of the usethereof by Depomed shall inure to the benefit of Collegium. Depomed shall as soon as practicable notify Collegium ofany apparent infringement by a Third Party of any of the Collegium Trademarks of which Depomed becomesaware. Depomed agrees to cooperate with Collegium to enable Collegium to verify that the use of the CollegiumTrademarks is consistent with Collegium’s quality standards.Section 4.8 Domain Names and WebsiteDepomed shall cooperate with Collegium and follow Collegium’s reasonable instructions in order to effect thetransfer of the Transferred Domain Name registrations, the hosting provider account(s) for the Transferred DomainNames and the Transferred Websites (including any third party content contained therein which Depomed isauthorized to transfer to Collegium) promptly41 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (and in any event within thirty (30) days) after the Closing Date. Specifically with respect to the Transferred DomainNames, Depomed agrees to prepare and transmit the necessary InterNic Registrant Name Change Agreement (RNCA)and or to correspond with InterNic to authorize transfer of the Transferred Domain Names, effective as of the ClosingDate.Section 4.9 Election by Depomed to Detail in the Territory(a) Depomed may elect, at any time during the Term, to have the Depomed Sales Force Detail theProducts directly to Professionals in the Territory who are not on any of Collegium’s then-current call plans withrespect to the Products.(b) If Depomed desires to make this election and to use the Depomed Sales Force for this purpose:(i) Depomed will inform Collegium at least six (6) months in advance of thecommencement of Details by the Depomed Sales Force. During such six (6) month period, Collegium shall provideDepomed with a list of Professionals in the Territory on Collegium’s then-current call plans to be Detailed by theCollegium Sales Force so as to avoid overlap with Detailing performed by the Depomed Sales Force. To that end, theparties shall review and discuss any changes made by Collegium to its call plan on an annual basis so to ensure thatthey continue to coordinate their respective Detailing of the Products to Professionals in the Territory.(ii) Depomed may purchase from Collegium, at Collegium’s actual out-of-pocket costs ofreproduction and shipment, copies of any Promotional Materials created by Collegium for the Products that are inCollegium’s possession or Control. Upon Depomed’s request, Collegium will provide to Depomed electronic copiesof such Promotional Materials, which Promotional Materials may be modified for use by Depomed, and Depomed maycreate and develop its own Promotional Materials for use by the Depomed Sales Force (“Depomed PromotionalMaterials”). Depomed shall provide Collegium with the requisite number of copies of the final printed form of suchDepomed Promotional Materials in a timely manner so as to allow Collegium to satisfy its obligation to file suchDepomed Promotional Materials with the FDA prior to the first use by the Depomed Sales Force of such DepomedPromotional Materials, if applicable, and, upon request by Depomed, Collegium shall make such filing with the FDAwithin five (5) Business Days of its receipt of such copies.(iii) Depomed may purchase from Collegium, at Collegium’s actual out-of-pocket costs ofreproduction and shipment, copies of training materials developed and Controlled by Collegium related to the Productsfor use by Depomed in the training of the Depomed Sales Force. Depomed shall be responsible for training of theDepomed Sales Force, and may, at its own expense, develop training materials for the Depomed Sales Force in othermedia or forms.42 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (iv) Prior to the initiation of any Detailing of Products by Depomed, the parties shall enterinto a reasonable and customary pharmacovigilance agreement on mutually acceptable terms.(v) Depomed shall be solely responsible for the costs and expenses related to any activitiesof the Depomed Sales Force, including for all compensation payable to the Depomed Sales Force in connection withtheir Detailing of the Products, costs for Depomed Promotional Materials, and training or training materials or thepurchase from Collegium of Promotional Materials for the Depomed Sales Force. Without limiting the foregoing,Depomed shall be solely responsible for all taxes, benefits, withholding, worker's compensation, unemploymentinsurance and similar requirements pertaining to its Depomed Sales Force, and no member of the Depomed SalesForce shall be deemed an agent or employee of Collegium or have any authority to bind or act on behalf of Collegium.(vi) Depomed will cause the Depomed Sales Force and Depomed employees and agentsacting on Depomed’s behalf (a) to comply with this Agreement and all applicable Legal Requirements in connectionwith the Promotion of the Products and (b) not to make any representations to Professionals, customers or othersregarding the Products which Depomed knows are false or misleading and will not make any representations,warranties or guarantees with respect to the specifications, features or capabilities of the Products that are not consistentwith the applicable then-current FDA approved labeling and package insert. It is understood, and Depomed agrees,that it will be accountable for the acts or omissions of its employees and agents and agrees to undertake timely andcomplete corrective action for any deviations from this Section 4.9(b)(vi).(c) For the avoidance of doubt, Collegium and its Affiliates shall book all sales of the Products inthe Territory, including Products Detailed by the Depomed Sales Force pursuant to this Section 4.9. Collegium and itsAffiliates shall also be solely responsible for entering into any contracts and other arrangements with any Personregarding the sale of Products, and for establishing and approving the form, content and terms and conditions thereof,including any discount, allowance, rebate, chargeback or other term granted therein, including with respect to allProducts Detailed by the Depomed Sales Force hereunder. Further, unless otherwise expressly agreed by the parties inthe Transition Plan or by Collegium, Depomed shall not, during the Term, Detail the Products directly to Professionalsin the Territory who are on any of Collegium’s then-current call plans with respect to the Products.ARTICLE 5REGULATORY AFFAIRSSection 5.1 Authorized Agent(a) From and after the Closing Date, Depomed shall appoint Collegium as its authorized agentduring the Term for regulatory activities relating to Products in the Territory, in accordance with the terms andconditions described in this Agreement. Depomed shall43 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. provide written notification to FDA, including any specific offices and reviewing divisions within FDA as needed, andother applicable Regulatory Authorities of the appointment of Collegium as its authorized agent within fifteen (15)days after the Closing Date. This written notification shall specify: (i) the scope of the authorized agency, (ii) thenames and contact information for the responsible individuals at Collegium who shall have the authority tocommunicate with FDA as Depomed’s authorized agent, (iii) that this authorized agency shall remain in effect untilwritten notification modifying or terminating the authorized agency is provided to FDA or the applicable RegulatoryAuthority by Depomed, and (iv) any other information requested by FDA or the applicable Regulatory Authority tomake effective the appointment of Collegium as Depomed’s authorized agent. Collegium agrees to cooperate, asrequired, to make effective its appointment as Depomed’s authorized agent, and to make effective the elimination ofsuch appointment upon termination or expiration of this Agreement (to the extent that notification from Depomed isinsufficient).(b) As Depomed’s authorized agent, Collegium shall not take any action with respect to Productsthat could reasonably be expected to have an adverse impact upon the regulatory status or potential sales of Products;provided that the foregoing shall not restrict Collegium from taking actions reasonably required to avoid or address anysafety or human health problems as required by Regulatory Authorities or Legal Requirements.Section 5.2 Regulatory Approvals(a) Prior to the Closing Date, Depomed shall properly maintain and keep current and active allRegulatory Approvals for the Products that are in effect in the Territory as of the Effective Date, including payment ofany administrative fees required by FDA or applicable Regulatory Authorities with respect to the RegulatoryApprovals. Depomed shall consult with Collegium regarding any proposed supplement, amendment or alteration tothe Regulatory Approvals prior to the Closing Date, provided that Depomed shall have final decision-making authorityas to whether and how to supplement, amend or otherwise alter the Regulatory Approvals for the Products in theTerritory prior to the Closing Date.(b) Depomed agrees that, from and after the Closing Date, all Regulatory Approvals, in theTerritory with respect to the Products shall be in the name of, and shall be owned by, Depomed, except as providedotherwise by this Agreement.(c) From and after the Closing Date, Collegium shall properly maintain and keep current and activeall Regulatory Approvals for the Products that are in effect in the Territory as of the Effective Date. From and after theClosing Date, Collegium shall promptly prepare and file with the applicable Regulatory Authorities all applications,reports and related documentation and shall pay any administrative fees in order to maintain and continue allRegulatory Approvals for the Products in the Territory, including the Prescription Drug User Fee Act (PDUFA) feesand any additional fees that FDA may require for the Regulatory Approvals for the Products in the Territory. At thetime of any such submission or payment of fees,44 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Collegium shall provide a copy of the submission or evidence of such payment to Depomed. Upon reasonable noticeto Collegium, Depomed reserves the right to review and approve any documents before submission by Collegium tothe Regulatory Authority.(d) As applicable, Depomed shall keep Collegium reasonably informed of regulatory developmentsrelating to Products outside the Territory of which Depomed becomes aware and shall promptly notify Collegium inwriting of any material action or decision by any Regulatory Authority outside the Territory with respect to Products ofwhich Depomed becomes aware.(e) Depomed shall not take any action inside or outside the Territory with respect to Products thatwould reasonably be expected to have a material adverse impact upon the regulatory status or potential sales ofProducts in the Territory; provided that the foregoing shall not restrict Depomed from taking actions reasonablyrequired to avoid or address any safety or human health problems as required by Regulatory Authorities or LegalRequirements.(f) During the Term, Collegium will have full responsibility for the development, Manufacture andCommercialization of any Line Extensions in the Territory, at Collegium’s sole cost. All INDs and RegulatoryApprovals related to any Line Extensions will be submitted in the name of Collegium, its Affiliates or otherSublicensees, and all such Regulatory Approvals will be owned or controlled solely by Collegium, its Affiliates orother Sublicensees, as applicable. To the extent requested in writing by Collegium, Depomed shall (i) promptly grantto Collegium or its Affiliates or Sublicensees a right of reference to all regulatory documentation related to theProducts, (ii) provide copies of such regulatory documentation and underlying data, under the control of Depomed thatis necessary for Collegium, any of its Affiliates or other Sublicensees, to develop, register, Manufacture orCommercialize any Line Extensions, and (iii) reasonably cooperate with Collegium to implement such technology andequipment necessary to perform such Manufacture of Line Extensions, at Collegium’s expense, in accordance with amutually agreed plan.Section 5.3 Compliance with Regulatory Requirements(a) Unless otherwise required by Legal Requirement or expressly required by this Agreement, priorto the Closing Date, Depomed will be responsible for complying with all regulatory requirements with respect to theProducts in the Territory, including complying with and updating all Regulatory Approvals and The Extended-Releaseand Long-Acting Opioid Analgesics Risk Evaluation and Mitigation Strategy (“ER/LA Opioid Analgesics REMS”),handling complaints, reporting any Adverse Drug Experiences to the FDA, submitting Promotional Materials to theFDA, complying with pre-clinical and clinical study requirements, and communicating with applicable RegulatoryAuthorities; provided that Depomed shall (i) consult with Collegium prior to submitting any related documentation tothe FDA or applicable Regulatory Authority, and (ii) within two Business Days after receipt of any communicationfrom the FDA or from any other Regulatory Authority relating to the Products, forward a copy of45 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. the same to Collegium and reasonably respond to all inquiries by Collegium relating thereto. In addition, Depomedwill collaborate with Collegium to make such filings as are required for Collegium to Commercialize the Productsunder Collegium’s NDC Numbers.(b) Unless otherwise required by Legal Requirement or expressly required by this Agreement, fromand after the Closing Date, Collegium will be responsible for complying with all regulatory requirements with respectto the Products in the Territory, including but not limited to, complying with and updating all Regulatory Approvalsand the ER/LA Opioid Analgesics REMS, handling complaints, reporting any Adverse Drug Experiences to the FDA,submitting Promotional Materials to the FDA, complying with pre-clinical and clinical study requirements, andcommunicating with applicable Regulatory Authorities. Depomed reserves the right to consult with Collegium onthese regulatory activities, and Collegium agrees to cooperate with Depomed as may be reasonably requested.Section 5.4 Communications with Regulatory Authorities(a) All communications with Regulatory Authorities concerning the Products prior to the ClosingDate shall be the responsibility of Depomed. Depomed shall consult with Collegium regarding any suchcommunication. Depomed shall, within two Business Days after receipt of any communication from the FDA or fromany other Regulatory Authority relating to the Products, forward a copy of the same to Collegium and reasonablyrespond to all inquiries by Collegium relating thereto.(b) All communications with Regulatory Authorities concerning the Products and arising fromCollegium’s Commercialization of the Products from and after the Closing Date shall be the responsibility ofCollegium, provided that Depomed shall have the right to communicate with the FDA or any other RegulatoryAuthority in the Territory regarding the Products if such communication is reasonably necessary to comply with theterms of this Agreement or any Legal Requirement or is related to Commercialization activities undertaken by or onbehalf of Depomed or the Depomed Sales Force.(c) Collegium shall, within two Business Days after receipt of any communication from the FDAor from any other Regulatory Authorities relating to the Products, forward a copy of the same to Depomed andreasonably respond to all inquiries by Depomed relating thereto. Depomed shall have the right to request review andapprove, with reasonable notice, any and all Regulatory Communications, Regulatory Approvals, and relatedregulatory documents that pertain to the Product NDAs before they are submitted to FDA or other RegulatoryAuthorities by Collegium or Newco. At the time of any submission to FDA or other Regulatory Authorities,Collegium shall provide a copy of the communication to Depomed.Section 5.5 Healthcare ComplianceAs of the Effective Date and continuing throughout the Term, Collegium shall maintain a robust healthcarecompliance program that complies with the Department of Health and Human46 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Services Office of Inspector General’s “OIG Compliance Program Guidance for Pharmaceutical Manufacturers,” 68Fed. Reg. 23731 (May 5, 2003), including but not limited to: (a) implementing written policies and proceduresgoverning compliance; (b) designating a compliance officer and compliance committee that is charged with overseeingcompliance across the organization; (c) conducting effective employee training and education on at least an annualbasis; (d) developing effective lines of communication including maintaining an anonymous reporting hotline; (e)conducting internal monitoring and auditing of marketing, sales and medical affairs activities; (f) enforcing compliancestandards through disciplinary guidelines; and (g) responding promptly to detected problems and undertakingcorrective action.Section 5.6 Advertising and Promotion Compliance(a) In performing its duties hereunder and without limiting any of Depomed’s obligations under theLong Term Collaboration Agreement, each party shall, and shall cause the Collegium Sales Force or Depomed SalesForce, as applicable, and its employees and agents to, comply with all Legal Requirements, including the FDA’sregulations and guidelines concerning the advertising and promotion of prescription drug products, OPDP’spromotional guidance, the PhRMA Code on Interactions with Healthcare Providers, the Prescription Drug MarketingAct of 1987, as amended, and the rules and regulations promulgated thereunder, equal employment, non-discriminationand federal and state anti-kickback Legal Requirements, and Legal Requirements with respect to submission of falseclaims to governmental or private health care payors, which may be applicable to the activities to be performed by suchparty hereunder. None of Collegium, Depomed, the Collegium Sales Force, the Depomed Sales Force or either party’semployees or agents shall offer, pay, solicit or receive any remuneration to or from Professionals in order to reward orinduce referrals of or purchase of the Products in violation of applicable Legal Requirements, including withoutlimitation federal or state anti-kickback Legal Requirements. The Collegium Sales Force and the Depomed SalesForce shall have been trained in compliance with applicable Legal Requirements prior to engaging in Promotion of theProducts and shall be required to complete regularly scheduled training each fiscal year on Promotion of the Products.(b) After the Closing Date, Collegium shall bear sole responsibility for submitting any PromotionalMaterials to the FDA and other applicable Regulatory Authorities and complying with all Legal Requirementsapplicable to the Commercialization of the Products by Collegium described in Article 4.Section 5.7 Product Complaints(a) From and after the Closing Date, Depomed shall refer any oral or written Product Complaintswhich it receives concerning the Products to Collegium as soon as reasonably practicable, but not more than twoBusiness Days, after its receipt thereof; provided that all complaints concerning suspected or actual Product tampering,contamination or mix-up shall be delivered within twenty-four (24) hours after Depomed’s receipt thereof. Depomedshall47 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. not take any other action in respect of any such complaint without the consent of Collegium unless otherwise requiredby Legal Requirements. If requested by Collegium, Depomed will collaborate with Collegium to resolve any ProductComplaints. All Product Complaints shall be directed to the attention of Collegium’s customer service provider.(b) From and after the Closing Date, Depomed reserves the right to obtain reasonable access toProduct Complaint records and to obtain summaries of the Product Complaints from Collegium in a format to beagreed upon by the parties. Collegium shall provide Depomed with: (a) copies of all written Product Complaintswhich Collegium receives that relate to Products; and (b) a summary of all oral Product Complaints that Collegiumreceives that relate to Products, in each case (clauses (a) and (b)) as soon as reasonably practicable, but not more thantwo Business Days, after Collegium’s receipt thereof; provided that all complaints concerning suspected or actualProduct tampering, contamination or mix-up that relate to Products shall be delivered within twenty-four (24) hoursafter Collegium’s receipt thereof.(c) From and after the Closing Date, Collegium reserves the right to obtain reasonable access toDepomed’s Product Complaint records and to obtain summaries of the Product Complaints from Depomed in a formatto be agreed upon by the parties. Depomed shall provide Collegium with: (i) copies of all written Product Complaintswhich Depomed has received or receives that relate to Products; and (ii) a summary of all oral Product Complaints thatDepomed has received or receives that relate to Products, in each case (clauses (i) and (ii)) as soon as reasonablypracticable, but not more than two Business Days, after its receipt thereof; provided that all complaints concerningsuspected or actual Product tampering, contamination or mix-up that relate to Products shall be delivered withintwenty-four (24) hours after Depomed’s receipt thereof.Section 5.8 Adverse Drug Experience Reports(a) Each party shall notify the other: (i) of all Serious Adverse Drug Experience Reports withinforty-eight (48) hours after the time such Serious Adverse Drug Experience Report becomes known to such party(including its employees); and (ii) of all Adverse Drug Experience Reports as soon as reasonably practicable, but notmore than two Business Days, after the time such Adverse Drug Experience Report becomes known to such party(including its employees).(b) Until the Closing Date, (i) responsibility for maintaining the Adverse Drug Experience Reportdatabase shall be retained by Depomed at its sole expense, and (ii) Depomed shall maintain the Adverse DrugExperience Report database in accordance with all applicable Legal Requirements. Until the Closing Date, Depomedshall (A) review the scientific literature for safety report information, (B) report Adverse Drug Experience Reports,Periodic Adverse Drug Experience Reports (PADER) and Periodic Safety Update Reports (PSUR) in accordance withInternational Conference on Harmonization Clinical Safety Data Management:48 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Periodic Safety Update Reports for Marketed Drugs (ICH E2C) and 21 C.F.R. § 314.80, and (C) conduct all follow-up investigations concerning any reports described in this subsection.(c) From and after the Closing Date, Collegium shall use [***], at its sole expense, for maintainingthe Adverse Drug Experience Report database and performing the activities described in this subsection. From andafter the Closing Date, Collegium shall reimburse Depomed for all fees and costs it incurs with [***] relating toProducts. Depomed shall send an invoice to Collegium at the end of each calendar quarter that summarizes such feesand costs for such just-ended quarter, and Collegium shall pay such invoice promptly (and in any event within thirty(30) days of receipt). From and after the Closing Date, Collegium shall (i) review the scientific literature for safetyreport information, (ii) report Adverse Drug Experience Reports, Periodic Adverse Drug Experience Reports(PADER) and Periodic Safety Update Reports (PSUR) in accordance with International Conference on HarmonizationClinical Safety Data Management: Periodic Safety Update Reports for Marketed Drugs (ICH E2C) and 21 C.F.R. §314.80, and (iii) conduct all follow-up investigations concerning any reports described in this subsection.(d) Depomed shall have the right to participate in any such investigations relating to Products uponits request. Depomed shall provide reasonable cooperation with any such follow-up investigation, includingdocumentation, as may be requested by Collegium from time to time. Depomed reserves the right to obtain reasonableaccess to the Adverse Drug Experience Reports and related records that are maintained by Collegium. Likewise,Collegium shall have the right to participate in any Depomed investigations relating to Products upon itsrequest. Collegium shall provide reasonable cooperation with any such follow-up investigation, includingdocumentation, as may be requested by Depomed from time to time. Collegium reserves the right to obtain reasonableaccess to the Adverse Drug Experience Reports and related records that are maintained by Depomed.Section 5.9 Recalls or Other Corrective Action(a) Prior to the Closing Date, Depomed shall have final decision-making authority with respect toany recall (including recall of packaging and Promotional Materials), market withdrawals or any other corrective actionas may be reasonably required related to the commercial distribution of the Products. Depomed shall promptly consultwith Collegium with respect to any such actions proposed to be taken by Depomed (and in all events prior to the takingof such actions), including all actions that are reasonably likely to result in a material adverse effect on the marketabilityof the Products in the Territory. Prior to the Closing Date, Depomed shall be responsible for all communications withthe FDA with respect to any Product recall, market withdrawal or other corrective action related to the commercialdistribution of the Products; provided that (i) Depomed shall consult with Collegium prior to submitting any relateddocumentation to the FDA and (ii) Depomed shall provide Collegium with copies of all communications received fromor submitted to the FDA with respect to any such recall, market withdrawal or other corrective action within twoBusiness Days after receipt or submission49 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. thereof. After the Closing Date, Depomed shall promptly consult with Collegium with respect to any recall, marketwithdrawal or other corrective actions proposed to be taken by Depomed outside the Territory, if any, that arereasonably likely to result in a material adverse effect on the marketability of the Products in the Territory. Depomedshall provide Collegium with copies of all communications received from regulatory authorities located outside theTerritory with respect to any such recall, market withdrawal or other corrective action within two (2) Business Daysafter Depomed’s receipt; and Depomed shall provide Collegium with a copy of any related communications sent byDepomed to such regulatory authorities at the time of submission.