Collegium Pharmaceutical, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, 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, 2021

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 001-37372

Collegium Pharmaceutical, Inc.

(Exact name of registrant as specified in its charter)

Virginia
(State or other jurisdiction of incorporation or organization)
100 Technology Center Drive
Stoughton, MA
(Address of principal executive offices)

03-0416362
(I.R.S. Employer Identification Number)
02072
(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
Common stock, par value $0.001 per share

Trading Symbol(s)
COLL

Name of exchange on which registered:
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
such shorter 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, every Interactive Data File required to be submitted pursuant to Rule 405 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 such files). Yes ⌧ No ☐

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 if
smaller 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 standards
provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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, 2021, 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 the
registrant was approximately $831.0 million, based on the closing price of the registrant’s common stock on The NASDAQ Global Select Market on June 30, 2021 of $23.64 per share. Shares of
the registrant’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 that such persons may be deemed affiliates. This determination of affiliate status is not a determination for other purposes.

As of January 31, 2022, there were 33,377,788 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 2022 Annual Meeting of Shareholders (the "Proxy Statement"), to be filed within 120 days of the registrant's year ended
December 31, 2021, 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 not deemed to be filed as part of this Form 10-K.

  
  
  
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TABLE OF CONTENTS

     Page No.

PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.

Item 13.
Item 14.
PART IV
Item 15.
Item 16.
SIGNATURES

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Consolidated Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services

Exhibits and Financial Statement Schedules
Form 10-K Summary

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Forward-Looking Statements

Statements made in this Annual Report on Form 10-K that are not statements of historical or current facts, such as those under the
heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements discuss our current expectations
and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These
statements may be preceded by, followed by or include the words “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.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You
should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and
projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are
reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

You should understand that the following important factors could affect our future results and could cause those results or other
outcomes to differ materially from those expressed or implied in our forward-looking statements:

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our ability to commercialize and grow sales of our products, particularly in light of current global challenges stemming from
the COVID-19 pandemic;
our ability to complete our announced acquisition of BioDelivery Sciences International, Inc. (“BDSI”), successfully integrate
BDSI’s operations into our organization following closing, and realize projected cost savings associated with the acquisition
of BDSI;
our ability to obtain and maintain regulatory approval of our products, and any related restrictions, limitations, and/or
warnings in the label of an approved product;
the size of the markets for our products, and our ability to service those markets;
the success of competing products that are or become available;
our ability to obtain and maintain reimbursement and third-party payor contracts with favorable terms for our products;
the costs of commercialization activities, including marketing, sales and distribution;
the rate and degree of market acceptance of our products;
changing market conditions for our products;
the outcome of any patent infringement, opioid-related or other litigation that may be brought by or against us, including
litigation with Purdue Pharma, L.P.;
the outcome of any governmental investigation related to the manufacture, marketing and sale of opioid medications;
the performance of our third-party suppliers and manufacturers;
our ability to secure adequate supplies of active pharmaceutical ingredients for each of our products, manufacture adequate
quantities of commercially salable inventory and maintain our supply chain in the face of global challenges, such as the
COVID-19 pandemic;
our ability to effectively manage our relationships with licensors and to commercialize products that we in-license from third
parties;
our ability to attract collaborators with development, regulatory and commercialization expertise;
our ability to obtain funding for our business development;
our ability to comply with the terms of our outstanding indebtedness;
regulatory and legislative developments in the United States, including the adoption of opioid stewardship and similar taxes
that may impact our business;
our ability to obtain and maintain sufficient intellectual property protection for our products and any future product
candidates;
our ability to comply with stringent government regulations relating to the manufacturing and marketing of pharmaceutical
products, including U.S. Drug Enforcement Agency (“DEA”) compliance;
our customer concentration, which may adversely affect our financial condition and results of operations;
the accuracy of our estimates regarding expenses, revenue, capital requirements and need for additional financing; and
the other risks, uncertainties and factors discussed under the heading “Risk Factors” in this Annual Report on Form 10-K.

In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this Annual Report on
Form 10-K (including the exhibits hereto) might not occur. We undertake no obligation, and specifically decline any obligation, to
publicly update or revise any forward-looking statements, even if experience or future developments make it clear that projected results
expressed or implied in such statements will not be realized, except as may be required by law.

These and other risks are described under the heading “Risk Factors” in this Annual Report on Form 10-K. Those factors and the other
risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ
materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our
results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if
substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, prospective investors
are cautioned not to place undue reliance on such forward-looking statements.

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Item 1. Business

Overview

PART I

We are building a leading, diversified specialty pharmaceutical company committed to improving the lives of people living
with serious medical conditions. Our portfolio includes Xtampza ER, an abuse-deterrent, extended-release, oral
formulation of oxycodone and Nucynta ER and Nucynta IR (collectively, the “Nucynta Products”), which are extended-
release (“ER”) and immediate-release (“IR”) formulations of tapentadol. Xtampza ER was approved by the U.S. Food and
Drug Administration (“FDA”) in April 2016 for the management of pain severe enough to require daily, around-the-clock,
long-term opioid treatment and for which alternative treatment options are inadequate. We commercially launched
Xtampza ER in June 2016.