(b) From and after the Closing Date, Collegium shall have final decision-making authority withrespect to any recall (including recall of packaging and Promotional Materials), market withdrawals or any othercorrective action related to the commercial distribution of the Products, and Collegium shall be responsible for theimplementation thereof; provided that Collegium shall promptly consult with Depomed with respect to any such recallor corrective actions proposed to be taken by Collegium (and in all events prior to the taking of such actions), includingall actions that are reasonably likely to result in a material adverse effect on the marketability of the Products in theTerritory. Collegium shall be responsible for all communications with the FDA with respect to any Product recall,market withdrawal or other corrective action related to the commercial distribution of the Products. Collegium shallprovide Depomed with copies of all communications received from FDA with respect to any such recall, marketwithdrawal or other corrective action within two (2) Business Days after receipt; and Collegium shall provideDepomed with a copy of any related communications sent by Collegium to FDA at the time of submission.(c) With respect to any recall, market withdrawal or corrective action with respect to Products,(i) Depomed shall be responsible for all Liabilities associated with such recall, market withdrawal or corrective actionto the extent relating to Product Manufactured prior to the Closing Date, and (ii) Collegium shall be responsible for allLiabilities associated with such recall, market withdrawal or corrective action to the extent relating to ProductManufactured on or after the Closing Date for sale in the Territory. To the extent the recall, market withdrawal orcorrective action relates to Product Manufactured both before and after the Closing Date, the responsibility forLiabilities associated therewith shall be equitably apportioned between the parties based on the relative amount ofProduct affected that was Manufactured before the Closing Date and the relative amount of Product affected that wasManufactured on or after the Closing Date.Section 5.10 Regulatory Inspections or Audits(a) If FDA or other Regulatory Authority desires to conduct an inspection or audit at Collegium’sfacility or a facility under contract with Collegium with respect to the Products, including any facility that, tests,develops, stores, or handles Products (“Collegium Regulatory Inspection”), Collegium shall permit and cooperate withsuch Collegium Regulatory Inspection and cause any contract facility to permit and cooperate in the CollegiumRegulatory50 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Inspection. Upon receipt of notice or any other indication from any Regulatory Authority of such CollegiumRegulatory Inspection, Collegium will promptly notify Depomed within forty-eight (48) hours after receiving suchnotice. Collegium will permit a representative of Depomed to be present during applicable portions of the CollegiumRegulatory Inspection, upon reasonable request by Depomed. Collegium will provide timely access to Depomed of alldocuments and any other relevant information available about the progress of the Collegium RegulatoryInspection. Collegium will provide to Depomed copies of any inspection reports or notifications received during orafter the Collegium Regulatory Inspection, including any notices of observation or other reports of the outcome of suchCollegium Regulatory Inspection. Collegium will prepare a written response to any communications from RegulatoryAuthorities relating to the Collegium Regulatory Inspection, and will provide a copy for Depomed’s review beforesubmission to the Regulatory Authority. Collegium agrees to conform its activities under this Agreement to anycommitments made in response to a Collegium Regulatory Inspection, except to the extent any such commitmentviolates Legal Requirements.(b) If FDA or other Regulatory Authority desires to conduct an inspection or audit at Depomed’sfacility or a facility under contract with Depomed with respect to the Products, including any facility that, tests,develops, stores, or handles Products (“Depomed Regulatory Inspection”), Depomed shall permit and cooperate withsuch Depomed Regulatory Inspection and cause any contract facility to permit and cooperate in the DepomedRegulatory Inspection. Upon receipt of notice or any other indication from any Regulatory Authority of suchDepomed Regulatory Inspection, Depomed will promptly notify Collegium within forty-eight (48) hours afterreceiving such notice. Depomed will permit a representative of Collegium to be present during applicable portions ofthe Depomed Regulatory Inspection, upon reasonable request by Collegium. Depomed will provide timely access toCollegium of all documents and any other relevant information available about the progress of the DepomedRegulatory Inspection. Depomed will provide to Collegium copies of any inspection reports or notifications receivedduring or after the Depomed Regulatory Inspection, including any notices of observation or other reports of theoutcome of such Depomed Regulatory Inspection. Depomed will prepare a written response to any communicationsfrom Regulatory Authorities relating to the Depomed Regulatory Inspection, and will provide a copy for Collegium’sreview before submission to the Regulatory Authority. Depomed agrees to conform its activities under this Agreementto any commitments made in response to a Depomed Regulatory Inspection, except to the extent any such commitmentviolates Legal Requirements.Section 5.11 Review of Regulatory ComplianceEach fiscal quarter after Closing, Depomed and its duly authorized representatives shall have the right toreview, audit, and inspect the activities conducted by Collegium and Newco under this Agreement as they pertain tocompliance with Health Laws and the Regulatory Approvals. Collegium and Newco agree to provide reasonableaccess to any records, facilities, or personnel requested for this review. All reviews by Depomed will be conductedwithout any undue disruption to the business and operations of Collegium. Any Third Parties conducting51 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. such reviews on behalf of Depomed will enter into confidentiality agreements with Collegium. Collegium will correct,or cause the correction of, any deficiencies which are discovered by any such review.If Depomed elects not to conduct a review in a fiscal quarter, Depomed shall have the right to request writtencertification by Collegium and Newco that they are in compliance with all applicable Health Laws, RegulatoryApprovals, and this Article 5 of this Agreement.Section 5.12 AssistanceEach party agrees to provide to the other all reasonable assistance and take all actions reasonably requested bythe other party that are necessary to enable the other party to comply with its regulatory obligations under thisAgreement and with any Legal Requirement applicable to the Products and Line Extensions in the Territory.ARTICLE 6SALES AND PRICINGSection 6.1 SalesCommencing as of the Closing Date, Collegium or its Affiliates shall book all sales of the Products and LineExtensions in the Territory and shall be responsible for entering into any contracts and other arrangements with anyPerson regarding the sale of the Products or Line Extensions, and for establishing and approving the form, content andterms and conditions thereof, including any discount, allowance, rebate, chargeback or other term granted therein;provided, however, that Collegium may not sell Products as part of a bundled product without the prior written consentof Depomed. For purposes of this Section 6.1, a “bundled product” means Product that is sold together with at leastone other pharmaceutical product for a single price or discounted price, whether sold together in the same package ormerely price bundled.Section 6.2 PricingCommencing as of the Closing Date, except as expressly set forth in Section 6.1, Collegium will have the soleauthority to determine the prices of the Products or Line Extensions sold by it and to establish its own terms andconditions of sale and pricing policies for the Products and Line Extensions in the Territory, including price increasesor decreases and the timing thereof, provided that, in the event Collegium elects to terminate the Agreement pursuant toSection 9.2(b), Collegium shall not, and shall cause its Affiliates not to, increase the price of any Product by more than[***] per annum at any time during the twelve (12) month period following the delivery of Collegium’s notice oftermination and prior to the effective date of termination, unless otherwise mutually agreed in writing by the parties.52 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. ARTICLE 7COMPENSATIONSection 7.1 Payment for Transferred Inventory(a) In consideration of the transfer of the Transferred Inventory pursuant to Section 2.3(a)(i),Collegium shall pay to Depomed, on the Closing Date, the Transferred Inventory Cost as set forth on the TransferredInventory Cost Statement. Such payment shall be non-refundable, and shall not be creditable against any other amountdue hereunder.(b) No more than five (5) Business Days prior to the Closing Date, Depomed shall deliver toCollegium a statement listing the Transferred Inventory and the Transferred Inventory Cost (the “Transferred InventoryCost Statement”).Section 7.2 Upfront PaymentIn partial consideration of the rights granted to Collegium hereunder, Collegium shall pay to Depomed, on theClosing Date, an initial fee in the amount of Ten Million Dollars ($10,000,000) (the “Upfront Payment”). The UpfrontPayment shall be non-refundable, and shall not be creditable against any other amount due hereunder.Section 7.3 Payments on Annual Net Sales(a) Annual Net Sales through 2021. From and after the Closing Date through December 31, 2021during the Payment Term, and subject to Section 7.3(f), Collegium shall pay to Depomed amounts based upon AnnualNet Sales of Payment-Bearing Products in the Territory according to the schedule set forth below: Portion of Annual Net Sales of Payment-Bearing Products Amount / RateUp to Two Hundred Thirty-Three Million Dollars ($233,000,000) One Hundred Thirty-Five Million Dollars($135,000,000)Above Two Hundred Thirty-Three Million Dollars ($233,000,000) up to Two HundredFifty-Eight Million Dollars ($258,000,000) 25% of such portion ofAnnual Net SalesAbove Two Hundred Fifty-Eight Million Dollars ($258,000,000) 17.5% of such portion ofAnnual Net Sales For illustration purposes only, if Annual Net Sales of Payment-Bearing Products in the Territory are $253,000,000 fora particular calendar year, then the amount owed for such period would be $135,000,000 plus 25% of $20,000,000 fora total amount owed of $140,000,000.53 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Payments under this Section 7.3(a) (i) with respect to Annual Net Sales of Payment-Bearing Products up to TwoHundred Thirty-Three Million Dollars ($233,000,000), shall be due and payable in equal installments of Thirty-ThreeMillion Seven Hundred and Fifty Thousand Dollars ($33,750,000) (each, a “Minimum Quarterly Payment”) withinforty-five (45) days after the last day of each calendar quarter, and (ii) with respect to any portion of Annual Net Salesof Payment-Bearing Products above Two Hundred Thirty-Three Million Dollars ($233,000,000), shall be due andpayable within sixty (60) days after the last day of each calendar year. Notwithstanding anything in this Agreement tothe contrary, if for any reason (other than a reason directly attributable to an action or omission entirely within thecontrol of Collegium or Newco) the Closing Date occurs after January 8, 2018 but during the first calendar quarter of2018, then the amount of the first Minimum Quarterly Payment (and thus the obligation to pay Depomed One HundredThirty-Five Million Dollars ($135,000,000) with respect to calendar year 2018) will be reduced, on a pro rata basis, toaccount for the total number of days in the first calendar quarter after the Closing during which Collegium was entitledto sell Payment-Bearing Products. Such reduction in the first Minimum Quarterly Amount, if any, shall be applied toall other provisions in this Agreement applicable to the first Minimum Quarterly Payment, including for purposes ofdetermining whether there was any Quarterly Shortfall with respect to such calendar quarter pursuant to Section 7.7(a)(i). If the Closing Date occurs at any time after the last day of the first calendar quarter of 2018, then the parties willwork in good faith to determine the appropriate adjustment, if any, to one or more of the Minimum Quarterly Paymentsto account for the reduced number of days in such calendar year during which Collegium is entitled to sell Payment-Bearing Products.(b) Annual Net Sales after 2021. From and after January 1, 2022 during the Payment Term,Collegium shall pay to Depomed amounts based upon Annual Net Sales of Payment-Bearing Products in the Territoryaccording to the schedule set forth below: Portion of Annual Net Sales of Payment-Bearing Products RateUp to Two Hundred Thirty-Three Million Dollars ($233,000,000) 58% of such portion ofAnnual Net SalesAbove Two Hundred Thirty-Three Million Dollars ($233,000,000) up to Two HundredFifty-Eight Million Dollars ($258,000,000) 25% of such portion ofAnnual Net SalesAbove Two Hundred Fifty-Eight Million Dollars ($258,000,000) 17.5% of such portionof Annual Net Sales For illustration purposes only, if Annual Net Sales of Payment-Bearing Products are $358,000,000 for a particularcalendar year, then the amount owed for such period would be 58%54 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. of $233,000,000 plus 25% of $25,000,000 plus 17.5% of $100,000,000 for a total amount owed of $158,890,000.Payments under this Section 7.3(b) (i) with respect to Annual Net Sales of Payment-Bearing Products up to TwoHundred Thirty-Three Million Dollars ($233,000,000), shall be due and payable within forty-five (45) days after thelast day of each calendar quarter, and (ii) with respect to any portion of Annual Net Sales of Payment-Bearing Productsabove Two Hundred Thirty-Three Million Dollars ($233,000,000), shall be due and payable within sixty (60) daysafter the last day of each calendar year.(c) Payment Term. Collegium’s payment obligations under Section 7.3(a) and Section 7.3(b) shallcommence on the Closing Date and remain in effect (with respect to each such Product and Line Extension in thefollowing clauses (i) and (ii), as applicable, the “Payment Term”):(i) with respect to each Product, for so long as Collegium or any of its Affiliates or otherSublicensees continues to sell the applicable Product in the Territory; provided, however, that following the occurrenceof Generic Entry with respect to any Product (an “Expired Product”), the Annual Net Sales tiers in Section 7.3(a) andSection 7.3(b), as applicable, will thereafter be automatically adjusted downward on a percentage basis equal to ninetypercent (90%) of the percentage of the prior calendar year’s Annual Net Sales of all Payment-Bearing Productsrepresented solely by such Product that became an Expired Product and the adjusted Annual Net Sales tiers will beapplied, on a prospective basis, to calculate the royalties payable by Collegium to Depomed on the sales of Payment-Bearing Products occurring thereafter; provided further, that such adjustment shall occur only once, upon theoccurrence of the first Expired Product, and shall not occur again thereafter upon the occurrence of other ExpiredProducts. For example, with respect to Expired Products, if the Net Sales associated with any Expired Product weresixty percent (60%) of the Annual Net Sales of all Payment-Bearing Products during the prior calendar year, then theAnnual Net Sales tiers in Section 7.3(a) and Section 7.3(b), as applicable, would each be reduced by fifty-four percent(54%, i.e., 60% x 90%) (i.e., the first tier would be up to $107,180,000, the second tier would be between$107,180,000 and $118,680,000, and the third tier would be above $118,680,000); and(ii) with respect to each Line Extension, for so long as Collegium or any of its Affiliates orSublicensees continues to sell the applicable Line Extension in the Territory until the expiration of the last OrangeBook-Listed Patent associated with such Line Extension.(d) Payments after Payment Term for Line Extensions. From and after the earlier of the terminationof this Agreement or the expiration of the Payment Term with respect to Line Extensions, (i) Collegium shall pay toDepomed nine percent (9%) of Annual Net Sales of Line Extensions throughout the Territory, due and payable withinforty-five (45) days after the last day of each calendar quarter, and (ii) the Net Sales of Line Extensions shall beexcluded55 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. from the calculation of Annual Net Sales for purposes of payments due pursuant to Section 7.3(a) and Section 7.3(b)with respect to Products and Authorized Generics.(e) Grünenthal Obligations.(i) Collegium, on behalf of Depomed, shall calculate, report directly to Grünenthal and, subject to Section 7.3(e)(ii) and Section 7.3(e)(iii), pay directly to Grünenthal all royalties (including minimumroyalties, if applicable) due from Depomed pursuant to the Grünenthal License Agreement (but not, for clarity, anyroyalties or other payments due pursuant to the Consent Agreement, other than for “New Products” (as defined in theConsent Agreement) as set forth in Section 7.3(e)(iv)) with respect to the sale by Collegium and its Affiliates and anyother Sublicensees of Payment-Bearing Products in the Territory, in each case in accordance and consistent with theterms and conditions of the Grünenthal License Agreement. Collegium shall provide Depomed with a copy of all suchreports concurrently with the delivery thereof to Grünenthal. All such reports provided to Depomed by Collegium willbe treated as Collegium’s Proprietary Information under this Agreement, provided that Depomed may disclose suchreports to Grünenthal (subject to the confidentiality provisions of the Grünenthal License Agreement). Further, thesublicenses granted to Newco in Section 2.1(a)(iii) and Section 2.1(a)(iv) shall be subject to the applicable terms andconditions of the Grünenthal License Agreement, which are hereby deemed to be incorporated into this Agreement,and if the practice of such sublicenses by Newco and its Sublicensees directly results in any payment obligations toGrünenthal pursuant to Sections 4.6(b), 6.1(f), 7.10, 7.13, 11.5(b) (with regard to the OMP Territory and the EU (assuch terms are defined in the Grünenthal License Agreement), subject to Depomed’s obligations to pay for RetainedPost-Marketing Commitments as set forth in Section 14.7 below), 11.12 and 12.2 of the Grünenthal LicenseAgreement, Depomed shall pass through such payment obligations to Collegium and Collegium, on behalf ofDepomed, shall make the applicable payment(s) directly to Grünenthal and concurrently provide Depomed withevidence thereof.(ii) From and after the Closing Date through December 31, 2021 during the Payment Term,Collegium shall pay to Grünenthal and/or Depomed, as applicable, amounts based upon annual “Net Sales” of“Products” (each, as defined the Grünenthal License Agreement), but excluding “New Products” (as defined in theConsent Agreement), in the Territory that would otherwise be payable solely to Grünenthal pursuant to Section 7.3(e)(i) according to the schedule set forth below: Portion of annual “Net Sales” of “Products” Rate Payable toGrünenthal Rate Payable toDepomed Up to Two Hundred Forty-Three Million Dollars($243,000,000) [***] [***] 56 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Above Two Hundred Forty-Three Million Dollars($243,000,000) and up to Two Hundred Fifty-EightMillion Dollars ($258,000,000) [***] [***] Above Two Hundred Fifty-Eight Million Dollars($258,000,000) and less than Three Hundred MillionDollars ($300,000,000) [***] [***] Equal to or greater than Three Hundred Million Dollars($300,000,000) and less than Six Hundred Million Dollars($600,000,000) [***] [***] Equal to or greater than Six Hundred Million Dollars($600,000,000) [***] [***] For illustration purposes only, if annual “Net Sales” of “Products” are $358,000,000 for a particular calendar year, thenthe amount owed for such period pursuant to this Section 7.3(e)(ii) (A) to Grünenthal would be [***] of $243,000,000plus [***] of $15,000,000 plus [***] of $100,000,000 for a total amount owed of [***], and (B) to Depomed wouldbe [***] of $243,000,000 plus [***] of $15,000,000 plus [***] of $42,000,000 plus [***] of $58,000,000 for a totalamount owed of [***].(iii) From and after January 1, 2022 during the Payment Term, Collegium shall pay toGrünenthal and/or Depomed, as applicable, amounts based upon annual “Net Sales” of “Products” but, excluding“New Products” as defined in the Consent Agreement, in the Territory that would otherwise be payable solely toGrünenthal pursuant to Section 7.3(e)(i) according to the schedule set forth below:Portion of annual “Net Sales” of “Products” Rate Payable toGrünenthal Rate Payable toDepomed Up to Two Hundred Thirty-Three Million Dollars($233,000,000) [***] [***] Above Two Hundred Thirty-Three Million Dollars($233,000,000) and up to Two Hundred Fifty-EightMillion Dollars ($258,000,000) [***] [***] Above Two Hundred Fifty-Eight Million Dollars($258,000,000) and less than Three Hundred MillionDollars ($300,000,000) [***] [***] 57 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Equal to or greater than Three Hundred Million Dollars($300,000,000) and less than Six Hundred Million Dollars($600,000,000) [***] [***] Equal to or greater than Six Hundred Million Dollars($600,000,000) [***] [***] For illustration purposes only, if annual “Net Sales” of “Products” are $358,000,000 for a particular calendar year, thenthe amount owed for such period pursuant to this Section 7.3(e)(iii) (A) to Grünenthal would be [***] of$233,000,000 plus [***] of $25,000,000 plus [***] of $100,000,000 for a total amount owed of [***], and (B) toDepomed would be [***] of $233,000,000 plus [***] of $25,000,000 plus [***] of $42,000,000 plus [***] of$58,000,000 for a total amount owed of [***].(iv) From and after the expiration of the Payment Term with respect to Line Extensionswhich are “New Products” as defined in the Consent Agreement, Collegium shall pay to Grünenthal [***] of annual“Net Sales” of such “New Products” throughout the Territory, due and payable in accordance with Section 7.3(e)(i).(v) Depomed shall cooperate reasonably to extend to Collegium, its Affiliates and any otherSublicensees all of the benefits of the terms and conditions of the Grünenthal License Agreement applicable toCollegium’s obligations under this Section 7.3(e), subject to Collegium’s compliance with this Section 7.3(e). Inaddition, Depomed shall use commercially reasonable efforts to pursue any rights and remedies Depomed may haveunder the Grünenthal License Agreement for the benefit of Collegium or any of its Affiliates or any other Sublicenseeswith respect to their practice of sublicenses under the Grünenthal License Agreement in the Territory, solely asrequested by Collegium in writing, provided that Collegium shall reimburse Depomed for any reasonable, documentedout-of-pocket expenses (including legal expenses) incurred by Depomed with respect to its pursuit of such rights andremedies. In addition, notwithstanding anything in Section 7.3(e)(ii) or Section 7.3(e)(iii) to the contrary, in the eventany royalty rate reduction under Section 6.9 (Cost of Goods Sold Cap in OMP Territory) in the Grünenthal LicenseAgreement would apply with respect to the sale of Payment-Bearing Products (except “New Products” as defined inthe Consent Agreement) in the Territory, Collegium shall be entitled to apply such royalty rate reduction to the royaltyrates owed to Depomed pursuant to Section 7.3(e)(ii) or Section 7.3(e)(iii). In the event such royalty rate reductionexceeds the royalty rate owed to Depomed pursuant to Section 7.3(e)(ii) or Section 7.3(e)(iii), then Depomed shallreimburse Collegium within sixty (60) days after the end of each calendar year for the portion of the amount paid byCollegium to Grünenthal during such calendar year that is equivalent to the amount Collegium would have beenentitled to withhold from Depomed pursuant to the foregoing sentence. Except for (A) Collegium’s paymentobligations to Grünenthal, (B) Collegium’s indemnification obligations under clause (vii) of Section 12.2(a), and(C) Depomed’s activities in pursuing rights and remedies under the Grünenthal License Agreement for the benefit ofCollegium upon Collegium’s written request, in58 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. the case of (A) and (C), as set forth in this Section 7.3(e), Collegium shall not be liable to Grünenthal or to Depomed orany of its Affiliates for any costs, Liabilities or expenses associated with Depomed’s acts or omissions under or inconnection with the Grünenthal License Agreement.(vi) Depomed shall, and shall cause its Affiliates to, fulfill all of its and their respectiveobligations, including payment obligations, under the Grünenthal License Agreement and ConsentAgreement. Depomed shall not, and shall cause its Affiliates not to, amend or waive, or take any action or omit to takeany action that would alter, any of its rights under the Grünenthal License Agreement or Consent Agreement in anymanner that adversely affects, or would reasonably be expected to adversely affect, Collegium’s rights and benefitsunder this Agreement. Depomed shall promptly notify Collegium of any default or breach under the GrünenthalLicense Agreement or Consent Agreement. In the event that Depomed, or any of its Affiliates, shall fail to make anypayment when due or any other default or breach arises under the Grünenthal License Agreement or ConsentAgreement, Collegium shall have the right (but not the obligation) to make such payment or otherwise cure suchdefault or breach on behalf of Depomed or its Affiliate. In such event, Depomed shall promptly reimburse Collegiumany such amounts paid and/or costs and expenses incurred by Collegium or, at Collegium’s election, Collegium mayoffset such amounts paid and/or costs and expenses incurred by Collegium against any amounts payable to Depomedhereunder. Notwithstanding anything herein to the contrary, Depomed shall not assign the Grünenthal LicenseAgreement, other than in connection with a permitted assignment by Depomed of this Agreement under Section 17.9,without Collegium’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. In addition, Depomed shall not consent to an assignment of the Grünenthal License Agreement without Collegium’sconsent, which consent shall not be unreasonably withheld, conditioned, or delayed (provided that Collegium shall notwithhold its consent in a manner that would cause Depomed to breach any of Depomed’s obligations under theGrünenthal License Agreement).