Nucynta ER is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid
treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate
treatment options are inadequate. Nucynta IR is indicated for the management of acute pain severe enough to require an
opioid analgesic and for which alternative treatments are inadequate in adults. We initially licensed the right to
commercialize the Nucynta Products in the United States through a Commercialization Agreement with Assertio
Therapeutics, Inc. (formerly known as Depomed) (“Assertio”) entered into in December 2017 (the “Nucynta
Commercialization Agreement”) and began marketing the Nucynta Products in February 2018. On February 13, 2020, we
closed our acquisition of certain assets related to the Nucynta Products, including the right to commercialize the Nucynta
Products in the United States and certain regulatory and supply chain assets (the “Nucynta Acquisition”), from Assertio for
an aggregate purchase price of $375.0 million, subject to certain adjustments as set forth in the Asset Purchase Agreement,
dated as of February 6, 2020, between us and Assertio (the “Nucynta Purchase Agreement”).

For the fiscal year ended December 31, 2021, we generated $276.9 million in net revenues, comprised of $103.7 million
from sales of Xtampza ER and $173.2 million from sales of the Nucynta Products.

As of the date of the filing of this Annual Report on Form 10-K, we expect the COVID-19 pandemic and actions taken to
contain it to continue to impact our revenue. Notwithstanding the lifting of some COVID-19 restrictions in many
jurisdictions, and amidst continuing public health concerns relating to the spread of COVID-19, particularly variants
thereof, weekly pain patient office visits continue to be depressed compared to pre-COVID periods, which we believe in
turn may account for fewer patients beginning therapy with our products. We believe that the disruptions caused by
COVID-19 will continue and there remains substantial uncertainty as to when such disruptions will cease.

Pain, Pain Management and Opioid Abuse in the United States

Acute and Chronic Pain

Pain can be classified along many different variables, including severity, duration and etiology. There are two broad
categories of pain based on duration: acute pain, or pain that is self-limited and generally requires treatment for no more
than up to a few weeks, and chronic pain, or pain that lasts beyond the healing of an injury or that persists longer than 3-6
months. According to a 2019 U.S. Centers for Disease Control and Prevention (“CDC”) report, it is estimated that chronic
pain affects at least 40 million U.S. adults annually, with at least 14 million of those adults experiencing high impact
chronic pain, defined as chronic pain that interferes with daily life or work activities most days or every day. Acute pain is
even more prevalent and can occur after an injury, burn, trauma or surgery.

Chronic pain leads to over $560 billion in healthcare and productivity costs annually, according to a 2011 report from the
Institute of Medicine. In addition, studies suggest that healthcare costs for people suffering from chronic pain are higher,
and often substantially higher, than for those without chronic pain.

The Role of Prescription Opioids in the Treatment of Pain

Prescription opioids continue to serve as important tools in the treatment of acute and chronic pain where alternative
treatments have been inadequate. Prescription opioids are available in immediate-release formulations as well as in
extended-release formulations, which incorporate a time-release mechanism designed to deliver steady amounts of

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opioid, typically over 12 to 24 hours. Extended-release opioids are designed to offer more convenient dosing with a longer
period of consistent blood levels of the active drug as compared to immediate-release formulations.

In 2021, there were approximately 152.8 million prescriptions for opioids written in the United States, representing a 3%
decline from 2020 levels and including approximately 2.9 million prescriptions for branded extended-release opioids,
approximately 12.1 million prescriptions for generic extended-release opioids, and greater than 137.7 million prescriptions
for immediate-release opioids. After marked increases in opioid prescriptions from 2000 to 2015, prescriptions decreased
each year since 2015, correlated with rising awareness of the extent and impact of the opioid crisis. Prescription levels for
2020 represented a return to levels similar to these seen in the year 2000, when 143.8 million prescriptions for opioid were
written in the United States, including 11.4 million prescriptions for extended-release opioids and 132.3 million
prescriptions for immediate-release opioids.

Increasingly, practitioners and regulators are focusing on multidisciplinary, multimodal approaches to pain management,
including exercise, physical therapy and psychotherapy, and opioid and non-opioid medications. Recognizing the role that
opioid therapy continues to play in effective management of moderate to severe pain in appropriate patients, these groups
are advocating for best practices that support appropriate opioid prescribing practices that may help mitigate the risks of
abuse, addiction and other adverse events to patients.