(f) Material Supply Failure. Notwithstanding anything to the contrary in this Agreement, in theevent of a Material Supply Failure occurring after the Closing and not later than December 31, 2018, Collegium shallpromptly (and in any event within fifteen (15) Business Days after the occurrence thereof) provide Depomed withwritten notice thereof (a “Material Supply Failure Notice”) and indicate in such notice whether Collegium elects toexercise the option to modify its rights and obligations under this Agreement such that:(i) (A) the payment obligations under Section 7.3(a) solely with respect to Annual NetSales of Payment-Bearing Products during the period from January 1, 2018 through December 31, 2018 (including theobligation to pay Minimum Quarterly Payments with respect to such period) shall no longer apply, and (B) Collegiumshall instead be subject to the payment obligations under Section 7.3(b) with respect to such period;59 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (ii) if, after payment of all amounts due under Section 7.3(b) by Collegium to Depomed withrespect to Annual Net Sales of Payment-Bearing Products during the period from January 1, 2018 through December31, 2018, the amount of Annual Net Sales with respect to such period retained by Collegium (i.e., Annual Net Salesless any payments to Depomed pursuant to Section 7.3(a) or Section 7.3(e), any payments to Grünenthal pursuant tothe Grünenthal License Agreement, and COGS) is less than Forty Million Dollars ($40,000,000), then Collegium shallprovide Depomed with written notice thereof not later than forty-five (45) days after the end of such period, includingreasonable supporting documentation, and Depomed shall pay to Collegium the difference between Forty MillionDollars ($40,000,000) and such amount actually retained by Collegium, within thirty (30) days after receipt of aninvoice therefor; and(iii) Collegium's right to give notice of termination of this Agreement pursuant to Section9.2(b) shall not become effective until the second (2nd) anniversary of the Closing Date, such that any such terminationof this Agreement pursuant to Section 9.2(b) shall not become effective until on or after the third (3rd) anniversary ofthe Closing Date after taking into account the one (1) year notice period set forth in Section 9.2(b).In the event of a Material Supply Failure, if Collegium does not provide a Material Supply Failure Notice by thedeadline set forth above or does not affirmatively elect to exercise the foregoing option in conjunction with timelydelivery of a Material Supply Failure Notice, then Collegium's rights and obligations under this Agreement shallremain in full force and effect without modification, and without limitation of any other rights or remedies available toCollegium. Without limiting the foregoing, neither party will take any action or omit to take any action under thisAgreement which it knows or reasonably should know is likely to result in a Material Supply Failure.(g) Reports. Payments due to Depomed pursuant to this Section 7.3 shall be made via the sweepaccount mechanism set forth in Section 7.7(b)(i). Within forty-five (45) days after the last day of each calendar quarter,Collegium shall deliver a report in a mutually agreed form specifying: (A) the total gross invoiced amount from sales ofPayment-Bearing Products by Collegium and its Affiliates; (B) the amounts deducted by category from gross invoicedamounts to calculate Net Sales; (C) Annual Net Sales (to date, as applicable) for the applicable calendar year; (D)amounts payable under this Section 7.3; and (E) any refund amounts due under Section 7.7(b). Within twenty-five(25) days after the last day of each month, Collegium shall provide a good faith estimate of Net Sales for the priormonth. Within twenty-five (25) days after the last day of each calendar quarter, Collegium shall provide a good faithestimate of Net Sales for the prior quarter and estimated payments of all amounts due under this Section 7.3 for theprior quarter.60 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 7.4 Maintenance of Records(a) Newco and Collegium agree, and Collegium shall cause Newco, to keep, for a period of at leastthree (3) years after the date of entry (or such longer period as may be required by Legal Requirements) full andaccurate records maintained in accordance with GAAP in sufficient detail to enable a Third Party to accuratelycalculate all payments, reports and similar obligations of Collegium under this Agreement, including all payments,reports and similar obligations of Collegium with respect to the Grünenthal License Agreement pursuant to Section7.3(e). Upon thirty (30) days prior written notice, such records shall be made available by Collegium for audit by anindependent certified public accounting firm designated by Depomed and reasonably acceptable to Collegium. Theauditor shall be required to enter into a non-disclosure agreement with Collegium prior to commencing its auditingactivities. The auditor shall disclose to Depomed and Collegium only a summary of the audit results. The auditor willonly examine such books and records during business hours but not more than once each calendar year while thisAgreement remains in effect and for three (3) years thereafter. The fees and expenses of the auditor performing suchverification examination shall be borne by Depomed; provided, however, that if any verification reveals that Collegiumhas reported incorrectly, and the amount of such discrepancy is at least five percent (5%) of the aggregate amount thatshould have been reported for the period examined, then Collegium shall pay the entire amount of the fees andexpenses for such verification.(b) Whenever in this Agreement a party is required to report its costs, or is entitled to receive orobligated to make a payment based on its costs, such costs (including COGS) shall be determined in accordance withGAAP, consistent with the terms of this Agreement. The term “out-of-pocket” costs or expenses means cost orexpenses paid to Third Parties and shall not include any fixed costs or expenses, personnel costs or expenses, overheadcosts or expenses, or other costs or expenses of a similar nature.Section 7.5 Allocation of Prepaid Business ExpensesThe Prepaid Business Expenses shall be prorated on a per diem basis such that Depomed shall have financialresponsibility for the portion of the applicable billing period prior to the Closing Date and Collegium shall havefinancial responsibility for the portion of the applicable billing period after the Closing Date (the “Collegium PrepaidBusiness Expense Allocation”). Collegium shall pay to Depomed, on the Closing Date, the Collegium PrepaidBusiness Expense Allocation. Such payment shall be non-refundable, and shall not be creditable against any otheramount due hereunder.Section 7.6 PaymentsAny payments required to be made by either party under this Agreement shall be made in United States Dollarsvia wire transfer of immediately available funds to such bank account as the other party shall designate in writing priorto the date of such payment. All payments shall bear interest from the date due until paid at a rate equal to the lesser of:(a) the prime rate61 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. effective for the date that payment was due (as quoted by the Wall Street Journal, Internet Edition) plus eight percent(8%) or (b) the maximum rate permitted by applicable Legal Requirements.Section 7.7 Security(a) Letter of Credit.(i) As of the Closing Date, Newco shall, and Collegium shall cause Newco to, deliver toDepomed an irrevocable standby letter of credit from a nationally recognized financial institution (the “FinancialInstitution”), in form and substance reasonably acceptable to Depomed, in favor of Depomed (the “Letter of Credit”) inan aggregate amount of Thirty-Three Million Seven Hundred Fifty Thousand Dollars ($33,750,000) (the “MaximumStated Value”), to be issued pursuant to a master agreement in form and substance reasonably acceptable to Depomed(the “Master Letter of Credit Agreement”, and together with the Letter of Credit, the “Letter of CreditDocuments”). Depomed shall have the right to draw upon the Letter of Credit, up to the Maximum Stated Value, inthe event that there is a shortfall in the Minimum Quarterly Payment made to Depomed by Collegium pursuant toSection 7.3(a) hereof, solely to the extent of such quarterly shortfall as determined in good faith by Depomed (a“Quarterly Shortfall”), provided that Collegium does not pay the amount of such Quarterly Shortfall to Depomedwithin forty-five (45) days after the last day of such calendar quarter.(ii) At any time prior to the Expiration Date (as defined below), Depomed may provide awritten notice to the Financial Institution and Newco asserting a Quarterly Shortfall (the “Claim Notice”). The ClaimNotice shall state the amount of such Quarterly Shortfall (the “Claim Amount”). Following its receipt of a ClaimNotice, the Financial Institution shall permit Depomed to draw upon the Letter of Credit in the amount of the ClaimAmount and shall deliver the applicable funds under the Letter of Credit in accordance with the Claim Notice.(iii) Newco shall, and Collegium shall cause Newco to, maintain the Letter of Credit in effectuntil the earliest of (A) 5:00 p.m. eastern time on the day that is sixty-one (61) days after the fourth anniversary of theClosing Date, (B) the date on which the Financial Institution honors a drawdown on the Letter of Credit whichexhausts the Maximum Stated Amount and (C) the termination of this Agreement by either party ((A), (B) or (C), the“Expiration Date”). For clarity, if there is any drawdown on the Letter of Credit pursuant to this Section 7.7(a)(iii), Newco shall not be obligated, and Collegium shall not be obligated to cause Newco to, reissue the Letter of Credit atthe full Maximum Stated Value or at any value. Further, if there is any drawdown on the Letter of Credit pursuant tothis Section 7.7(a)(iii), Newco shall not be obligated, and Collegium shall not be obligated to cause Newco, tomaintain the Letter of Credit in an aggregate amount of the Maximum Stated Value for the term of this Agreement.62 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (b) Accounts (i) Depomed and Newco shall, and Collegium shall cause Newco to, establish andmaintain with a Financial Institution reasonably satisfactory to Depomed, in the name of Depomed and Newco a salesaccount (the “Sales Account”). Such account and any amounts deposited therein shall be pledged in favor ofDepomed to secure the payment obligations of Newco and Collegium owed to Depomed pursuant to Section 7.3, andshall be subject to a first priority Lien and “control” (as defined in the applicable Uniform Commercial Code) pursuantto a deposit account control agreement or securities account control agreement in form and substance reasonablyacceptable to Depomed (the “Control Agreement”). The Control Agreement shall be entered into by Depomed,Newco and the applicable Financial Institution as of the Closing Date.(ii) Newco shall, and Collegium shall cause Newco to, cause all amounts from gross salesof the Payment-Bearing Products to be deposited directly into the Sales Account (including, requiring all Customers ofthe Payment-Bearing Products to remit all payments owed to Collegium or any of its Affiliates or any otherSublicensees directly into the Sales Account) and, on a daily basis, thirty-five percent (35%) of such day’s deposits (the“Newco Deposits”) shall be swept into an account designated by Depomed until the Minimum Quarterly Paymentobligation is satisfied for each calendar quarter, and sixty-five percent (65%) shall be swept into an account designatedby Newco. Once the Minimum Quarterly Payment obligation is satisfied for a given calendar quarter, then onehundred percent (100%) of the Newco Deposits shall be swept into an account designated by Newco. The sweepmechanism shall not be subject to change and shall be the only mechanism for disbursing funds from the SalesAccount, unless in a writing signed by both Depomed and Newco; provided that upon an “Event of Default” (asdefined in the Collateral Agreement), Depomed may exercise all remedies granted under the Collateral Agreement. Based on Newco’s reports provided to Depomed calculating amounts payable under Section 7.3, Depomed shallrefund to Newco any amounts overpaid to Newco from the Newco Deposits within ten (10) Business Days ofreceiving such reports.(iii) Newco shall, and Collegium shall cause Newco to, pay all fees, expenses and charges ofthe Financial Institution at which the Sales Account is maintained. Neither Newco nor Collegium shall have any rightto terminate the Financial Institution at which the Sales Account is maintained without Depomed’s prior writtenconsent. Any such consent, which Depomed may grant or withhold in its sole and absolute discretion, shall be subjectto the satisfaction of each of the following conditions to the satisfaction of Depomed: (A) the successor FinancialInstitution shall be acceptable to Depomed; (B) Depomed shall have received evidence that all of the applicable partiesmaking payments in respect of sales of the Payment-Bearing Product have been instructed to remit all future paymentsin respect of sales of the Payment-Bearing Product to the new accounts held at the successor Financial Institution; and(C) Depomed shall have received evidence to its satisfaction necessary to secure Depomed’s security interest in theSales Account, including the execution and delivery of the Control Agreement in favor of Depomed in form andsubstance satisfactory to Depomed.63 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 7.8 Other FeesFrom and after the Closing Date, and without limiting Collegium’s obligations under Section 5.2(c), Collegiumshall reimburse Depomed for all fees and costs that Depomed incurs with respect to Third Parties (includingGovernmental Authorities) based upon its ownership and maintenance of the Regulatory Approvals for the Products,including branded prescription drug fees payable to the Internal Revenue Service and fees related to the ER/LA OpioidAnalgesics REMS. Depomed shall send an invoice to Collegium at the end of each calendar quarter that summarizessuch fees and costs for such quarter, and Collegium shall pay such invoice promptly (and in any event within thirty(30) days of receipt).ARTICLE 8TRANSITION MATTERSSection 8.1 Customer NotificationsWithin ten (10) days after the Closing Date, Depomed shall notify all of its Customers in the Territory thatfuture orders for the Products in the Territory on or after the Closing Date shall be placed with Collegium. Depomedshall forward to Collegium any orders for the purchase of Products in the Territory by Customers that are unfulfilled asof the Closing Date within five (5) days after the Closing Date. Depomed shall refer to Collegium any orders forProducts that it receives in the Territory that it receives any time after the Closing Date which provide for delivery afterthe Closing Date. From and after the Closing Date and subject to Depomed’s manufacture of such Product, Collegiumshall be responsible for supplying Products in fulfillment of such orders.Section 8.2 NDC NumbersFollowing the Closing, and in any event not later than October 31, 2018, Collegium shall obtain its own NDCNumbers for the Products and shall use commercially reasonable efforts to have in place as soon as reasonablypracticable all authorizations from Governmental Authorities necessary for Collegium to use such NDC Numbers forthe Products. Thereafter, Collegium shall use its new NDC Numbers on all invoices, orders and other communicationswith customers and Governmental Authorities.Section 8.3 Product Returns, Rebates and Chargebacks(a) Product Returns.(i) Depomed shall be financially responsible for all returns of Product that are labeled withDepomed’s lot numbers for lots sold prior to the Closing Date, provided, however, that Collegium shall be financiallyresponsible for any incremental return credit amounts resulting from any price increases implemented by Collegiumafter the Closing Date for such lots.64 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (ii) Collegium shall be financially responsible for all returns of Product that are labeled withCollegium’s lot numbers or Depomed’s lot numbers for lots sold on or after the Closing Date.(iii) Collegium and Depomed shall each be financially responsible for returns of theTransition Lots, on a proportional basis equal to the proportion of Product in such Transition Lots sold prior to and onor after the Closing Date, provided, however, that Collegium shall be financially responsible for any incremental returncredit amounts resulting from any price increases implemented by Collegium after the Closing Date for such lots.(b) Commercial Rebates.(i) Depomed shall be responsible for (A) all commercial rebates with respect to Products(“Commercial Rebates”) dispensed to patients prior to the Closing Date and (B) all Commercial Rebates with respectto Products dispensed to patients through the Depomed Responsibility Period, provided, however, that Collegium shallbe financially responsible for any incremental rebate amounts resulting from any price increases implemented byCollegium after the Closing Date for such lots.(ii) Collegium shall be responsible for all Commercial Rebates with respect to Productsdispensed to patients after the Depomed Responsibility Period.(c) Government Rebates.(i) Depomed shall be responsible for (A) all government rebates with respect to Products(“Government Rebates”) dispensed to patients prior to the Closing Date and (B) all Government Rebates with respectto Products dispensed to patients through the Depomed Responsibility Period, provided, however, that Collegium shallbe financially responsible for any incremental rebate amounts resulting from any price increases implemented byCollegium after the Closing Date.(ii) Collegium shall be responsible for all Government Rebates with respect to Productsdispensed to patients after the Depomed Responsibility Period.(d) GPO and Government Chargeback Claims.(i) Depomed shall be financially and legally responsible for all group purchase organization(“GPO”) and government chargeback claims (“Chargeback Claims”) related to Products sold by the wholesaler ordistributor prior to the Closing Date and through the Depomed Responsibility Period, provided, however, thatCollegium shall be financially responsible for any incremental chargeback amounts resulting from any price increasesimplemented by Collegium after the Closing Date.65 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (ii) Collegium shall process and be financially and legally responsible for all ChargebackClaims related to Products sold by the wholesaler or distributor after the Depomed Responsibility Period.(e) Co-Pay Card Program. Responsibility for co-pay card discounts with respect to Products (“Co-Pay Card Discounts”) shall be allocated between Depomed and Collegium as follows:(i) Depomed shall be responsible for (1) all Co-Pay Card Discounts with respect toProducts dispensed to patients prior to the Closing Date and (2) all Co-Pay Card Discounts with respect to Productsdispensed to patients through the Depomed Responsibility Period, provided, however, that Collegium shall befinancially responsible for any incremental discount amounts resulting from any price increases implemented byCollegium after the Closing Date.(ii) Collegium shall be responsible for all Co-Pay Card Discounts with respect to Productsdispensed to patients beginning after the Depomed Responsibility Period.(f) Limitation of Liability. Notwithstanding the foregoing, Collegium agrees that (i) Depomed’sfinancial liability for GPO Commercial Rebates and Co-Pay Card Discounts shall be limited to those commercialcustomers with which the Business has a rebate obligation as of the Closing Date, and (ii) any payments by Depomedwith respect to sales after the Closing Date shall be made in accordance with Depomed’s rebate obligations on theClosing Date with respect to each commercial customer and shall be solely based on the terms and conditions ofDepomed’s agreements with the respective customer, as such terms and conditions existed as of the Closing Date.(g) Long Term Collaboration Agreement. For the avoidance of doubt, the provisions of thisSection 8.3 shall not apply to any matters addressed in the Long Term Collaboration Agreement.(h) Commercial Agreements. After the Closing, Depomed shall use commercially reasonableefforts to maintain in full force and effect all commercial agreements relating to the Products (including GPO andMedicare part D) (each such commercial agreement, a “Commercial Agreement”) through April 30, 2019; provided,however, that if Collegium enters into a commercial agreement relating to the Products with the counterparty orcounterparties to a Commercial Agreement, Depomed shall be permitted to immediately terminate any suchCommercial Agreement.Section 8.4 Collegium Use of Depomed Names(a) During the period commencing on the Closing Date and ending upon Collegium’s receipt of itsown NDC Numbers for the Products in accordance with Section 8.2 (the “Limited License Period”), Depomed grants,and shall cause its Affiliates to grant, to66 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Collegium and its Affiliates a limited, non-exclusive, royalty-free right and license to use the Depomed Names, and theUPCs and, subject to Section 8.2, the NDC Numbers for each of the Products, in each case solely for the purpose ofutilizing the labels, packaging, and Promotional Materials for the Products as they exist on the Closing Date.(b) Promptly upon the expiration of the Limited License Period, Collegium shall, and shall cause itsAffiliates to, destroy and dispose of all labels and packaging, and all Promotional Materials, in each case in itspossession or subject to its control, bearing any Depomed Names; provided, however, that the expiration of theLimited License Period shall not restrict Collegium and its Affiliates from selling the Transferred Inventory or anyfinished goods inventory of Product acquired by Collegium pursuant to an order that was outstanding as of the ClosingDate. For clarity, the expiration of the Limited License Period shall not restrict Collegium or its Affiliates fromexercising any of the rights granted to them with respect to the Promotional Materials under Section 4.5.(c) In no event shall Collegium or any of its Affiliates (i) use any Depomed Names in any manneror for any purpose different from the use of such Depomed Names by Depomed and its Affiliates immediately prior tothe Closing Date to market, distribute and sell the Products or (ii) manufacture or produce, or cause or authorize anyThird Party to manufacture or produce, any new labels, packaging or advertising, marketing, sales and promotionalmaterials using or otherwise incorporating any Depomed Names in any manner.(d) Collegium shall use commercially reasonable efforts to ensure that the quality of the finishedgoods inventory of Products sold by Collegium under any Depomed Names is of a sufficiently high quality to begenerally comparable to the quality of the Products sold by Depomed prior to the Closing Date. At the reasonablerequest of Depomed, Collegium will send Depomed samples of such finished goods inventory of Products. In theevent Collegium materially breaches this Section 8.4(d) and fails to cure such breach within sixty (60) days afterDepomed notifies Collegium in writing of such breach, Depomed may terminate the license granted under Section8.4(a) by delivery to Collegium of a written notice of termination. If Collegium disputes in good faith the existence ormateriality of an alleged breach specified in a notice provided by Depomed pursuant to this Section 8.4(d), andprovides notice to Depomed of such dispute within the sixty (60) day period following the date that Depomed notifiedCollegium of the breach, Depomed will not have the right to terminate such license unless and until the existence ofsuch material breach has been finally determined in accordance with the dispute resolution provisions of Section 17.12and Collegium fails to cure such breach within twenty (20) days following such determination.(e) Notwithstanding the transfer of any labels or packaging, or any advertising, marketing, salesand promotional materials, Collegium acknowledges that this Agreement does not, and shall not, transfer, convey orassign any right, title, license or interest in any trademarks of Depomed or any of its Affiliates other than the LicensedTrademarks pursuant to the Trademark License Agreement.67 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (f) Notwithstanding the foregoing, the parties acknowledge that this Agreement does not, and shallnot, transfer, convey or assign any right, title, license or interest in any trademark of any Third Party.Section 8.5 Customer ServiceFor the period from the Effective Date up to the Closing Date, Depomed will continue to provide all customerservice with respect to the Products at a level comparable to that which was provided prior to the Effective Date. Onand from the Closing Date, through the completion of the Term, Collegium shall assume all customer serviceresponsibility and provide all customer service required by its customers with respect to the Products. As of theClosing Date, and through the completion of the Term, all customer service requests relating to the Product received byDepomed will be referred to Collegium to the attention of Collegium’s customer service provider as designated byCollegium.ARTICLE 9TERM AND TERMINATIONSection 9.1 Term(a) The term of this Agreement shall commence on the Effective Date and shall, unless terminatedsooner in accordance with this Article 9, continue for so long as Collegium is engaging in any Commercializationactivities with respect to a Payment-Bearing Product (the “Term”).Section 9.2 Early Termination(a) Depomed may terminate this Agreement: (i) upon at least ninety (90) days’ prior written noticeto Collegium in the event that the aggregate Net Sales of the Payment-Bearing Products in the Territory during anyperiod of twelve (12) consecutive calendar months ending on or before December 31, 2021 are less than One HundredEighty Million Dollars ($180,000,000) and Depomed does not receive the full amount of any Minimum QuarterlyPayment that becomes due and payable during that same twelve (12) month period, either through direct payment ofthe Minimum Quarterly Payment by Collegium or by Depomed’s recourse to the Letter of Credit or Sales Accountpursuant to Section 7.7(a) or Section 7.7(b); (ii) without cause, upon at least sixty (60) days’ prior written notice toCollegium given not later than December 31, 2018, provided that Depomed pays to Collegium a termination fee in theamount of Eighty Million Dollars ($80,000,000) not later than the effective date of termination; or (iii) upon at leastninety (90) days’ prior written notice to Collegium in the event that the Annual Net Sales of Payment-Bearing Productsfor any period after December 31, 2021 are less than One Hundred Forty Million Dollars ($140,000,000).(b) At any time on or after the first anniversary of the Closing Date (subject to Section 7.3(f)(iii)),Collegium and Newco may tender a written notice to Depomed68 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. terminating this Agreement for any reason, with such termination to be effective one year from the delivery of suchnotice; provided that, if the effective date of termination designated in such notice is prior to the fourth anniversary ofthe Closing Date, then such termination shall be contingent upon the payment by Collegium to Depomed, not later thanthe termination date, of a termination fee in the amount of Twenty-Five Million Dollars ($25,000,000). After thedelivery of notice of termination and prior to the effective date of termination pursuant to this Section 9.2(b), Collegiumshall continue to comply with its diligence obligations as set forth in the first sentence of Section 4.1 and otherwiseoperate and maintain the business and assets relating to this Agreement in the ordinary course of business andconsistent in all material respects with the twelve (12) month period prior to such delivery of notice of termination.(c) Collegium and Newco may terminate this Agreement upon ten (10) days’ prior written notice toDepomed, if the Grünenthal License Agreement is terminated by Grünenthal as a result of any breach of theGrünenthal License Agreement by Depomed (other than a breach of the Grünenthal License Agreement by Depomedwhich is caused by a breach by Newco or its Affiliates or Sublicensees, including Collegium or its Affiliates, of any oftheir obligations under this Agreement or any of Depomed’s obligations under the Grünenthal License Agreement).Section 9.3 Termination for Cause(a) In the event of a material breach of this Agreement other than a failure to make any undisputedpayment(s) hereunder, the non-breaching party shall have the right to terminate this Agreement by written notice to thebreaching party specifying the nature of such breach in reasonable detail. Such termination shall become effectivesixty (60) days from receipt of such notice by the breaching party, unless the allegedly breaching party disputes suchbreach in good faith.(b) In the event of a material breach of this Agreement by a party as a result of any failure to makeany undisputed payment(s) under this Agreement, the non-breaching party (excluding Newco, in the event thebreaching party is Collegium, and Collegium, in the event the breaching party is Newco) shall have the right toterminate this Agreement by written notice to the breaching party and such termination shall become effective ten (10)days from receipt of such notice by the breaching party unless the breaching party has cured such breach within suchperiod. If such breach is due to the action of Collegium, then this Agreement shall automatically terminateimmediately, without the need for notice by the non-breaching party. For clarity, Collegium shall not be deemed to bein breach of its obligation to make any Minimum Quarterly Payment to Depomed under this Agreement in the eventthat Depomed does not receive its full Minimum Quarterly Payment through the Sales Account and Depomed iseligible to, and does, draw on the Letter of Credit in accordance with Section 7.7(a) to satisfy any such QuarterlyShortfall.69 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (c) If Collegium or Depomed disputes in good faith the existence or materiality of an allegedmaterial breach specified in a notice provided by the other party pursuant to this Section 9.3, and provides notice to theother party of such dispute within the sixty (60) day period or ten (10) day period, as applicable, following the date thatthe other party notified the breaching party of the breach, the other party will not have the right to terminate thisAgreement unless and until the existence of such material breach has been finally determined in accordance with thedispute resolution provisions of Section 17.12 and the breaching party fails to cure such breach within twenty (20) daysfollowing such determination. Notwithstanding the foregoing, Collegium shall not be entitled to dispute its obligationto make any of the Minimum Quarterly Payments to Depomed due and payable under Section 7.3(a).Section 9.4 Termination for Bankruptcy.To the extent permitted by law, each party (excluding Newco, in the event the other party is Collegium, andCollegium, in the event the other party is Newco) will have the right to terminate this Agreement immediately uponnotice to the other party, in the event of (a) the entry of an order for relief under the United States Bankruptcy Code(or any corresponding remedy under successor laws) against the other party, (b) the filing of a petition by or against theother party under any bankruptcy, insolvency or similar law (which petition is not dismissed within sixty (60) daysafter filing), (c) the appointment of a receiver for the other party’s business or property or (d) the other party’s makingof a general assignment for the benefit of its creditors. Where Collegium is the “other party,” such term “other party” ishereby deemed to mean either Collegium or Newco. Notwithstanding the occurrence of any of the events specified inthis Section 9.4, the parties acknowledge and agree that, to the extent Section 365(n) of the United States BankruptcyCode applies to this Agreement, the non-insolvent party may elect to retain and exercise the rights granted to ithereunder with respect to the intellectual property owned or controlled by the insolvent party.Section 9.5 Termination for Failure to Obtain HSR ClearanceIf the HSR Clearance Date has not occurred on or before seventy (70) days after the Effective Date, then anyparty shall have the right to terminate this Agreement in its entirety upon notice to the other parties referencing thisSection 9.5, and except for Article 13 and Section 17.12, none of the provisions of this Agreement shall remain ineffect after such termination.Section 9.6 Termination for Failure to CloseIf the parties fail to close on or prior to February 28, 2018, then any party shall have the right to terminate thisAgreement in its entirety upon notice to the other parties referencing this Section 9.6, and except for Article 13 andSection 17.12, none of the provisions of this Agreement shall remain in effect after such termination; provided,however, that the failure of the parties to close shall not be due to the action or inaction of the party invoking its right toterminate this Agreement pursuant to this Section 9.6; and provided, further, that if Depomed is70 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. unable for any reason to extend the termination date set forth in the Consent Agreement beyond January 31, 2018 onthe same terms and conditions as are set forth in the Consent Agreement as of the Effective Date (other than therevision to such termination date), then any party will have the right to terminate this Agreement pursuant to thisSection 9.6 if the parties fail to close on or prior to January 31, 2018.Section 9.7 Effects of Termination(a) General Effects of Termination. Upon expiration or termination of this Agreement for anyreason, the following terms and conditions shall apply:(i) Expiration or termination of this Agreement shall not relieve either party of anyobligations that accrued prior to such expiration or termination, including accrued payment obligations. For clarity,Collegium shall not be obligated to make any Minimum Quarterly Payments with respect to any period of time or salesof any Payment-Bearing Product following the effective date of termination and, following receipt or issuance of anynotice of termination pursuant to Section 9.2 or Section 9.3, Collegium’s obligation to pay any further MinimumQuarterly Payment(s) (or portion thereof) shall only apply with respect to the period of time between its receipt orissuance of the termination notice and the effective date of termination.(ii) Except in the case of termination of this Agreement pursuant to Section 9.5 (the effectsof which are addressed in Section 9.5), the following provisions shall survive expiration or termination of thisAgreement and remain in effect, along with any other provisions to the extent required to interpret and enforce theparties’ rights and obligations under this Agreement: Sections 3.2(e)(iv), 4.5(b), 5.1(a) (solely the last sentence),7.3(d) (solely with respect to Line Extensions), 7.3(e)(iv) (solely with respect to Line Extensions which are “NewProducts”), 7.4, 7.6, 9.7 and 10.3 and Articles 1, 12, 13, 15, 16 and 17.(iii) Expiration or termination of this Agreement shall be without prejudice to (A) anyremedies which any party may then or thereafter have hereunder or at law or in equity, (B) a party’s right to receiveany payment accrued under the Agreement prior to the termination date but which becomes payable thereafter and(C) either party’s right to obtain performance of any obligations provided for in clause (ii) above which survivetermination. Except as expressly set forth herein, the rights to terminate this Agreement as set forth in this Agreementshall be in addition to all other rights and remedies available under this Agreement, at law, in equity or otherwise.(iv) All licenses, rights, and sublicenses granted by Depomed to Newco pursuant to Section2.1 and Section 2.2(a) shall automatically terminate and no longer be effective.(v) Any sublicenses granted by Newco hereunder (including to Collegium and/or itsAffiliates) shall automatically terminate and no longer be effective.71 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (vi) Depomed shall retain exclusive ownership of all Products. Collegium shall retainexclusive ownership of all Line Extensions.(vii) Section 7.3(d) and Section 7.3(e)(iv) shall survive solely with respect to Line Extensionssold in the Territory by Collegium or its Affiliates or other Sublicensees after termination, with the payments specifiedin Section 7.3(d) becoming payable commencing as of the effective date of termination.(viii) As soon as is reasonably practicable after expiration or termination of this Agreement,Collegium shall (and shall cause its Affiliates to) return to Depomed all applications, reports and related documentationthat it prepared for filing with the applicable Regulatory Authorities, as well as the pharmacovigilance database andany other related data, in each case solely with respect to Products.(ix) As soon as is reasonably practicable after expiration or termination of this Agreement,except as necessary or useful for the exercise of rights continuing after expiration or termination, the recipient partyshall (and shall cause its Affiliates to) return to the disclosing party or destroy all originals of documents (in paper,electronic or other tangible form) and physical materials then in the recipient party’s possession, and copies thereof,containing or embodying Proprietary Information received from the disclosing party, and destroy all documents andother materials that the recipient party created containing any such Proprietary Information, provided, however, that therecipient party may retain in confidence (a) one archival copy of the Proprietary Information of the disclosing party inits legal files solely to permit the recipient party to determine compliance with its obligations hereunder and (b) anyportion of the Proprietary Information of the disclosing party which such recipient party is required by applicable LegalRequirements to retain. Notwithstanding the return or destruction of the documents and materials described above, theparties will continue to be bound by their obligations under Article 13.(b) Additional Effects of Termination. Upon termination of this Agreement pursuant to Section9.2, Section 9.3 or Section 9.4, the following additional terms and conditions shall apply:(i) At Depomed’s request, Collegium shall, and shall cause Newco to, promptly transfer,convey and assign to Depomed or its designee either, at Depomed’s option, (A) each Transferred Asset then inexistence that is selected by Depomed for assignment, or (B) all then outstanding membership interests in Newco.(ii) At Depomed’s request, Collegium shall cooperate in undertaking a reasonable wind-down or orderly transition to Depomed or its designee of Collegium’s development and/or Commercialization activitieswith respect to the Products (including taking such reasonable actions in regard to Regulatory Approvals as may bedirected by Depomed pending the assignment and transfer of such Regulatory Approvals pursuant to Section 9.7(b)(v)).72 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (iii) At Depomed’s request, if on the effective date of such termination, there are any on-going clinical studies (including post-approval commitments, but not including investigator-initiated clinical studies) ofany Product conducted by or on behalf of Collegium, Collegium shall transition such clinical studies to Depomed or itsdesignee as promptly as practicable, at Depomed’s cost and expense.(iv) For any investigator-initiated clinical studies, Collegium shall either terminate suchstudies, such that Depomed is not responsible for any costs thereof, or continue such studies at Collegium’s own costand expense.(v) At Depomed’s request, Collegium shall promptly (A) transfer, convey and assign toDepomed or its designee all regulatory filings and Regulatory Approvals then owned by Collegium or its Affiliates thatrelate solely to the Products, and deliver to Depomed or its designee all pre-clinical and clinical data and information inCollegium’s possession or Control relating solely to the Products, and (B) deliver or make available to Depomed or itsdesignee copies of those reports, records and regulatory correspondence in Collegium’s possession or Control thatrelate solely to the development of the Products.(vi) At Depomed’s request, Collegium shall promptly assign (or use commerciallyreasonable efforts to assign if the applicable contract does not freely permit assignment) to Depomed or its designeeany manufacturing, supplier, distributor, clinical study, or other contracts relating solely to the development,Manufacture or Commercialization of the Products entered into by Collegium with Third Parties (in addition to anycontracts assigned pursuant to Section 9.7(b)(i)) or otherwise use reasonable efforts to facilitate Depomed’sestablishment of similar relationships with such Third Parties.(vii) At Depomed’s request, Collegium shall promptly transfer, convey and assign toDepomed or its designee all right, title and interest in and to all then-existing inventory of Products in finished goodsform that is in Collegium’s possession or control (whether intended for clinical or commercial supply), subject toDepomed reimbursing Collegium’s COGS with respect to such inventory.(viii) At Depomed’s request, Collegium shall promptly provide to Depomed or its designee allPromotional Materials used in connection with the Products in the Territory that are in Collegium’s possession orControl (including electronic files of such Promotional Materials), subject to Depomed reimbursing Collegium’s out-of-pocket cost for printing and delivering such Promotional Materials.(ix) Collegium shall continue to be responsible for returns, Commercial Rebates,Chargeback Claims and Co-Pay Card Discounts with respect to Products Commercialized by Collegium prior to suchtermination, in accordance with Section 8.3.(x) To the extent that Depomed has not previously commenced such activities pursuant toSection 4.9, Depomed may elect, at any time after delivery of the notice of73 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. termination, to have the Depomed Sales Force Detail the Products directly to Professionals in the Territory inaccordance with Section 4.9, except that the notice period set forth in Section 4.9(b)(i) shall not apply.(xi) Each party agrees to execute, acknowledge and deliver such further instruments,consents and other documents, and to do all such other acts, as may be necessary or appropriate in order to carry outthe purposes and intent of this Section 9.7(b), for no further consideration.ARTICLE 10REPRESENTATIONS AND WARRANTIESSection 10.1 Representations and Warranties of DepomedDepomed hereby represents and warrants to Collegium as follows:(a) Organization. Depomed is a corporation duly incorporated, validly existing and in goodstanding under the Legal Requirements of the State of California. Depo NF Sub, LLC is a limited liability companyduly formed, validly existing and in good standing under the Legal Requirements of the State of Delaware. EachDepomed Entity is authorized to do business under the Legal Requirements of all jurisdictions in which it is required tobe so authorized.(b) Authority; Binding Effect.(i) Each Depomed Entity has all requisite corporate power and authority to own andoperate its properties and assets and to carry on its business as it is now being conducted and as it is related to theTransferred Assets and the Business. Depomed has all requisite corporate power and authority to execute and deliverthis Agreement and the Ancillary Agreements, and to carry out, or to cause to be carried out, the Transactions. Theexecution and delivery by Depomed of this Agreement and the Ancillary Agreements, and the performance by eachDepomed Entity of its obligations hereunder and thereunder, have been duly authorized by all requisite corporateaction on the part of such Depomed Entity.(ii) This Agreement has been duly executed and delivered by Depomed and, assuming thevalid execution and delivery by Collegium, constitutes a legal, valid and binding obligation of Depomed, enforceableagainst Depomed in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency,reorganization, fraudulent conveyance, moratorium or similar laws affecting creditors’ rights generally or by generalprinciples of equity (regardless of whether enforcement is sought in a proceeding in equity or law).(iii) Each of the Ancillary Agreements has been duly authorized by all necessary action onthe part of Depomed and has been, or will be at the Closing, duly executed74 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. and delivered by Depomed and, assuming the valid execution and delivery by Collegium, constitutes or will constitutea legal, valid and binding obligation of Depomed, enforceable against Depomed in accordance with its terms, except assuch enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium orsimilar laws affecting creditors’ rights generally or by general principles of equity (regardless of whether enforcement issought in a proceeding in equity or law).(c) Non-Contravention. The execution, delivery and performance of this Agreement and the otherTransaction Documents by Depomed, and the consummation of the Transactions, do not and will not (i) violate anyprovision of the articles of incorporation or bylaws of Depomed and the comparable organizational documents of DepoNF Sub, LLC; (ii) subject to obtaining the consents referred to in Schedule 10.1(c), result in the creation of any Lien(other than Permitted Liens) upon any of the Transferred Assets; or (iii) assuming compliance with the matters set forthin Section 10.1(d) and Section 10.2(d), violate or result in a breach of, or constitute a default under any LegalRequirement or other restriction of any Governmental Authority to which any Depomed Entity is subject, except, withrespect to clause (iii), for any violations, breaches, or defaults, that would not, individually or in the aggregate,reasonably be expected to be materially adverse to the Transferred Assets or to the conduct of the Business, taken as awhole.(d) Governmental Authorization. Except as set forth on Schedule 10.1(d) or in connection with thefilings required by the Competition Laws, the execution and delivery of this Agreement and the other TransactionDocuments by Depomed, and the consummation of the Transactions, do not require any consent or approval of, or anynotice to or other filing with, any Governmental Authority.(e) No Litigation.(i) Except as set forth on Schedule 10.1(e)(i), no Legal Proceeding or Order that (A) is oris reasonably likely to be material to the Business, the Transferred Assets or the Assumed Liabilities, taken as a whole,(B) would enjoin, restrict or prohibit the transfer of all or any part of the Transferred Assets, or the performance by anyDepomed Entity, as contemplated by this Agreement or the Ancillary Agreements, or (C) seeks to impose any materiallimitation on the ability of any Depomed Entity to operate the Business or the Transferred Assets as currentlyconducted or after the Closing or would impose any material limitation on the ability of Collegium to operate theBusiness or the Transferred Assets as currently conducted, is pending or outstanding against or, to the Knowledge ofDepomed, threatened against any Depomed Entity. This Section 10.1(e)(i) does not relate to Legal Proceedingsrelating solely to the Licensed IP Rights, which are the subject of Section 10.1(i).(ii) Except as set forth on Schedule 10.1(e)(ii), from April 2, 2015 through the date hereof,no Legal Proceeding related to product liability, product defect, fraud, misrepresentation, unjust enrichment, conspiracyor economic loss has been initiated or filed75 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. against any Depomed Entity or their agents and, to the Knowledge of Depomed, no such Legal Proceeding has beenthreatened against any Depomed Entity relating to any of the Products.(f) Compliance with Legal Requirements. Except as to matters set forth in Schedule 10.1(f):(i) Each Depomed Entity is, and since April 2, 2015 has been, in material compliance withall Legal Requirements applicable to the ownership of the Transferred Assets or the operation of the Business,including applicable Health Laws and Environmental Laws.(ii) Each Depomed Entity possesses, and is in compliance with, all GovernmentalAuthorizations necessary for the conduct of the Business as it is currently conducted, except where the failure topossess or comply with any such Governmental Authorization would not, individually or in the aggregate, bematerially adverse to the operation of the Business, and all such Governmental Authorizations are valid and in fullforce and effect. Each Depomed Entity, as applicable, have completed and filed all reports, documents, claims, permitsand notices required by any Governmental Authority in order to maintain the Governmental Authorizations, exceptwhere failure to file such reports would not be materially adverse to the Business. To the Knowledge of Depomed, allsuch reports, documents, claims, permits and notices were complete and accurate in all material respects on the datefiled (or were corrected in or supplemented by a subsequent filing). No event has occurred that would reasonably beexpected to result in a penalty under or the revocation, cancellation, non-renewal or adverse modification of anyGovernmental Authorization, except as has not been and would not, individually or in the aggregate, reasonably beexpected to be materially adverse to the Business.(iii) To the Knowledge of Depomed, Depomed has calculated and reported all pricesreported to or used to calculate pricing or discounts under the Medicaid Program (42 U.S.C. § 1396r-8), the 340BDrug Discount Program (42 U.S.C. § 256b), and Section 603 of the Veterans Healthcare Act of 1993 (Pub. L. 102-585) for the Products in compliance with applicable Legal Requirements.(g) Regulatory Matters.(i) Schedule 10.1(g) sets forth, as of the Effective Date, a list of all material RegulatoryApprovals granted to any Depomed Entity by, or application therefor pending with, any Governmental Authority tomanufacture, have made, test, market, package, import, distribute, sell and commercialize the Products in the Territory.(ii) All Products sold under the Regulatory Approvals are manufactured, marketed,distributed and sold in accordance with such Regulatory Approvals, including the specifications and standardscontained therein, except as has not been and would76 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. not, individually or in the aggregate, reasonably be expected to be materially adverse to the Business.(iii) With respect to the Business, neither any Depomed Entity, nor, to the Knowledge ofDepomed, any officer, employee, or agent of any Depomed Entity, (A) has made an untrue statement of a material factor a fraudulent statement to the FDA, failed to disclose a material fact required to be disclosed to the FDA orcommitted an act, made a statement, or failed to make a statement that, at the time such disclosure was made, wouldreasonably be expected to provide a basis for the FDA to invoke its Fraud, Untrue Statements of Material Facts,Bribery, and Illegal Gratuities policy set forth in the FDA’s Compliance Policy Guide Sec. 120.100 (CPG 7150.09), or(B) has been convicted of any crime or engaged in any conduct that would reasonably be expected to result indebarment under 21 U.S.C. 335a or any similar Legal Requirement.(iv) Since April 2, 2015, no Depomed Entity has (A) voluntarily nor involuntarily initiated,conducted or issued, or caused to be initiated, conducted or issued, any recall, field alerts, market withdrawal orreplacement, safety alert, “dear doctor” letter, investigator notice, or other notice or action relating to an alleged lack ofsafety, or efficacy of any Product, and to the Knowledge of Depomed, there are no facts which are reasonably likely tocause (1) the recall, market withdrawal or replacement of any Product sold or intended to be sold by any DepomedEntity, (2) a change in the marketing classification or a material change in the labeling of any such Products or (3) atermination or suspension of the marketing of such Products; or (B) received any written notice that any GovernmentalAuthority has (1) commenced, or threatened to initiate, any action to request the recall or to enjoin the manufacture ordistribution of any Product sold or intended to be sold by any Depomed Entity or (2) commenced, or threatened toinitiate, any action to withdraw any Regulatory Approvals issued relating to any Product.(v) Except for ordinary course inquiries or as set forth on Schedule 10.1(g)(v), since April2, 2015, Depomed has not received, with respect to the Products marketed and sold in the Territory, any written noticeor communications from any Governmental Authority alleging any safety or quality concerns with respect to anyProduct or noncompliance with any applicable Legal Requirements or Regulatory Approvals, except as would not,individually or in the aggregate, reasonably be expected to be materially adverse to the operation of theBusiness. Depomed is not subject to any enforcement proceedings by the FDA related to the Products and, to theKnowledge of Depomed, no such proceedings have been threatened.(vi) All clinical trials and studies for the Products that have been or are being conducted byor on behalf of Depomed or its Affiliates, were conducted, and are being conducted, in all material respects inaccordance with all applicable Legal Requirements, including Health Legal Requirements. To the Knowledge ofDepomed, there is no Legal Proceeding pending or threatened by any Governmental Authority to suspend, investigateor terminate any ongoing clinical trials or studies for any Product.77 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (h) Contracts.(i) As of the Effective Date, the Grünenthal License Agreement is valid and binding onDepomed and, to the Knowledge of Depomed, Grünenthal, and is in full force and effect in accordance with its terms,except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,moratorium or similar laws affecting creditors’ rights generally or by general principles of equity (regardless of whetherenforcement is sought in a proceeding in equity or law). Neither Depomed nor, to the Knowledge of Depomed,Grünenthal is in material breach of or material default under, or has provided notice of its intent to terminate, theGrünenthal License Agreement, and no event has occurred that, with the giving of notice or lapse of time or both,would constitute a material breach or material default thereunder. During the Term, Depomed shall not amend,terminate or cause to be terminated the Grünenthal License Agreement in any manner that would reasonably beexpected to be materially adverse to Collegium’s rights or obligations under this Agreement without the prior writtenconsent of Collegium, which consent shall not be unreasonably withheld, conditioned or delayed.(ii) As of the Effective Date, Grünenthal has consented, in writing, to the grant of thesublicense under Section 2.1(a)(iii) and Section 2.1(a)(iv), and such consent has not been rescinded, revoked, modifiedor conditioned in any manner.(i) Intellectual Property.(i) Except as set forth on Schedule 10.1(i)(i):(1) to the Knowledge of Depomed, the Transferred IP Rights and Licensed IPRights are subsisting, the issued Patents and registered Trademarks included within the Transferred IP Rights andLicensed IP Rights are valid and enforceable, and there is no objection or claim being asserted or threatened in writingby any Person challenging the scope, ownership, inventorship, validity or enforceability of any Transferred IP Rightsor Licensed IP Rights, other than the ANDA Litigation; provided that the foregoing “Knowledge of Depomed”qualifier shall not apply with respect to the Licensed Trademarks, the Transferred Domain Names or the DepomedAcuform Patents;(2) on the Effective Date, a Depomed Entity is, and at the Closing, will be, (I) thesole and exclusive beneficial and, with respect to applications and registrations, record owner of, and hold good,saleable and sole title to the Transferred IP Rights and Licensed IP Rights, other than the Licensed IP Rights that arelicensed to a Depomed Entity, in which case, a Depomed Entity is the holder of an assignable valid right or license tosuch Licensed IP Rights, and (II) the beneficial owner of the Depomed Product Know-How;(3) no license of any kind relating to any Transferred IP Right or Licensed IP Righthas been granted by any Depomed Entity to any Third Parties (except for78 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. immaterial, non-exclusive licenses to use Transferred IP Rights or Licensed IP Rights to customers and suppliers in theordinary course of business);(4) the Transferred IP Rights and the Licensed IP Rights are (in the case of theGrünenthal IP Rights, to the Knowledge of Depomed and subject to the Grünenthal License Agreement) free and clearof any Liens, other than Permitted Liens;(5) there are no Legal Proceedings or other claims pending or threatened by aDepomed Entity against any Person, and no Depomed Entity has provided notice of any Person’s Infringement of anyTransferred IP Right or the Licensed IP Right or misappropriation of Depomed Product Know-How;(6) there are no Legal Proceedings or other claims pending, or to the Knowledge ofDepomed, threatened in writing against Depomed or any of its other Affiliates by any Person, and none of Depomedor any of its other Affiliates received written notice (including in the form of offers, invitations to obtain a license orcease-and-desist letters) from any Person that the conduct of the Business (including the use of Depomed ProductKnow-How), including the marketing and sale of the Products in the United States, constitutes Infringement of any IPRight of such Person;(ii) Except as set forth on Schedule 10.1(i)(ii), the Transferred IP Rights and the Licensed IPRights constitute all of the IP Rights owned or licensed to or by Depomed and its Affiliates at the Closing that are usedto commercialize the Products, except in respect of the manufacture and packaging of the Products. To the Knowledgeof Depomed, all assignments, declarations and powers of attorney with respect to the Transferred IP Rights and theLicensed IP Rights have been properly obtained and recorded, provided that the foregoing “Knowledge of Depomed”qualifier shall not apply with respect to the Licensed Trademarks, Depomed Acuform Patents or the TransferredDomain Names.(iii) Each Depomed Entity has taken and currently takes commercially reasonable measuresto protect the confidentiality of confidential information material to the conduct of the Business and owned, used orheld for use in the conduct of the Business by any Depomed Entity, and to the Knowledge of Depomed, there has notbeen any disclosure of any trade secret or confidential information owned, used or held for use in the conduct of theBusiness to any Person in a manner that has resulted in the loss of such trade secret or other rights in and to suchinformation.(iv) Schedule 10.1(i)(iv) lists all of the United States Patents licensed from Grünenthal underthe terms of the Grünenthal License Agreement that relate to the Products (the “Grünenthal Patents”).(v) Nucynta® ER constitutes a Grünenthal-ADF-Formulation (as defined in the GrünenthalLicense Agreement).79 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (j) Brokers. No broker, finder or investment banker is entitled to any brokerage, finders or otherfee or commission in connection with the Transactions based upon arrangements made by or on behalf of anyDepomed Entity.(k) Transferred Assets. Except as set forth on Schedule 10.1(k), the Depomed Entities (a) own,lease or have the legal right to use all of the Transferred Assets, and (b) have good title to all the Transferred Assets(other than those Transferred Assets that are licensed) free and clear of all Liens, except for Permitted Liens. Otherthan Depo NF, no Affiliate of Depomed has any right, title or interest in, to or under the TransferredAssets. Following the Closing, neither Depomed nor any of its Affiliates will own any right, title or interest in or toany of the Transferred Assets, except as otherwise expressly set forth in Section 9.7(b) and Article 13 or any of theAncillary Agreements. This Section 10.1(k) does not relate to intellectual property, which is the subject of Section10.1(i).(l) Absence of Material Changes. Since September 30, 2017, and through the date hereof, and asof the Closing Date, except as set forth on Schedule 10.1(l), the Business has been operated in the ordinary course andthere has not been:(i) any sale, pledge, disposition, transfer, lease, license, encumbrance or authorization ofthe sale, pledge, disposition, transfer, lease, license or encumbrance of any assets, including any IP Rights, that are (orwould otherwise be) Transferred Assets, other than (A) sales of Products in the ordinary course of business consistentwith past practice or (B) Permitted Liens;(ii) any waiver of any material claims or rights of material value that relate to the TransferredAssets;(iii) any acquisition of any material properties, assets or IP Rights that constitute TransferredAssets, other than Transferred Assets that would not reasonably be expected to result in any material AssumedLiabilities;(iv) any settlement of any Legal Proceeding or waiver of any material claims or rights ofmaterial value in a manner that constitutes an Assumed Liability or otherwise would reasonably be expected to bematerially adverse to the Transferred Assets or the operation of the Business, taken as a whole;(v) any termination, cancellation, lapse, amendment, waiver or modification of anyRegulatory Approvals material to the Business or the Transferred Assets;(vi) any abandonment, termination or lapse of any Transferred IP Rights or Licensed IPRights, or rights relating to any Transferred IP Rights or Licensed IP Rights, in each case, relating to the TransferredAssets or the Business;80 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (vii) any failure to take any action necessary to protect or maintain any Transferred IP Rightsor Licensed IP Rights or to prosecute any pending applications for any trademarks or file any documents or otherinformation or pay any maintenance or other fees related thereto, in each case, relating to the Transferred Assets or theBusiness;(viii) any transfer, assignment or grant of any license or sublicense of any rights under or withrespect to any Transferred IP Rights or Licensed IP Rights relating to the Transferred Assets, the Products or theBusiness, other than immaterial, non-exclusive licenses to use Transferred IP Rights or Licensed IP rights to customersand suppliers in the ordinary course of business;(ix) any (A) change in any Depomed Entity’s activities and practices with respect toinventory levels of the Products maintained at the wholesale, chain or institutional levels inconsistent with past practice,(B) any change in the selling, distribution, advertising, pricing, terms of sale or collection practices inconsistent withpast practice or (C) the entry into any program, activity or other action (including any rebate, discount, chargeback orrefund policy or practice), in each case, that would reasonably be expected to result in a trade buy-in that is materiallyin excess of normal customer purchasing patterns consistent with past course of dealing with the Business during thetwelve (12) months prior to the date hereof; or(x) any agreement, commitment to take or authorization of any action described in thisSection 10.1(l).(m) Transferred Inventory. The Transferred Inventory is of usable or saleable quality in theordinary course of business and has the expiration dates set forth on the Transferred Inventory Cost Statement (exceptfor such inaccuracies as would not be material). All of the Transferred Inventory is, as of the Closing Date, free ofmaterial defects (including defects in packaging, labeling, and storage) and systematic or chronic problems and complyin all material respects with all applicable specifications and all applicable Legal Requirements, including all HealthLegal Requirements and Environmental Legal Requirements. All Transferred Inventory that has been returned, hasexpired or has been deemed unusable or not fit for sale has been or will be destroyed in accordance with the policies ofDepomed and applicable Legal Requirements.(n) Taxes. Except as set forth on Schedule 10.1(n) to the extent a breach or inaccuracy of any ofthe following could result in a liability of Newco, Collegium (or any of their Affiliates) to any Person: (a) all materialTax Returns required to be filed by Depomed or its subsidiaries with respect to the ownership or use of the TransferredAssets have been duly and timely filed; (b) all material Taxes due and payable by Depomed or its subsidiaries withrespect to the ownership or use of the Transferred Assets have been timely paid; (c) none of the Transferred Assets issubject to any Liens as a result of a failure to pay any Tax (excluding, any Permitted Liens); and (d) other than asrelates to income taxes, there are no ongoing or pending Tax audits or administrative or similar proceedings withrespect to any Tax Returns of Depomed81 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. relating to the ownership or use of the Transferred Assets. Notwithstanding any provisions of this Agreement to thecontrary, Section 10.1(e)(i) and the foregoing provisions of this Section 10.1(n) constitute the sole representations andwarranties of Depomed and its Affiliates relating to Taxes.Section 10.2 Representations and Warranties of Collegium and NewcoCollegium and Newco hereby jointly and severally represent and warrant to Depomed as follows:(a) Organization. Collegium is a corporation duly organized, validly existing and in good standingunder the Legal Requirements of the State of Virginia. Newco is a limited liability company duly formed, validlyexisting and in good standing under the Legal Requirements of Delaware. Collegium and Newco are each authorizedto do business under the Legal Requirements of all jurisdictions in which they are required to be so authorized, exceptas would not, individually or in the aggregate, have a material and adverse effect on the ability of Collegium andNewco to consummate the Transactions (a “Collegium Material Adverse Effect”).(b) Authority; Binding Effect.(i) Collegium has all requisite corporate power and authority to own and operate itsproperties and assets, to carry on its business as it is now being conducted and to execute and deliver this Agreementand the Ancillary Agreements, and to carry out or cause to be carried out, the Transactions. Newco has all requisitepower and authority to own and operate its properties and assets, to carry on its business as it is now being conductedand to execute and deliver this Agreement and the Ancillary Agreements, and to carry out or cause to be carried out,the Transactions. The execution and delivery by Collegium and Newco of this Agreement and the AncillaryAgreements, and the performance by Collegium and Newco of their obligations hereunder and thereunder, have beenduly authorized by all requisite corporate action on the part of Collegium and Newco.(ii) This Agreement has been duly executed and delivered by Collegium and Newco, andassuming the valid execution and delivery by Depomed, constitutes a legal, valid and binding obligation of each ofCollegium and Newco, enforceable against Collegium and Newco in accordance with its terms, except as enforcementmay be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar laws affectingcreditors’ rights generally or by general principles of equity (regardless of whether enforcement is sought in aproceeding in equity or law).(iii) Each of the Ancillary Agreements has been duly authorized by all necessary corporateaction on the part of Collegium and Newco, and has been, or will be at the Closing, duly executed and delivered byCollegium and Newco, and assuming the valid execution and delivery by Depomed, constitutes or will constitute alegal, valid and binding82 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. obligation of each of Collegium and Newco, enforceable against Collegium and Newco in accordance with its terms,except as such enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,moratorium or similar laws affecting creditors’ rights generally or by general principles of equity (regardless of whetherenforcement is sought in a proceeding in equity or law).(c) Non-Contravention. The execution, delivery and performance by Collegium and Newco of thisAgreement and the other Transaction Documents, and the consummation of the Transactions, do not and will not (i)violate any provision of the certificate of formation, bylaws or other organizational documents of Collegium and thecomparable organization documents of Newco; (ii) conflict with, or result in a breach of, constitute a default under orresult in the termination, cancellation or acceleration (whether after the giving of notice or the lapse of time or both) ofany right or obligation of Collegium or any of its Affiliates under, or to a loss of any benefit to which Collegium or anyof its Affiliates is entitled under, any agreement, lease of real estate or license of intellectual property to whichCollegium or any of its Affiliates is a party or to which its properties or assets are subject; or (iii) assuming compliancewith the matters set forth in Section 10.1(d) and Section 10.2(d), violate or result in a breach of or constitute a defaultunder any Legal Requirement or other restriction of any Governmental Authority to which Collegium or Newco issubject, except, with respect to clause (iii), for any violations, breaches, or defaults that would not, individually or inthe aggregate, reasonably be expected to have a Collegium Material Adverse Effect.(d) Governmental Authorization. Except as set forth on Schedule 10.2(d) and in connection withthe filings required by the Competition Laws, the execution and delivery of this Agreement and the other TransactionDocuments, and the consummation of the Transactions, do not require any consent or approval of, or any notice to orother filing with, any Governmental Authority.(e) Brokers. No broker, finder or investment banker is entitled to any brokerage, finders or otherfee or commission in connection with the Transactions based upon arrangements made by or on behalf of Collegium orany of its Affiliates.(f) Financial Capability. As of the Closing, Collegium will have sufficient cash available to pay theTransferred Inventory Cost, the Upfront Payment and the Collegium Prepaid Business Expense Allocation on theterms and conditions contemplated by this Agreement.(g) Solvency. As of the Effective Date, after giving effect to all of the Transactions, including thepayment of the Transferred Inventory Cost, the Upfront Payment and the Collegium Prepaid Business ExpenseAllocation, Collegium and Newco shall be Solvent. For the purposes of this Section 10.2(g), the term “Solvent” whenused with respect to any Person, means that, as of any date of determination, (i) the “fair saleable value” of the assets ofsuch Person will, as of such date, exceed (A) the value of all “liabilities of such Person, including83 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. contingent and other liabilities,” as of such date, as such quoted terms are generally determined in accordance withapplicable federal laws governing determinations of the insolvency of debtors, and (B) the amount that will be requiredto pay the probable liabilities of such Person on its existing debts (including contingent liabilities) as such debts becomeabsolute and matured, (ii) such Person will not have, as of such date, unreasonably small capital for the operation of thebusinesses in which it is engaged or proposed to be engaged following such date and (iii) such Person will be able topay its liabilities, including contingent and other liabilities, as they mature.(h) No Litigation. No Legal Proceeding or Order that (i) would enjoin, restrict or prohibit thetransfer of all or any part of the Transferred Assets, or the performance by Collegium or Newco, as contemplated bythis Agreement or the Ancillary Agreements, or (ii) seeks to impose any material limitation on the ability of Collegiumor Newco to operate the Business or the Transferred Assets after the Closing is pending or outstanding against or, tothe Knowledge of Collegium, threatened in writing against Collegium.(i) Regulatory Matters.(i) Since April 26, 2016, Xtampza® ER FDA approval date, Collegium has manufactured,tested, marketed, distributed, and sold all of the products owned or controlled by it and subject to FDA regulation(“Collegium Products”) in accordance with all applicable Legal Requirements, including all Health Laws, andapplicable regulatory approvals, including the specifications and standards contained therein, except as has not beenand would not, individually or in the aggregate, reasonably be expected to have a material adverse effect.(ii) Since April 26, 2016, Xtampza® ER FDA approval date, Collegium has not (A)voluntarily nor involuntarily initiated, conducted or issued, or caused to be initiated, conducted or issued, any recall,field alerts, market withdrawal or replacement, safety alert, “dear doctor” letter, investigator notice, or other notice oraction relating to an alleged lack of safety, or efficacy of any Collegium Products, and to the Knowledge of Collegium,there are no facts which are reasonably likely to cause (1) the recall, market withdrawal or replacement of anyCollegium Products, or (2) a termination or suspension of the marketing of any Collegium Products. NeitherCollegium nor Newco has received any written notice that any Governmental Authority has (1) commenced, orthreatened to initiate, any action to request the recall or to enjoin the manufacture or distribution of any CollegiumProducts, or (2) commenced, or threatened to initiate, any action to withdraw any regulatory approvals relating toCollegium Products.(iii) Except for ordinary course inquiries or as set forth on Schedule 10.2(i)(iii), since April26, 2016, Xtampza® ER FDA approval date, Collegium has not received any written notice or communications fromany Governmental Authority alleging any safety or quality concerns with respect to any Collegium Products ornoncompliance with any applicable Legal Requirements, including Health Laws relating to the sale and marketing ofCollegium Products, or applicable regulatory approvals, except as would not, individually or in the84 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. aggregate, reasonably be expected to have a material effect. Collegium is not subject to any enforcement proceedingsby the FDA related to Collegium Products and, to the Knowledge of Collegium, no such proceedings have beenthreatened.(iv) All clinical trials and studies that have been or are being conducted by or on behalf ofCollegium with respect to Collegium products, were conducted, and are being conducted, in all material respects inaccordance with all applicable Legal Requirements, including Health Laws. To the Knowledge of Collegium andNewco, there is no Legal Proceeding pending or threatened by any Governmental Authority to suspend, investigate orterminate any ongoing clinical trials or studies conducted by or on behalf of Collegium.(v) Neither Collegium nor, to the Knowledge of Collegium, any officer, employee, or agentof Collegium, (A) has made an untrue statement of a material fact or a fraudulent statement to the FDA, failed todisclose a material fact required to be disclosed to the FDA or committed an act, made a statement, or failed to make astatement that, at the time such disclosure was made, would reasonably be expected to provide a basis for the FDA toinvoke its Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities policy set forth in the FDA’sCompliance Policy Guide Sec. 120.100 (CPG 7150.09), or (B) has been convicted of any crime or engaged in anyconduct that would reasonably be expected to result in debarment under 21 U.S.C. 335a or any similar LegalRequirement.Section 10.3 Warranty DisclaimerEXCEPT AS EXPRESSLY PROVIDED HEREIN, EACH PARTY DISCLAIMS ALL OTHERWARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO THE PRODUCTS AND LINE EXTENSIONS,INCLUDING THE WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR APARTICULAR PURPOSE.ARTICLE 11INTELLECTUAL PROPERTY MATTERSSection 11.1 Acuform Patent Prosecution and MaintenanceDepomed shall have the sole right, but not the obligation, to prosecute and maintain the Depomed AcuformPatents in the Territory. Depomed shall keep Collegium reasonably informed regarding material developments relatingto the prosecution and maintenance of the Depomed Acuform Patents in the Territory that would reasonably beexpected to have a material impact on any Product or Line Extension in the Territory.Section 11.2 Acuform Patent InfringementEach party shall promptly notify the other party in writing of any alleged or threatened Infringement of theDepomed Acuform Patents in the Territory by a Third Party of which such party becomes aware. Depomed shall havethe sole right, but not the obligation, to prosecute any85 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. such infringement of the Depomed Acuform Patents in the Territory at its sole expense and Depomed shall retaincontrol of the prosecution of such claim, suit or proceeding (an “Acuform Patent Action”). Newco and Collegiumshall cooperate fully with, and as reasonably requested by, Depomed in any Acuform Patent Action, and Depomedshall reimburse Newco and Collegium, as applicable, for such party’s out-of-pocket expenses incurred in providingsuch cooperation. Newco and Collegium may be represented by counsel of its own selection at its own expense in anyAcuform Patent Action.Section 11.3 ANDA LitigationAs between Depomed and Collegium, from and after the Closing, Depomed shall, at its cost and expense,continue to control, direct and maintain control over the ANDA Litigation. Depomed shall keep Collegium reasonablyinformed with respect to the status of and any material developments in the ANDA Litigation, including any settlementdiscussions in connection therewith, and shall consider in good faith any reasonable input provided by Collegium or itscounsel with respect thereto. As between Depomed and Collegium, Depomed may settle or otherwise resolve theANDA Litigation, in its sole and absolute discretion, including by granting ANDA Settlement Distributors the right toCommercialize Generic Versions of Products in the Territory. Any awards for any motions, applications or otherfilings for recovery of funds (regardless of type or category), including costs, fees and sanctions related to the ANDALitigation, whether or not they were on file prior to the Closing Date, shall be retained in full by Depomed.Section 11.4 Grünenthal Patent InfringementEach party shall promptly notify the other party in writing of any alleged or threatened Infringement of theGrünenthal Patents in the Territory by a Third Party of which such party becomes aware. Except for the ANDALitigation, Depomed and Newco shall cooperate fully with, and as reasonably requested by, Collegium in any actionto enforce any Grünenthal Patent in any Legal Proceedings (including ANDA litigation proceedings) initiated byNewco or Collegium after the Closing Date and involving the Products or Line Extensions, to the extent permittedunder the Grünenthal License Agreement, the Joint Litigation Agreement and the Consent Agreement (a “GrünenthalPatent Action”), including agreeing to be joined as a party to any such action as Collegium determines is necessary forstanding purposes. Collegium shall reimburse Depomed for its out-of-pocket expenses incurred in providing suchcooperation and shall be represented in any Grünenthal Patent Action by counsel of its choosing that is reasonablyacceptable to Depomed. For any such Grünenthal Patent Action, Newco and Collegium shall use counsel reasonablyacceptable to Depomed. Any recovery received as a result of any such Grünenthal Patent Action pursuant to thisSection 11.4 shall, as between the parties, be used first to reimburse the parties’ documented, out-of-pocket costs andexpenses (including court, attorneys’ and professional fees) incurred in connection with such Grünenthal PatentAction, and the remainder of the recovery shall be retained by Collegium, provided that the imputed net sales uponwhich such remaining recovery was based shall be treated as Net86 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Sales of Payment-Bearing Products with respect to the applicable periods for which such recovery was calculated, forpurposes of calculating payments due pursuant to Section 7.3. Collegium agrees not to settle any Grünenthal PatentAction, or make any admissions or assert any position in such action, in a manner that would materially adverselyaffect Depomed’s rights or interests hereunder, including by authorizing a Third Party (as an Authorized GenericDistributor) to Commercialize a Generic Version, without the prior written consent of Depomed, which shall not beunreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, any awards for any motions,applications or other filings for recovery of funds (regardless of type or category), including costs, fees and sanctions,that were on file prior to the Closing Date shall be retained in full by Depomed.ARTICLE 12INDEMNIFICATIONSection 12.1 Indemnification by Depomed(a) Subject to the provisions of this Article 12, Depomedagrees to, from and after the Closing, defend, indemnify and hold harmless Collegium and its Affiliates and, ifapplicable, their respective directors, officers, agents, representatives, employees, successors and assigns (collectively,the “Collegium Indemnitees”), from and against any and all Losses to the extent arising out of or resulting from (i) anyRetained Liability; (ii) any Excluded Asset; (iii) any breach by Depomed of any of its covenants or agreementscontained in this Agreement; (iv) any breach of any warranty or representation of Depomed contained in thisAgreement; (v) any Third Party claim based on the development, manufacture, use, testing, handling, storage orcommercialization of the Products by or on behalf of Depomed or any of its Affiliates or Third Party licensees prior tothe Closing Date; (vi) any Detailing of the Products by Depomed pursuant to Section 4.9; or (vii) any grosslynegligent or willful acts or omissions by Depomed or any of its Affiliates, officers, directors, employees, agents orrepresentatives in connection with the Transaction Documents. The indemnity obligation set forth in this Section12.1(a) shall not apply to the extent Collegium has an obligation to indemnify Depomed Indemnitees in respect to suchmatter under Section 12.2(a).(b) Newco and Collegium shall take, and shall cause Newco and the other Collegium Indemniteesto take, commercially reasonable actions to mitigate any Loss that a Collegium Indemnitee asserts under this Article 12upon becoming aware of any event that would reasonably be expected to, or does, give rise thereto, provided that theforegoing shall not be deemed to limit the ability of Collegium and the other Collegium Indemnitees to incur reasonablecosts and expenses in connection therewith.Section 12.2 Indemnification by Collegium and Newco(a) Subject to the provisions of this Article 12, Collegium and Newco, jointly and severally, agreeto, from and after the Closing, defend, indemnify and hold harmless Depomed and its Affiliates and, if applicable, theirrespective directors, officers, agents,87 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. representatives, employees, successors and assigns (collectively, the “Depomed Indemnitees”), from and against anyand all Losses to the extent arising from or relating to (i) any Assumed Liability; (ii) any breach by Collegium orNewco of any of their covenants or agreements contained in this Agreement; (iii) any breach of any warranty orrepresentation of Collegium or Newco contained in this Agreement; (iv) the use of any Depomed Names byCollegium, Newco or any of their Affiliates (or any Third Party acting on behalf of Collegium, Newco or any of theirAffiliates) in a manner not authorized under Section 8.4; (v) any development, Manufacture, use, testing, handling,storage or Commercialization of the Products or Line Extensions by or on behalf of Collegium, Newco or any of theirAffiliates or Third Party Sales Representatives after the Closing Date (other than by Depomed on behalf of Collegiumor Newco pursuant to this Agreement), including any Regulatory Communications, Regulatory Approvals, ProductPromotion, handling of product complaints, reporting of Product adverse events, product liability claims, Productrecalls, and any related Product regulatory activities that are the subject of Health Laws; (vi) any grossly negligent orwillful acts or omissions by Collegium, Newco or any of their Affiliates, officers, directors, employees, agents orrepresentatives in connection with the Transaction Documents; (vii) any breach of the Grünenthal License Agreementcaused, directly or indirectly, by Newco or its Affiliates or Sublicensees, including Collegium or its Affiliates; or (viii)any actions taken by Depomed or its Affiliates in performing the Transition Plan. The indemnity obligation set forth inthis Section 12.2(a) shall not apply to the extent Depomed has an obligation to indemnify Collegium Indemnitees inrespect to such matter under Section 12.1(a).(b) Depomed shall take, and shall cause the other Depomed Indemnitees to take, commerciallyreasonable actions to mitigate any Loss that a Depomed Indemnitee asserts under this Article 12 upon becoming awareof any event that would reasonably be expected to, or does, give rise thereto, provided that the foregoing shall not bedeemed to limit the ability of Depomed and the other Depomed Indemnitees to incur reasonable costs and expenses inconnection therewith.Section 12.3 Notice of ClaimsAny Collegium Indemnitee or Depomed Indemnitee claiming that it has suffered or incurred any Loss forwhich it may be entitled to indemnification under this Article 12 (the “Indemnified Party”) shall give prompt writtennotice to the party from whom indemnification is sought (the “Indemnifying Party”) of the matter, action, cause ofaction, claim, demand, fact or other circumstances upon which a claim for indemnification under this Article 12 (each,a “Claim”) may be based. Such notice shall contain, with respect to each Claim, such facts and information as are thenreasonably available with respect to such Claim, including a description of the Losses suffered or incurred by theIndemnified Party, the amount or estimated amount of such Losses (if known or reasonably capable of estimation) andthe method of computation of such Losses, and a reference to the provisions of this Agreement in respect of whichsuch Loss shall have occurred. If any Claim is based on any action, claim, suit or proceeding (in equity or at law)instituted by a Third Party with respect to which the Indemnified Party intends to claim88 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. any Loss under this Article 12 (a “Third Party Claim”), the Indemnified Party shall promptly notify (the “Third PartyClaim Notice”), in writing, the Indemnifying Party of such Third Party Claim and offer to tender to the IndemnifyingParty the defense of such Third Party Claim. A failure by the Indemnified Party to give written notice of and to offerto tender the defense of any Third Party Claim in a timely manner pursuant to this Section 12.3 shall not limit theobligation of the Indemnifying Party under this Article 12, except (a) to the extent such Indemnifying Party is actuallyprejudiced thereby or (b) as provided in Section 12.5.Section 12.4 Third Party Claims(a) The Indemnifying Party shall have the right, but not the obligation, exercisable by written noticeto the Indemnified Party within thirty (30) days of receipt of a Third Party Claim Notice from the Indemnified Partywith respect to a Third Party Claim, to assume the conduct and control, at the expense of the Indemnifying Party andthrough counsel of its choosing that is reasonably acceptable to the Indemnified Party, of such Third Party Claim;provided, however, that the Indemnifying Party shall not be entitled to assume or maintain control of the defense ofsuch Third Party Claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if (i) suchThird Party Claim relates to or arises in connection with any criminal Legal Proceeding, (ii) such Third Party Claimseeks an injunction or equitable relief against the Indemnified Party or any of its Affiliates, (iii) the Indemnified Partyreasonably concludes, based on the advice of counsel, that there is an irreconcilable conflict of interest between theIndemnifying Party and the Indemnified Party in the conduct of such defense or (iv) after assuming control of suchdefense, the Indemnifying Party withdraws from such defense or fails to diligently pursue and maintain such defense.(b) If the Indemnifying Party is controlling the defense of a Third Party Claim, the IndemnifyingParty may compromise or settle such Third Party Claim; provided, however, that the Indemnifying Party shall give theIndemnified Party advance written notice of any proposed compromise or settlement and shall not, without the priorwritten consent of the Indemnified Party, which consent shall not be unreasonably withheld, consent to or enter intoany compromise or settlement that commits the Indemnified Party to take, or to forbear to take, any action or does notprovide for a full and complete written release by the applicable Third Party of the Indemnified Party. No IndemnifiedParty may compromise or settle any Third Party Claim for which it is seeking indemnification hereunder without theconsent of the Indemnifying Party, which consent shall not be unreasonably withheld. No Indemnifying Party mayconsent to the entry of any judgment that does not relate solely to monetary damages arising from any such Third PartyClaim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld.(c) Subject to Section 12.4(a), the Indemnifying Party shall permit the Indemnified Party toparticipate in, but not control, the defense of any such Third Party Claim through counsel chosen by the IndemnifiedParty, provided that the fees and expenses of such counsel shall be borne by the Indemnified Party. If theIndemnifying Party elects not to, or is not89 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. permitted to pursuant to Section 12.4(a), control or conduct the defense of a Third Party Claim, the Indemnifying Partynevertheless shall have the right to participate in the defense of any Third Party Claim and, at its own expense, toemploy counsel of its own choosing for such purpose.(d) The parties shall cooperate in the defense of any Third Party Claim, with such cooperation toinclude (i) the retention and the provision to the Indemnifying Party of records and information that are reasonablyrelevant to such Third Party Claim and (ii) reasonable access to employees on a mutually convenient basis forproviding additional information and explanation of any material provided hereunder.Section 12.5 ExpirationIf the Closing shall have occurred, all covenants, agreements, warranties and representations made herein or inany certificate delivered in accordance herewith shall survive the Closing. Notwithstanding the foregoing, allrepresentations, warranties, covenants and agreements made herein or in any certificate delivered in accordanceherewith, and all indemnification obligations under Section 12.1(a)(iii), Section 12.1(a)(iv), Section 12.2(a)(ii) andSection 12.2(a)(iii) with respect to any such representations, warranties, covenants or agreements shall (a) in the case ofsuch representations and warranties other than the Fundamental Representations, terminate and expire on, and noaction or proceeding seeking damages or other relief for breach of any thereof or for any misrepresentation orinaccuracy with respect thereto, shall be commenced after, the date that is twenty-four (24) months after the ClosingDate, (b) in the case of the Fundamental Representations, terminate and expire, and no action or proceeding seekingdamages or other relief for breach of any thereof or for any misrepresentation or inaccuracy with respect thereto, asprovided in the relevant statute of limitations, or (c) in the case of any covenants or agreements, survive indefinitely orfor such shorter period of time specified therein, in each case, unless prior to such date a claim for indemnification withrespect thereto shall have been made, with reasonable specificity, by written notice given in accordance with Section12.3.Section 12.6 Certain LimitationsNotwithstanding any other provision in this Agreement, in no event shall Depomed or any of its Affiliates haveany liability under any provision in this Agreement for any Taxes (and any Losses with respect thereto or resultingtherefrom) to the extent such Taxes are attributable to Tax periods (or portions thereof) beginning after the ClosingDate.Section 12.7 Sole Remedy/WaiverExcept for either party’s right to terminate the Agreement set forth in Section 9.3, and except as set forth in thepenultimate sentence of this Section 12.7 and in Section 17.13, this Article 12 provides the sole recourse and exclusivemeans from and after the Closing by which a party may assert and remedy any Losses arising under or with respect tothis Agreement or any certificate or instrument of transfer, assignment or assumption delivered under this Agreement,90 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. and Section 17.12 and Section 17.13 provide the exclusive means by which a party may bring actions against the otherparty under or with respect to this Agreement or any certificate or instrument of transfer, assignment or assumptiondelivered under this Agreement. Notwithstanding the foregoing, nothing herein shall limit the liability of any partyhereto for intentional or willful misrepresentation of material facts which constitutes common law fraud underapplicable Legal Requirements. With respect to any Losses arising under or with respect to this Agreement or anycertificate or instrument of transfer, assignment or assumption delivered under this Agreement, each party agrees that itshall only seek such Losses from the other parties, and each party hereby waives the right to seek Losses from anyAffiliate of the other parties (except in the case of Newco, as an Affiliate of Collegium, and in the case of Collegium,as an Affiliate of Newco), or any director, officer or employee of the other parties (or any of its Affiliates).Section 12.8 Right to OffsetEach party shall have the right to offset any amount owed by the other party to such first party under or inconnection with this Agreement, including pursuant to this Article 12 or in connection with any breach, against anyfuture payments owed by such first party to such other party under this Agreement, in each case based on a finaldetermination by a court of competent jurisdiction pursuant to Section 17.11 (from which no appeal may be taken), anywritten agreement of the parties as to amounts owed or pursuant to an arbitration proceeding pursuant to Section 17.12,as applicable. Such offsets shall be in addition to any other rights or remedies available under this Agreement andapplicable Legal Requirements. For clarity, in the event that Collegium is entitled to and does offset any amountsowed to it by Depomed in accordance with this Section 12.8 against any of the Minimum Quarterly Paymentsotherwise owed by it under Section 7.3(a), Collegium will not be deemed to be in breach of its payment obligations toDepomed hereunder and the amount of such offset shall not constitute a Quarterly Shortfall for which Depomed willbe entitled to draw upon the Letter of Credit pursuant to Section 7.7(a)Section 12.9 Indemnity PaymentsIn the event that any party agrees to, or is determined to have an obligation to, pay another party for Losses asprovided in this Article 12, the Indemnifying Party shall, subject to its rights under Section 12.8, if applicable, promptlypay such amount to the Indemnified Party in U.S. Dollars via wire transfer of immediately available funds to theaccount(s) specified in writing by the Indemnified Party.Section 12.10 Calculation of DamagesExcept as otherwise provided in this Article 12, in any case where the Indemnified Party subsequently recoversfrom its insurance provider(s) any amount in respect of a matter with respect to which an Indemnifying Party hasindemnified it pursuant to this Article 12 (which, for the avoidance of doubt, shall not include an amount recovered asa Tax benefit), such Indemnified Party shall promptly pay over to the Indemnifying Party the amount so recovered91 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (after deducting therefrom the full amount of the expenses incurred by it in procuring such recovery), but not in excessof any amount previously so paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of suchmatter and less any increase in premiums or other fees reasonably attributable to such insurance recovery.Section 12.11 No Consequential DamagesNOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, WITH THEEXCEPTION OF ANY BREACH OF SECTION 2.5 OR SECTION 2.7(B), NO PARTY SHALL BE LIABLETO OR OTHERWISE RESPONSIBLE TO THE OTHER PARTY OR ANY AFFILIATE OF THE OTHERPARTY FOR LOST REVENUES OR PROFITS DAMAGES OR INDIRECT, INCIDENTAL,CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR MULTIPLIED DAMAGES THAT ARISE OUT OF ORRELATE TO THIS AGREEMENT OR THE PERFORMANCE OR BREACH HEREOF OR ANY LIABILITYRETAINED OR ASSUMED HEREUNDER; PROVIDED, HOWEVER, THAT THE FOREGOING SHALLNOT BE CONSTRUED TO PRECLUDE RECOVERY IN RESPECT OF ANY LOSS DIRECTLY INCURREDOR SUFFERED FROM THIRD PARTY CLAIMS.ARTICLE 13CONFIDENTIALITY AND PUBLICITYSection 13.1 Proprietary InformationPursuant to this Agreement, a party receiving Proprietary Information from the other, directly or indirectly, willtreat such Proprietary Information as confidential, will use such Proprietary Information only for the purposes of thisAgreement and will not disclose, and will take all reasonable precautions to prevent the disclosure of, such ProprietaryInformation to (a) any of its officers, directors, managers, equity holders, actual or potential partners, acquirers,financing sources, licensees, sublicensees, research collaborators, subcontractors, employees, agents, representatives,Affiliates or consultants, except those who need to know such Proprietary Information and who are bound by a likeobligation of confidentiality and non-use or (b) to Third Parties other than those referenced in clause (a).Section 13.2 Disclosures Required by LawIn the event the recipient party is required under applicable Legal Requirements to disclose ProprietaryInformation of the disclosing party to any Governmental Authority to obtain any Regulatory Approval for theProducts, is required to disclose Proprietary Information in connection with bona fide legal process (including inconnection with any bona fide dispute hereunder) or is required to disclose Proprietary Information under the rules ofthe securities exchange upon which its securities are traded, the recipient party may do so only if it limits disclosure tothat purpose after giving the disclosing party prompt written notice of any instance of such a requirement in reasonabletime for the disclosing party to attempt to object to or to92 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. limit such disclosure. In the event of disclosures required under applicable Legal Requirements, the recipient partyshall cooperate with the disclosing party as reasonably requested thereby.Section 13.3 PublicityThe parties have agreed upon the form and content of their own press releases to be issued by each of theparties promptly following the execution of this Agreement in the forms attached hereto as Schedule 13.3. Once suchpress release or any other written statement is approved for disclosure by the parties, either party may make subsequentpublic disclosure of the contents of such statement without the further approval of the other party. Any other publicity,news release, public comment or other public announcement, whether to the press, to stockholders, or otherwise,relating to this Agreement, shall first be reviewed and approved by the parties, except no such approval shall berequired for such publicity, news release, public comment or other public announcement which, in accordance with theadvice of legal counsel to the party making such disclosure, is required by Legal Requirement or for appropriate marketdisclosure; provided, however, that each party shall be entitled to refer publicly to the relationship of the partiesreflected in this Agreement in a manner that is consistent with the joint press release issued by the parties. For clarity,any party making any announcement which is required by Legal Requirement will, unless prohibited by law, give theother party an opportunity to review the form and content of such announcement and comment before it is made. Theparties shall work together to coordinate their respective filings with governmental agencies, including the UnitedStates Securities and Exchange Commission (“SEC”), as to the contents and existence of this Agreement as each partyshall reasonably deem necessary or appropriate and each party shall provide the other party an opportunity to commenton any proposed filings to ensure consistent treatment. The parties acknowledge that this Agreement and one or moreof the other Transaction Documents may need to be filed by one or both parties with the SEC. The parties agree, priorto making any such filing with the SEC, to provide the other party and its counsel with (i) a proposed redacted versionof this Agreement (and any other Transaction Document, as applicable) which it intends to file with the SEC, and (ii)any draft correspondence proposed to be sent to the SEC requesting the confidential treatment by the SEC of thoseredacted sections of the Agreement (or any other Transaction Document, as applicable), and to give due considerationto any comments provided by the other party or its counsel and use reasonable efforts to ensure the confidentialtreatment by the SEC of those sections specified by such other party or its counsel.Section 13.4 SurvivalThe provisions of this Article 13 shall survive termination of this Agreement and shall remain in effect until adate three (3) years after the Term of this Agreement.93 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. ARTICLE 14COVENANTSSection 14.1 HSR Act FilingEach party shall, as promptly as practicable, not later than three (3) Business Days following the EffectiveDate, file or cause to be filed with the U.S. Federal Trade Commission and the U.S. Department of Justice aNotification and Report Form (as defined in the HSR Act) with respect to the Transactions, which form shallspecifically request early termination of the waiting period prescribed by the HSR Act. All HSR filing fees payable inconnection with such filing shall be borne and paid one-half by Depomed (or its applicable Affiliate) and one-half byCollegium. Each party shall use its commercially reasonable efforts to respond promptly to any requests for additionalinformation made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate orexpire at the earliest possible date after the date of filing. Each party shall instruct its counsel to cooperate with theother party’s counsel to facilitate and expedite the identification and resolution of any such issues and, consequently,the expiration of the applicable HSR Act waiting period at the earliest practicable date.Section 14.2 Conduct of BusinessFrom the Effective Date to the Closing Date, except as consented to by an officer of Collegium in writing,Depomed agrees that it will conduct the Business, and will cause the Business to be conducted, in the ordinary courseof business consistent with past practice since April 2, 2015 and in compliance in all material respects with allapplicable Legal Requirements, pay or perform all material obligations relating to the Business as they become due andowing in the ordinary course of business, keep and maintain the Transferred Assets in good repair and normaloperating condition, wear and tear excepted, and preserve, and cause Depo NF to preserve, intact the Business andpreserve the related relationships with employees, Customers, suppliers, vendors, Regulatory Authority and other ThirdParties in regards to the Products.Section 14.3 Ancillary Agreements“Ancillary Agreements” means, collectively, the following:(a) The Consent Agreement;(b) The Joinder Agreement;(c) At the Closing, Collegium, Newco and Depomed, as applicable, shall enter into, execute anddeliver:(i) The Bill of Sale(ii) The Domain Name Assignment;94 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (iii) The Trademark License Agreement;(iv) A Transition Services Agreement in a form mutually agreed by the Parties (the“Transition Services Agreement”);(v) A Long-Term Collaboration Agreement (regarding government pricing) in a formmutually agreed by the Parties (the “Long-Term Collaboration Agreement”);(vi) A collateral agreement in substantially the form attached hereto as Exhibit E (the“Collateral Agreement”);(vii) A pledge agreement in substantially the form attached hereto as Exhibit F (the “PledgeAgreement”);(viii) The Master Letter of Credit Agreement;(ix) The Letter of Credit;(x) The Control Agreement; and(xi) A subordination and intercreditor agreement with Silicon Valley Bank, pursuant towhich Silicon Valley Bank will permit Depomed to secure a first-priority lien on all of the assets of Newco pursuant tothe Collateral Documents, including cash receipts and the equity interests of Newco held by Collegium, in a formreasonably acceptable to Depomed (the “Intercreditor Agreement”).(d) At the Closing, Collegium and Newco shall enter into, execute and deliver the CollegiumSublicense in substantially the form attached hereto as Exhibit G.Section 14.4 Grünenthal Consent AgreementSimultaneously with the execution of this Agreement, Newco shall join the Consent Agreement, dated as ofNovember 30, 2017, by and between Grünenthal and Depomed (the “Consent Agreement”) by executing a joinderagreement in the form of the joinder agreement attached as Exhibit A to the Consent Agreement (the “JoinderAgreement”), upon which Collegium and Newco shall become parties to the Consent Agreement and shall be fullybound by, and subject to, all of the terms and conditions of the Consent Agreement as though Collegium and Newcowere original parties thereto. Depomed shall, and shall cause its Affiliates to, fulfill all of its and their respectiveobligations, including payment obligations, under the Consent Agreement. Depomed shall not, and shall cause itsAffiliates not to, amend or waive, or take any action or omit to take any action that would alter, any of its rights underthe Consent Agreement in any manner that adversely affects, or would reasonably be expected to adversely affect,Collegium’s rights and benefits under this Agreement or the Grünenthal License Agreement. Depomed shall promptlynotify Collegium of any default or breach under95 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. the Consent Agreement. In the event that Depomed, or any of its Affiliates, shall fail to make any payment when dueor any other default or breach arises under the Consent Agreement, Collegium shall have the right (but not theobligation) to make such payment or otherwise cure such default or breach on behalf of Depomed or its Affiliate. Insuch event, Depomed shall promptly reimburse Collegium any such amounts paid and/or costs and expenses incurredby Collegium or, at Collegium’s election, Collegium may offset such amounts paid and/or costs and expenses incurredby Collegium against any amounts payable to Depomed hereunder. Notwithstanding anything herein to the contrary,Depomed shall not assign the Consent Agreement, other than in connection with a permitted assignment by Depomedof this Agreement under Section 17.9, without Collegium’s prior written consent, which consent shall not beunreasonably withheld, conditioned or delayed.Section 14.5 No NegotiationBetween the Effective Date and the Closing Date, Depomed shall not, and shall not permit any of its Affiliatesor Representatives to, directly or indirectly, solicit, initiate, encourage or entertain any inquiries or proposals, discuss ornegotiate with, provide any information to, consider the merits of any inquires or proposals from any Person (other thanCollegium) to enter into any contract or instrument relating to any transaction that would compromise the ability ofDepomed or any Transferring Entity to consummate the Transactions. Depomed shall promptly advise Collegium,orally and in writing, of any such inquiry or proposal received from a third party. Depomed agrees that the rights andremedies for noncompliance with this Section 14.5 shall include having such provision specifically enforced by a courthaving equity jurisdiction, it being acknowledged that any such breach or threatened breach may cause irreparableinjury to Collegium and that money damages will not provide an adequate remedy to Collegium.Section 14.6 Resale Exemption CertificatesAt the Closing (or within such reasonable time thereafter as may be necessary to perfect the resale or otherexemption certificates), Collegium shall deliver to Depomed fully completed and executed resale exemption certificatesor other applicable exemption certificates for all jurisdictions identified by Depomed prior to the Closing asjurisdictions in which inventory is to be transferred and for which resale exemption certificates are necessary to complywith Legal Requirements or to minimize Transfer Taxes.Section 14.7 Depomed Responsibility for Retained Post-Marketing CommitmentsAs between Depomed and Collegium, from and after the Closing, Depomed shall, at its cost and expense,continue to control, direct and maintain control over the Retained Post-Marketing Commitments. Depomed shall keepCollegium reasonably informed with respect to the status of and any material developments in the Retained Post-Marketing Commitments, and shall consider in good faith any reasonable input provided by Collegium or its counselwith respect thereto.96 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 14.8 Collegium Minimum Cash BalanceCollegium shall maintain cash and cash equivalents constituting immediately available funds of at least theMinimum Cash Balance from the Effective Date until immediately prior to payment of the Transferred Inventory Cost,the Upfront Payment and the Collegium Prepaid Business Expense Allocation on the Closing Date.Section 14.9 Newco Operations and Liabilities(a) Collegium and Newco agree to, and Collegium agrees to cause Newco to, grant a securityinterest in all of Newco’s property and rights to Depomed, including the exclusive licenses and sublicenses transferredunder this Agreement and the Trademark License Agreement, the Transferred Assets, off membership interests inNewco, Newco’s rights under the Sales Account, and all other rights of Newco under this Agreement and theTrademark License Agreement.(b) Except as prohibited by law or by order of a court of competent jurisdiction, Newco shall, andCollegium shall cause Newco to, fully perform its obligations under the Transaction Documents to which Newco is aparty, including, to the extent approval by Collegium is required prior to Newco performing such obligations,Collegium shall approve any such obligations.(c) Newco shall, and Collegium shall cause Newco to, (i) establish and maintain the Sales Account,(ii) cause any amounts from sales of the Payment-Bearing Products to be deposited directly into the Sales Account, and(iii) cause the Newco Deposits to be swept daily into the account designated by Depomed.(d) If Collegium, Newco or any of their Affiliates shall receive any amounts from sales of thePayment-Bearing Products, Collegium and Newco, as applicable, shall, and Collegium shall cause Newco, ifapplicable, to, deliver such amounts by wire transfer of immediately available funds to the Sales Account, and in anyevent not later than two (2) Business Days following its receipt thereof; provided further, that Collegium shall (i) takeany and all steps necessary or desirable to collect all amounts becoming due and payable from the Commercializationof Payment-Bearing Products and deliver such amounts to the Sales Account to the extent required by this Agreement;and (ii) enforce its rights under any of its commercial contracts.(e) Collegium and Newco shall not, and Collegium shall cause Newco not to, except as otherwiseprovided herein (including under Section 2.2 and Section 17.9) or, in any other Transaction Document, directly orindirectly, sell, assign (by operation of law or otherwise) or otherwise dispose of, or create, incur, assume or suffer tobe created or to exist any Lien on any of its rights, title or beneficial interest in, to or under, whether directly orindirectly, (i) Newco; (ii) the Depomed Acuform Patents or Depomed Product Know-How; (iii) the Grünenthal IPRights; or (iv) the Transferred Assets, in each case other than any Lien granted under the Collateral Agreements.97 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. (f) Newco shall not, and Collegium shall cause Newco not to, (i) incur or guarantee anyIndebtedness; (ii) create, incur, assume or permit to exist any Liens on its assets that are senior to the Lienscontemplated by the Collateral Agreement; (iii) sell, assign, or otherwise transfer any of its assets, contracts or business,whether by sale, merger consolidation, acquisition, transfer, operation of law or otherwise; or (iv) engage in anybusiness or activities or acquire any assets, lines of business or other Persons; except in each case other than pursuant tothe rights, property and privileges granted by, and obligations required of it under, the Transaction Documents.(g) Newco shall not, and Collegium shall cause Newco not to, take any action to waive, repeal,amend, vary, supplement or otherwise modify its organizational documents in a manner that would adversely affect therights, privileges or preferences of Depomed under the Transaction Documents;(h) Newco shall not, and Collegium shall cause Newco not to, take any action or cause or permitNewco (except as required by law) to take any action to cause Newco to become subject to a voluntary bankruptcy oran involuntary bankruptcy.(i) Newco shall not, and Collegium shall cause Newco not to, take any action to dissolve Newco.(j) Newco shall not, and Collegium shall cause Newco not to, enter into any lease of real property.(k) Newco shall not, and Collegium shall cause Newco not to, have any employees.(l) Newco shall, and Collegium shall cause Newco to, maintain its existence as a limited liabilitycompany, validly existing and in good standing under the laws of the State of Delaware, and duly qualified as a limitedliability company licensed under the laws of each state necessary for the conduct of its business or activities.(m) Newco shall, and Collegium shall cause Newco to, comply with all provisions of itsorganizational documents(n) Newco shall, and Collegium shall cause Newco to, maintain all licenses permits, charters,governmental qualifications, registrations, consents, filings, certificates, waivers, approvals, notices or otherauthorizations necessary for it to carry on its activities and business as contemplated in the Transaction Documents.(o) Newco shall, and Collegium shall cause Newco to, provide Depomed prompt notice of anyadverse events, or threatened events, with which it becomes aware in98 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. connection with the transactions contemplated by the Transaction Documents, including but not limited to a breach ofany representation, warranty or covenant hereunder, a default by any of its customers, distributors, vendors, suppliersor any other Third Parties that it is under privity of contract with, or any Claim.(p) Newco shall, and Collegium shall cause Newco to, pay any applicable taxes.(q) Collegium and Newco shall not, and Collegium shall cause Newco not to, sell, assign orotherwise transfer any equity interests in Newco, or grant a proxy with respect to the voting rights of Newco or thatotherwise would prohibit a de facto change of Control of Newco.(r) Newco shall not, and Collegium shall cause Newco not to; enter into any transactions other thanthe Sublicense to Collegium.(s) Newco shall not, and Collegium shall cause Newco not to; incur or otherwise suffer to exist orbecome effective or remain liable for any contractual obligation that would, or would reasonably be expected to, (i)restrict, hinder or limit the ability of Newco or Collegium to comply with each of its obligations under the TransactionDocuments, or (ii) restrict or hinder the return of the Transferred Assets and Licensed IP Rights to Depomed inaccordance with the Transaction Documents upon an “Event of Default” (as defined in the Collateral Agreement)or upon termination or expiration of this Agreement.(t) With respect to the Collegium Sublicense, Newco shall, and Collegium shall cause Newco to,at Collegium’s own expense:(i) perform and observe all terms and provisions of the Collegium Sublicense to beperformed or observed by Newco;(ii) maintain the Collegium Sublicense in full force and effect and enforce the CollegiumSublicense in accordance with the terms thereof; and(iii) furnish to Depomed promptly upon receipt thereof copies of all material notices, requestsand other documents received by Newco under or pursuant to the Collegium Sublicense, and from time to time furnishto Depomed such information and reports related to the Collegium Sublicense as Depomed may reasonably request.(u) Newco shall not, and Collegium shall cause Newco not to, cancel or terminate the CollegiumSublicense or consent to or accept any cancellation or termination thereof or take any other action in connection withthe Collegium Sublicense that would materially impair the value of the interests or rights of Newco thereunder or thatwould materially impair the interests or rights of Depomed hereunder.99 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 14.10 Affiliates(a) Depomed Affiliates. Depomed shall cause Depo NF and its other Affiliates to comply with theterms of, and to perform their respective obligations under, this Agreement.(b) Collegium Affiliates. Collegium shall cause Newco and its other Affiliates to comply with theterms of, and to perform their respective obligations under, this Agreement.Section 14.11 Further AssurancesEach party agrees, upon the reasonable request of another party, to execute, acknowledge and deliversuch further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out thepurposes and intent of this Agreement, including the preparation and delivery, at the expense of the requesting party, ofsuch financial information regarding the Products or Transferred Assets as may be required by a GovernmentalAuthority having jurisdiction over the parties. Each party agrees, upon the reasonable request of another party, todiscuss and cooperate in order to ensure consistent Tax and accounting positions.ARTICLE 15NOTICESSection 15.1 NoticesAll notices required or permitted hereunder shall be given in writing and sent by facsimile transmission (with acopy sent by first-class mail), or mailed postage prepaid by certified or registered mail (return receipt requested), or sentby a nationally recognized express courier service, or hand-delivered at the following address:If to Depomed:Depomed, Inc.7999 Gateway Boulevard, Suite 300Newark, CA 94560Attention: Legal DepartmentFax No.: (510) 744-8001100 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. With a copy to (which shall not constitute notice hereunder):Wilson Sonsini Goodrich & Rosati650 Page Mill RoadPalo Alto, CA 94304Attention: Lowell SegalFax No.: (650) 493-6811andGibson, Dunn & Crutcher LLP555 Mission Street, Suite 3000San Francisco, CA 94105Attention: Ryan MurrFax No.: (415) 374-8430If to Collegium:Collegium Pharmaceutical, Inc.780 Dedham Street, Suite 800Canton, MA 02021Attention: Michael HeffernanFax No.: (781) 828-4697With a copy to (which shall not constitute notice hereunder):Gunderson Dettmer Stough Villeneuve Franklin & HachigianOne Marina Park Drive, Suite 900Boston, MA 02210Attention: Tim EhrlichFax No.: (617) 648-9199All notices shall be deemed made upon receipt by the addressee as evidenced by the applicable written receipt.ARTICLE 16INSURANCESection 16.1 Insurance(a) During the Term and for a period of two (2) years after any expiration or termination of thisAgreement, each party shall maintain (i) a commercial general liability insurance policy or policies with minimumlimits of [***] per occurrence [***] in the aggregate on an annual basis and (ii) a product liability insurance policy orpolicies with minimum limits of101 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. [***] per occurrence and [***] in the aggregate on an annual basis. Upon request, each party shall provide certificatesof insurance to the other evidencing the coverage specified herein. Neither party’s liability to the other is in any waylimited to the extent of its insurance coverage.(b) As of the Closing Date, the coverage under all insurance policies of Depomed and its Affiliatesshall continue in force only for the benefit of Depomed and its Affiliates, and not for the benefit of Collegium or any ofits representatives. As of the Closing Date, Collegium (i) agrees to arrange for its own insurance policies with respectto the Transferred Assets covering all periods from and after the Closing Date and agrees not to seek, through anymeans, to benefit from any of Depomed’s or its Affiliates’ insurance policies which may provide coverage for claimsrelating in any way to the Transferred Assets and (ii) shall name Depomed as an additional insured under Collegium’sproduct liability insurance policy.ARTICLE 17MISCELLANEOUSSection 17.1 HeadingsThe titles, headings or captions and paragraphs in this Agreement are for convenience only and do not define,limit, extend, explain or describe the scope or extent of this Agreement or any of its terms or conditions and thereforeshall not be considered in the interpretation, construction or application of this Agreement.Section 17.2 SeverabilityIn the event that any of the provisions or a portion of any provision of this Agreement is held to be invalid,illegal, or unenforceable by a court of competent jurisdiction or a governmental authority, such provision or portion ofany provision will be construed and enforced as if it had been narrowly drawn so as not to be invalid, illegal, orunenforceable, and the validity, legality, and enforceability of the enforceable portion of any such provision and theremaining provisions will not be adversely affected thereby.Section 17.3 Entire AgreementThis Agreement, together with the Schedules and Exhibits hereto, all of which are incorporated by reference,contains all of the terms agreed to by the parties regarding the subject matter hereof and supersedes any prioragreements, understandings, or arrangements between the parties, whether oral or in writing.Section 17.4 AmendmentsThis Agreement may not be amended, modified, altered, or supplemented except by means of a writtenagreement or other instrument executed by both of the parties hereto. No102 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. course of conduct or dealing between the parties will act as a modification or waiver of any provisions of thisAgreement.Section 17.5 CounterpartsThis Agreement may be executed in one or more counterparts, each of which shall be deemed an original, andtogether shall constitute one and the same agreement and shall become effective when one or more counterparts havebeen signed by each of the parties and delivered to the other party, it being understood that the parties need not sign thesame counterpart. This Agreement, following its execution, may be delivered via telecopier machine or other form ofelectronic delivery, which shall constitute delivery of an execution original for all purposes.Section 17.6 WaiverThe failure of either party to enforce or to exercise, at any time or for any period of time, any term of or anyright arising pursuant to this Agreement does not constitute, and will not be construed as, a waiver of such term orright, and will in no way affect that party’s right later to enforce or exercise such term or right.Section 17.7 Force MajeureIn the event of any failure or delay in the performance by a party of any provision of this Agreement due to actsbeyond the reasonable control of such party (such as, for example, fire, explosion, strike or other difficulty withworkmen, shortage of transportation equipment, accident, act of God, declared or undeclared wars, acts of terrorism, orcompliance with or other action taken to carry out the intent or purpose of any law or regulation) (a “Force MajeureEvent”), then such party shall have such additional time to perform as shall be reasonably necessary under thecircumstances. In the event of such failure or delay, the affected party will use its diligent efforts, consistent with soundbusiness judgment and to the extent permitted by law, to correct such failure or delay as expeditiously as possible. Inthe event that a party is unable to perform due to a Force Majeure Event its obligation to perform under the affectedprovision(s) of this Agreement shall be suspended during such time of nonperformance.Neither party shall be liable hereunder to the other party nor shall be in breach for failure to perform itsobligations caused by a Force Majeure Event. In the case of any such event, the affected party shall promptly, but inno event later than five (5) days of its occurrence, notify the other party stating the nature of the condition, itsanticipated duration and any action being taken to avoid or minimize its effect. Furthermore, the affected party shallkeep the other party informed of the efforts to resume performance. After fifteen (15) days of such inability to perform,the parties agree to meet and in good faith discuss how to proceed.103 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. Section 17.8 Successors and AssignsSubject to Section 17.9, this Agreement shall be binding upon and shall inure to the benefit of the parties heretoand their respective successors and assigns permitted under this Agreement.Section 17.9 AssignmentThis Agreement and the rights granted herein shall not be assignable (or otherwise transferred) by any partywithout the prior written consent of the other parties. Any attempted assignment without consent shall bevoid. Notwithstanding the foregoing or anything in this Agreement to the contrary (but subject to the fourth sentenceof this Section 17.9), Collegium or Depomed may transfer, assign or delegate its rights and obligations under thisAgreement without consent to: (a) an Affiliate reasonably capable of performing such party’s obligations under thisAgreement, for so long as such entity remains an Affiliate, provided that the assigning party shall remain primarilyliable for any acts or omissions of such Affiliate; (b) in the case of Depomed, solely with respect to the transfer orassignment of its rights to receive payments (or any portion thereof) due to Depomed under this Agreement, providedthat, in connection with such a transfer or assignment, Depomed may disclose to the transferee or assignee any reportsor information provided to Depomed regarding such payments under a written agreement containing non-disclosureand non-use provisions no less stringent than as set forth in this Agreement; or (c) a successor to all or substantially allof the business or assets of the assigning party relating to this Agreement, whether by sale, merger, consolidation,acquisition, transfer, operation of law or otherwise. Notwithstanding anything to the contrary in this Agreement, thisAgreement and the rights granted herein shall not be assignable (or otherwise transferred) by Collegium to a ThirdParty, other than to a successor in connection with a sale of all or substantially all of the business or assets ofCollegium, prior to the expiration of the last-to-expire Grünenthal Patent, without the prior written consent ofDepomed, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing,or anything to the contrary in this Agreement, neither Collegium nor any of its Affiliates (other than Newco, whichcannot assign (or otherwise transfer) this Agreement and the rights granted herein) shall transfer or assign its rights andobligations under this Agreement to any Person that (i) does not have at least an equal or greater amount ofstockholders’ equity, working capital, and a commercial sales force as Collegium as of the Closing Date; and (ii) is nota “United States person” for U.S. federal income tax purposes (including, for the avoidance of doubt, any Person thatis disregarded from any Person that is not a “United States person” for U.S. federal income tax purposes). Inconnection with any permitted assignment of this Agreement by Collegium, or Subcontracting pursuant to which aThird Party Sales Representative is engaged by Collegium to Promote the Products, Collegium shall ensure that theassignee or Subcontractor, as applicable, provides representations and warranties in substantially the same form andsubstance as set forth in Section 10.2(i)(v). No party shall knowingly engage any Third Party appearing on the FDA’sdebarment list or the list of excluded individuals/entities of the Office of Inspector General of the Department of Healthand Human Services to perform, or assist such party in the performance104 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. of, its obligations under this Agreement, and the parties shall review each such list prior to engaging any such ThirdParty. No assignment under clause (a) of this Section 17.9 shall relieve the assigning party of any of its responsibilitiesor obligations hereunder and, as a condition of such assignment, the assignee shall agree in writing to be bound by allobligations of the assigning party hereunder. This Agreement shall be binding upon the successors and permittedassigns of the parties.Section 17.10 ConstructionThe parties acknowledge and agree that: (a) each party and its representatives have reviewed and negotiated theterms and provisions of this Agreement and have contributed to its revision; and (b) the terms and provisions of thisAgreement will be construed fairly as to each party and not in favor of or against either party regardless of which partywas generally responsible for the preparation or drafting of this Agreement. Unless the context of this Agreementotherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural numberalso include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby,” and derivative orsimilar words refer to this entire Agreement; (iv) the terms “Article,” “Section,” “Exhibit,” “Schedule,” or “clause”refer to the specified Article, Section, Exhibit, Schedule, or clause of this Agreement; (v) “or” is disjunctive but notnecessarily exclusive; and (vi) the term “including” or “includes” means “including without limitation” or “includeswithout limitation.” Whenever this Agreement refers to a number of days, such number shall refer to calendar daysunless Business Days are specified. Any references in this Agreement to an amount paid by Company as being “non-refundable” or “non-creditable” shall not be construed to limit Collegium’s right to seek to recover or actually recoverany amount of damages arising from any uncured breach of this Agreement by Depomed, subject only to thelimitations and exclusions in Section 12.11.Section 17.11 Governing Law; Jurisdiction; No Jury Trial.(a) This Agreement shall be governed by and construed in accordance with the laws of the State ofNew York, without regard to the conflicts of law, principles or rules of such state, to the extent such principles or rulesare not mandatorily applicable by statute and would permit or require the application of the laws of another jurisdiction.(b) The parties consent to the exclusive jurisdiction of the Federal and State courts located in theState of New York for the resolution of all disputes or controversies between the parties which, pursuant to applicableLegal Requirement, are not subject to the provisions of Section 17.12. Each of the parties (i) consents to the exclusivejurisdiction of each such court in any suit, action or proceeding relating to or arising out of this Agreement or theTransactions; (ii) waives any objection that it may have to the laying of venue in any such suit, action or proceeding inany such court; and (iii) agrees that service of any court paper may be made in such manner as may be provided underapplicable Legal Requirements or court rules governing service of process. THE PARTIES HERETO HEREBYIRREVOCABLY WAIVE,105 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. AND AGREE TO CAUSE THEIR RESPECTIVE AFFILIATES TO WAIVE, THE RIGHT TO TRIAL BYJURY IN ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTIONWITH THIS AGREEMENT, ANY RELATED AGREEMENTS OR ANY TRANSACTIONSCONTEMPLATED HEREBY.(c) Notwithstanding anything herein to the contrary, each party acknowledges and irrevocablyagrees that with respect to any Covered Action, such party agrees and shall take (or refrain from taking) such actions asnecessary (i) to procure that any Covered Action shall be subject to the exclusive jurisdiction of any New York Statecourt or federal court of the United States of America sitting in the Borough of Manhattan in the county of New York,and any appellate court thereof, (ii) to procure that service of process, summons, notice or document by registered mailaddressed to them at their respective addresses provided in Section 15.1 shall be effective service of process against itfor any Covered Action, (iii) to waive and hereby waives, to the fullest extent permitted by applicable LegalRequirement, any objection which it may now or hereafter have to the laying of venue of, and the defense of aninconvenient forum to the maintenance of, any Covered Action, and (iv) to procure that a final judgment in anyCovered Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any othermanner provided by applicable Legal Requirement. Nothing in this paragraph shall affect or eliminate any right toserve process in any other manner permitted by applicable Legal Requirement. EACH PARTY HERETO HEREBYIRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY COVERED ACTION.Section 17.12 Dispute ResolutionThe parties recognize that a dispute may arise relating to this Agreement (a “Dispute”). Other than with respectto Third Party Claims, any Dispute, including Disputes that may involve any Affiliates of a party, shall be resolved inaccordance with this Section 17.12.(a) Mediation.(i) The parties shall first attempt in good faith to resolve any Dispute by confidentialmediation in accordance with the then current Mediation Procedure of the International Institute for Conflict Preventionand Resolution (the “CPR Mediation Procedure”) (www.cpradr.org) before initiating arbitration. The CPR MediationProcedure shall control, except where it conflicts with these provisions, in which case these provisions control. Themediator shall be chosen pursuant to CPR Mediation Procedure. The mediation shall be held in New York, NewYork.(ii) Either party may initiate mediation by written notice to the other party of the existence ofa Dispute. The parties agree to select a mediator within twenty (20) days of the notice and the mediation will beginpromptly after the selection. The mediation will continue until the mediator, or either party, declares in writing, nosooner than after the conclusion of one full day of a substantive mediation conference attended on behalf of each partyby a senior business person with authority to resolve the Dispute, that the Dispute cannot be106 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. resolved by mediation. In no event, however, shall mediation continue more than sixty (60) days from the initial noticeby a party to initiate meditation unless the parties agree in writing to extend that period.(iii) Any period of limitations that would otherwise expire between the initiation of mediationand its conclusion shall be extended until twenty (20) days after the conclusion of the mediation.(b) Arbitration.(i) If the parties fail to resolve the Dispute in mediation, and a party desires to pursueresolution of the Dispute, the Dispute shall be submitted by either party for resolution in arbitration pursuant to the thencurrent CPR Non-Administered Arbitration Rules (the “CPR Rules”) (www.cpradr.org), except where they conflictwith these provisions, in which case these provisions control. The arbitration will be held in New York, NewYork. All aspects of the arbitration shall be treated as confidential.(ii) The arbitrators will be chosen from the CPR Panel of Distinguished Neutrals, unless acandidate not on such panel is approved by the parties. Each arbitrator shall be a lawyer with at least fifteen (15) years’experience with a law firm or corporate law department of over twenty-five (25) lawyers or who was a judge of a courtof general jurisdiction. To the extent that the Dispute requires special expertise, the parties will so inform CPR prior tothe beginning of the selection process.(iii) The arbitration tribunal shall consist of three (3) arbitrators, of whom each party shalldesignate one in accordance with the “screened” appointment procedure provided in CPR Rule 5.4. The chair will bechosen in accordance with CPR Rule 6.4. If, however, the aggregate award sought by the parties is less than FiveMillion Dollars ($5,000,000) and equitable relief is not sought, a single arbitrator shall be chosen in accordance withthe CPR Rules. Candidates for the arbitrator position(s) may be interviewed by representatives of the parties inadvance of their selection, provided that all parties are represented.(iv) The parties agree to select the arbitrator(s) within forty-five (45) days of initiation of thearbitration. The hearing will be concluded within nine (9) months after selection of the arbitrator(s) and the award willbe rendered within sixty (60) days of the conclusion of the hearing, or of any post hearing briefing, which briefing willbe completed by both sides within forty-five (45) days after the conclusion of the hearing. In the event the partiescannot agree upon a schedule, then the arbitrator(s) shall set the schedule following the time limits set forth above asclosely as practical.(v) The hearing will be concluded in ten (10) hearing days or less. Multiple hearing dayswill be scheduled consecutively to the greatest extent possible. A107 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. transcript of the testimony adduced at the hearing shall be made and shall be made available to each party.(vi) The arbitrator(s) shall be guided, but not bound, by the CPR Protocol on Disclosure ofDocuments and Presentation of Witnesses in Commercial Arbitration (www.cpradr.org) (the “Protocol”). The partieswill attempt to agree on modes of document disclosure, electronic discovery, witness presentation, etc. within theparameters of the Protocol. If the parties cannot agree on discovery and presentation issues, the arbitrator(s) shalldecide on presentation modes and provide for discovery within the Protocol, understanding that the parties contemplatereasonable discovery.(vii) The arbitrator(s) shall decide the merits of any Dispute in accordance with the lawgoverning this Agreement, without application of any principle of conflict of laws that would result in reference to adifferent law. The arbitrator(s) may not apply principles such as “amiable compositeur” or “natural justice and equity.”(viii) The arbitrator(s) are expressly empowered to decide dispositive motions in advance ofany hearing and shall endeavor to decide such motions as would a United States District Court Judge sitting in thejurisdiction whose substantive law governs.(ix) The arbitrator(s) shall render a written opinion stating the reasons upon which the awardis based. The parties consent to the jurisdiction of the United States District Court for the district in which thearbitration is held for the enforcement of these provisions and the entry of judgment on any award renderedhereunder. Should such court for any reason lack jurisdiction, any court with jurisdiction may act in the same fashion.(x) Notwithstanding any provision to the contrary contained in this Agreement, each partyhas the right to seek from the appropriate court provisional remedies such as attachment, preliminary injunction,replevin or other equitable relief to avoid irreparable harm, maintain the status quo, preserve its status and priority as acreditor or preserve the subject matter of the Dispute. Rule 14 of the CPR Rules does not apply to this Agreement.Section 17.13 Equitable ReliefEach party acknowledges that a breach by it of the provisions of this Agreement may not reasonably oradequately be compensated in damages in an action at law and that such a breach may cause the other party irreparableinjury and damage. By reason thereof, each party agrees that the other party is entitled to, in addition to any otherremedies it may have under this Agreement or otherwise, preliminary and permanent injunctive and other equitablerelief to prevent or curtail any breach of this Agreement by the other parties; provided, however, that no specification inthis Agreement of a specific legal or equitable remedy will be construed as a waiver or prohibition against the pursuingof other legal or equitable remedies in the event of such a breach. Each party agrees that the existence of any claim,demand, or cause of action of it against the other parties, whether predicated upon this Agreement, or otherwise, willnot108 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. constitute a defense to the enforcement by the other parties, or its successors or assigns, of the covenants contained inthis Agreement.Section 17.14 Relationship Between PartiesThe parties are acting and performing as independent contractors, and nothing in this Agreement creates therelationship of partnership, joint venture, sales agency, or principal and agent. Neither party is the agent of the other,and neither party may hold itself out as such to any other party. Neither party shall have any express or implied powerto enter into any contracts or commitments or to incur any liabilities in the name of, or on behalf of, the other party, orto bind the other party in any respect whatsoever.Section 17.15 Tax TreatmentUnless required by applicable Legal Requirements, the parties agree to treat, for U.S. federal and applicablestate and local income Tax purposes, (i) the grant of any license pursuant to Section 2.1(a) as a license and not as a saleand (ii) the sale of the Transferred Assets pursuant to this Agreement as a sale of such Transferred Assets for theTransferred Asset Purchase Price. Collegium and Newco, and their respective Affiliates, agree that no Taxes shall bewithheld from any amounts due to Depomed pursuant to this Agreement, provided that Depomed provides Collegiumwith a properly completed, executed IRS Form W-9.Section 17.16 Bulk Transfer LawsCollegium acknowledges that Depomed and its Affiliates have not taken, and do not intend to take, any actionrequired to comply with any applicable bulk sale or bulk transfer laws or similar laws and hereby waives compliancetherewith.Section 17.17 Forward Looking StatementsWithout limiting the foregoing, Collegium acknowledges and agrees that (a) it may have received fromDepomed various forward looking projections, forecasts and business or commercial plans regarding the Products(collectively, the “Forward-Looking Statements”) in connection with Collegium’s investigation of the TransferredAssets; (b) there are uncertainties inherent in attempting to make such Forward-Looking Statements; (c) Collegium isfamiliar with such uncertainties; (d) Collegium is taking full responsibility for making its own evaluation of theadequacy and accuracy of all Forward-Looking Statements; (e) Collegium is not relying on any Forward-LookingStatement in any manner whatsoever; and (f) Collegium shall have no claim against Depomed or any of its Affiliateswith respect to any Forward-Looking Statement. Collegium further acknowledges and agrees that Depomed makes norepresentation or warranty hereunder with respect to (i) the reasonableness of the assumptions underlying any Forward-Looking Statement; or (ii) any Forward-Looking Statement made in any materials in the Data Room, any supplementaldue diligence information provided or made available to Collegium,109 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. any of Collegium’s discussions with management regarding the Products or any negotiations leading to this Agreementand the other Transaction Documents.(The remainder of this page is intentionally left blank. The signature page follows.) 110 Certain information in this document has been omitted and filed separately with the Securities and ExchangeCommission. Confidential treatment has been requested with respect to the omitted portions marked [***]. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first abovewritten. DEPOMED, INC. /s/ Arthur J. Higgins Arthur J. Higgins Chief Executive Officer COLLEGIUM PHARMACEUTICAL, INC. /s/ Michael Heffernan Michael Heffernan Chief Executive Officer COLLEGIUM NF, LLC /s/ Michael Heffernan Michael Heffernan Chief Executive Officer [Signature Page to Commercialization Agreement]Exhibit 10.28EXECUTION VERSIONAMENDMENT NO. 1 TO COMMERCIALIZATION AGREEMENTTHIS AMENDMENT NO. 1 TO COMMERCIALIZATION AGREEMENT (this “Amendment No. 1”) isentered into as of January 9, 2018, by and among Depomed, Inc., a California corporation (“Depomed”), CollegiumPharmaceutical, Inc., a Virginia corporation (“Collegium”), and Collegium NF, LLC, a Delaware limited liabilitycompany and wholly owned subsidiary of Collegium (“Newco”) and amends that certain CommercializationAgreement, dated as of December 4, 2017 (the “Commercialization Agreement”), by and among Depomed,Collegium, and Newco. Each of Depomed, Collegium and Newco is referred to herein individually as a “party” andcollectively as the “parties.” Defined terms used herein but not otherwise defined herein shall have the meaningascribed to such terms in the Commercialization Agreement.WHEREAS, the parties entered into that certain Commercialization Agreement on December 4, 2017 and wishto amend certain terms of the Commercialization Agreement; andWHEREAS, Section 17.4 of the Commercialization Agreement provides that the CommercializationAgreement may be amended by written agreement of the parties thereto.NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained, theparties, intending to be legally bound, hereby agree as follows:1. Section 1.111 of the Commercialization Agreement is hereby amended and restated as follows:““Consent and Sixth Amendment to Loan and Security Agreement” has the meaning set forth inSection 14.3(c)(xi).”2. Section 1.123 of the Commercialization Agreement is hereby amended and restated as follows:“Reserved.”3. Section 1.134 of the Commercialization Agreement is hereby amended and restated as follows:““Pledge Agreement” has the meaning set forth in Section 14.3(c)(vii).”4. Section 2.12(b)(x) of the Commercialization Agreement is hereby amended and restated as follows:“Reserved.”5. Section 2.12(c)(x) of the Commercialization Agreement is hereby amended and restated as follows:“The Control Agreement, dated as of the Closing Date, executed by Newco and the Financial Institution;” 6. Section 2.12(c)(xi) of the Commercialization Agreement is hereby amended and restated as follows:“Reserved.”7. Section 2.12(c)(xviii) of the Commercialization Agreement is hereby amended and restated as follows:“The Consent and Sixth Amendment to Loan and Security Agreement, dated as of the Closing Date, executedby Collegium and the Financial Institution; and”8. Section 7.7(a)(i) of the Commercialization Agreement is hereby amended and restated as follows:“As of the Closing Date, Newco shall, and Collegium shall cause Newco to, deliver to Depomed, anirrevocable standby letter of credit issued by Silicon Valley Bank (the “Financial Institution”), in form andsubstance reasonably acceptable to Depomed (the “Letter of Credit”) in an aggregate amount of Thirty-ThreeMillion Seven Hundred Fifty Thousand Dollars ($33,750,000) (the “Maximum Stated Value”). Depomed shallhave the right to draw upon the Letter of Credit, up to the Maximum Stated Value, in the event that there is ashortfall in the Minimum Quarterly Payment made to Depomed by Collegium pursuant to Section 7.3(a)hereof, solely to the extent of such quarterly shortfall as determined in good faith by Depomed (a “QuarterlyShortfall”), provided that Collegium does not pay the amount of such Quarterly Shortfall to Depomed withinforty-five (45) days after the last day of such calendar quarter.”9. Section 7.7(b)(ii) of the Commercialization Agreement is hereby amended and restated as follows:“Collegium and Newco shall, and Collegium shall cause Newco to, cause all amounts from gross sales of thePayment-Bearing Products to be deposited directly into the Sales Account (including, requiring all Customersof the Payment-Bearing Products to remit all payments owed to Collegium or any of its Affiliates or any otherSublicensees directly into the Sales Account) and, on a daily basis, thirty-five percent (35%) of such day’sdeposits (the “Newco Deposits”) shall be swept into an account designated by Depomed until the MinimumQuarterly Payment obligation is satisfied for each calendar quarter, and sixty-five percent (65%) shall be sweptinto an account designated and owned by Collegium. Once the Minimum Quarterly Payment obligation issatisfied for a given calendar quarter, then, on a daily basis, one hundred percent (100%) of the NewcoDeposits shall be swept into an account designated and owned by Collegium for the remainder of such calendarquarter. Once the Minimum Quarterly Payment obligation is satisfied in its entirety (i.e., once Collegium’spayment obligation is governed by Section 7.3(b)), then, on a daily basis, one hundred percent (100%) of theNewco Deposits shall be swept into an account designated and owned by Collegium for the remainder of thePayment Term. The sweep mechanism shall not be subject to change and shall be the only mechanism fordisbursing funds from the Sales Account, unless in a writing signed by both Depomed and Newco; providedthat upon an “Event of Default” (as defined in2  the Collateral Agreement), Depomed may exercise all remedies granted under the Collateral Agreement. Basedon Newco’s reports provided to Depomed calculating amounts payable under Section 7.3, Depomed shallrefund to Newco any amounts overpaid to Newco from the Newco Deposits within ten (10) Business Days ofreceiving such reports.”10. The Commercialization Agreement is hereby amended to add the following as a new Section 7.7(c) ofthe Commercialization Agreement:“(c) Assignment of Proceeds. On the terms and subject to the conditions set forth in this Agreement, andin consideration for Newco granting Collegium certain rights under the Collegium Sublicense, Collegiumhereby irrevocably contributes, assigns, transfers, conveys, grants and delivers to Newco, and Newco herebyacquires and accepts from Collegium, all of Collegium’s present and future right, title and interest in, to andunder all cash, royalties, fees, revenues, proceeds, payments, income or other amounts resulting from sales ofPayment-Bearing Products, in each case solely to the extent required to be deposited directly into the SalesAccount pursuant to Section 7.7(b)(ii) of this Agreement, free and clear of all Liens (except for any Liengranted to Depomed). Each of Collegium and Newco agree to execute such documents and to perform suchother acts as are necessary to implement this Section 7.7(c), but in each case only upon Depomed’s reasonablerequest.”11. Section 14.3(c)(viii) of the Commercialization Agreement is hereby amended and restated as follows:“Reserved.”12. Section 14.3(c)(xi) of the Commercialization Agreement is hereby amended and restated as follows:3 “An amendment to that certain existing Loan and Security Agreement by and between Silicon Valley Bankand Collegium, dated as of August 28, 2012 (as amended by that certain First Amendment to Loan andSecurity Agreement dated as of January 31, 2014, by and between Silicon Valley Bank and Collegium, asamended by that certain Assumption and Second Amendment to Loan and Security Agreement dated as ofAugust 12, 2014, by and between Silicon Valley Bank and Collegium, as amended by that certain ThirdAmendment to Loan and Security Agreement dated as of September 25, 2014, by and between Silicon ValleyBank and Collegium, as further amended by that certain Fourth Amendment to Loan and Security Agreementdated as of October 31, 2014, by and between Silicon Valley Bank and Collegium, and as further amended bythat certain Consent and Fifth Amendment to Loan and Security Agreement dated as of December 31, 2015,by and between Silicon Valley Bank and Collegium), in a form reasonably acceptable to Depomed (the“Consent and Sixth Amendment to Loan and Security Agreement”); provided, however, that the Consent andSixth Amendment to Loan and Security Agreement shall not be deemed an Ancillary Agreement for purposesof Section 10.1 of this Agreement or Section 3.01 of the Collateral Agreement.”13. Except as herein expressly amended, the Commercialization Agreement is ratified and confirmed in allrespects by each of the parties hereto and shall remain in full force and effect and enforceable against them inaccordance with its terms. Unless the context otherwise requires, the term “Agreement” as used in theCommercialization Agreement shall be deemed to refer to the Commercialization Agreement as amended hereby.14. This Amendment No. 1 may be executed in one or more counterparts, each of which shall be deemedan original, and together shall constitute one and the same agreement and shall become effective when one or morecounterparts have been signed by each of the parties and delivered to the other party, it being understood that theparties need not sign the same counterpart. This Amendment No. 1, following its execution, may be delivered viatelecopier machine or other form of electronic delivery, which shall constitute delivery of an execution original for allpurposes.15. This Amendment No. 1 shall be governed by and construed in accordance with the laws of the Stateof New York, without regard to the conflicts of law, principles or rules of such state, to the extent such principles orrules are not mandatorily applicable by statute and would permit or require the application of the laws of anotherjurisdiction.(The remainder of this page is intentionally left blank. The signature page follows.) 4  IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be executed on the date firstabove written. DEPOMED, INC. /s/ Matthew M. Gosling Matthew M. Gosling Senior Vice President, General Counsel and Secretary COLLEGIUM PHARMACEUTICAL, INC. /s/ Michael T. Heffernan By: Michael T. Heffernan Title: President and Chief Executive Officer COLLEGIUM NF, LLC /s/ Michael T. Heffernan By: Michael T. Heffernan Title: President and Chief Executive Officer [Signature Page to Amendment No. 1 to Commercialization Agreement]Exhibit 21.1 Subsidiaries of Collegium Pharmaceutical, Inc. SubsidiaryJurisdiction of IncorporationCollegium Securities CorporationMassachusettsCollegium NF, LLCDelaware Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement No. 333-213964 on Form S-3 and RegistrationStatement Nos. 333-207744 and 333-218767 on Form S-8 of our report dated March 7, 2018, relating to theconsolidated financial statements of Collegium Pharmaceutical, Inc. and subsidiaries, appearing in this Annual Reporton Form 10-K of Collegium Pharmaceutical, Inc. for the year ended December 31, 2017. /s/ Deloitte & Touche LLPBoston, MassachusettsMarch 7, 2018 Exhibit 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our report dated March 18, 2016 with respect to the consolidated financial statements included in theAnnual Report of Collegium Pharmaceutical, Inc. on Form 10-K for the year ended December 31, 2015. We consent tothe incorporation by reference of said report in the Registration Statements of Collegium Pharmaceutical, Inc. on FormS-3 (File No. 333-213964), and on Forms S-8 (File No. 333-207744 and 333-218767). /s/ Grant Thornton LLP Boston, MassachusettsMarch 7, 2018 /s/ MICHAEL T. HEFFERNANMichael T. HeffernanPresident and Chief Executive Officer Exhibit 31.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Michael T. Heffernan, certify that:1. I have reviewed this annual report on Form 10-K of Collegium Pharmaceutical, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present inall material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case ofan annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Dated: March 7, 2018/s/ PAUL BRANNELLYPaul BrannellyExecutive Vice President and Chief Financial OfficerExhibit 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Paul Brannelly, certify that:1. I have reviewed this annual report on Form 10-K of Collegium Pharmaceutical, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present inall material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during theperiod in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of theperiod covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting thatoccurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case ofan annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’sinternal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Dated: March 7, 2018/s/ MICHAEL T. HEFFERNANMichael T. HeffernanPresident and Chief Executive OfficerExhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report on Form 10-K of Collegium Pharmaceutical, Inc. (the “Company”) for the fiscal yearended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), theundersigned, Michael T. Heffernan, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Actof 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial conditionand results of operations of the Company.Date: March 7, 2018/s/ PAUL BRANNELLYPaul BrannellyExecutive Vice President and Chief Financial OfficerExhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report on Form 10-K of Collegium Pharmaceutical, Inc. (the “Company”) for the fiscal yearended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), theundersigned, Paul Brannelly, Executive Vice President and Chief Financial Officer of the Company, hereby certifies,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to hisknowledge:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Actof 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial conditionand results of operations of the Company. Date: March 7, 2018

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