Prescription Opioid Abuse in the United States

Prescription opioids of all kinds, including both immediate-release and extended-release formulations, are subject to 
manipulation, diversion, misuse, and abuse. Besides their accepted uses for analgesia, opioids produce a general sense of 
well-being or euphoria by reducing tension, anxiety, and aggression. These effects contribute to the attractiveness of 
opioids for abuse and, indeed, the CDC has described abuse of prescription drugs in the United States as a vast and deadly 
epidemic. The beginning of the opioid overdose epidemic in the late 1990s was marked by a rise in prescription opioid 
overdose deaths. For a variety of reasons, heroin use began increasing in the mid-2000s, and had surpassed prescription 
opioids as a cause of opioid-related overdose by 2016, reaching a rate of 4.9 per 100,000 persons in 2018.  Meanwhile, the 
predominant opioid cause of death in 2018 involved synthetic opioids other than methadone. While opioid-involved 
overdose deaths declined slightly in 2018 (in contrast to the sharp increases during 2014 to 2017), the number of drug 
overdose deaths was still four times higher in 2018 than in 1999.  

The emergence of COVID-19 in early 2020 raised fears that already-rising drug overdose deaths could surge even further
amid social isolation, economic stress, and disrupted access to treatment facilities and providers.
Prior research showed that overdose deaths immediately spiked to previously unseen levels after the COVID-19 pandemic
began to impact the United States domestically in March 2020 and stayed elevated throughout the summer. Provisional
data from the National Center for Health Statistics at the Centers for Disease Control and Prevention (based on data
available as of February 6, 2022) indicate that there were at least 74,754 opioid overdose deaths for the 12‐month period
ending September 2021, a year‐over-year increase of approximately 22%. While the bulk of these deaths is attributable to
synthetic opioids (excluding methadone), there remain a substantial number of overdose deaths attributable to natural and
semi‐synthetic opioids, with rates that have remained essentially consistent since at least 2015.   

The opioid epidemic has, in addition to its death toll, imposed significant burdens on the U.S. healthcare system. In 2016,
there were an estimated 91,840 hospitalizations and 197,970 emergency department visits for opioid-related poisonings in
the United States. A nonprofit group that studies the health economy recently estimated that the opioid epidemic has cost
the United States more than a trillion dollars since 2001, based on CDC mortality data through June 2017. The greatest
financial cost of the epidemic, according to the report, is in lost earnings and productivity losses to employers.

Despite the reduction in opioid prescriptions in recent years and the heightened awareness of the risks associated with
opioid use, abuse of prescription opioids, including extended-release formulations, continues to be a major public health
issue. In 2019, an estimated 10.1 million, or 3.7% of persons aged 12 and older, reported opioid misuse in the prior year as
collected by the National Survey on Drug Use and Health sponsored by Substance Abuse and Mental Health Services
Administration (SAMHSA). There was no significant change in this data for 2020.

Extended-release opioids may be especially attractive to people who abuse opioids because, if the extended-release
mechanism can be defeated through tampering, many extended-release products quickly deliver a relatively large amount
of active pharmaceutical ingredient (an effect known as “dose dumping”). By manipulating these products,

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therefore, people who abuse opioids achieve a more intense euphoria as a result of rapid increases in the blood
concentration of the active pharmaceutical ingredient.

In response to issues surrounding abuse of prescription opioids, pharmaceutical companies have developed novel, abuse-
deterrent formulation strategies. Abuse-deterrent formulations, including the DETERx platform that is incorporated in
Xtampza ER, target the known or expected routes of abuse, such as crushing in order to snort or dissolving in order to
inject, for the specific opioid drug substance. The FDA has encouraged the development of prescription opioids with
abuse-deterrent formulations to help combat the opioid crisis, and expanding access to abuse deterrent formulations is part
of the FDA’s comprehensive Opioids Action Plan. These technologies, however, do not eliminate the possibility of misuse
and abuse. Moreover, no abuse deterrence technology, including DETERx, is able to deter the most common form of abuse
—swallowing a number of intact capsules or tablets to achieve a feeling of euphoria.

Legislative and Regulatory Actions

In response to widespread prescription opioid abuse, the U.S. government and a number of state legislatures have in recent 
years enacted new legislation and regulations intended to fight the opioid epidemic. At the federal level (in addition to the 
DEA and FDA efforts discussed elsewhere in this Annual Report on Form 10-K), in 2016 the CDC issued prescribing 
guidelines intended to reduce opioid-related harms by encouraging primary care physicians to limit the amount of 
morphine milligram equivalents (MMEs) that they prescribe for chronic pain patients.  

While much, if not most, of the state level efforts have focused primarily on increasing people’s access to substance abuse
treatment and harm reduction measures, some initiatives more directly impact manufacturers and distributors of
prescription opioid products; these laws include requirements that manufacturers fund statewide drug take-back programs
or pay opioid-specific taxes or “impact fees” and laws that limit the amount of opioid products that a physician may
prescribe. Recent years have also seen a variety of proposed and enacted laws and regulations at the federal, state and local
level intended to reduce, or limit increases in, pharmaceutical prices, including particularly prescription drug price
disclosure laws. Other jurisdictions may enact similar or novel measures intended to reduce or constrain the growth of
pharmaceutical spending or otherwise impose policy measures (either opioid-specific or applicable to the pharmaceutical
industry as a whole) that could increase our operating costs associated with compliance.

The Collegium Portfolio

Our mission is to build a leading, diversified specialty pharmaceutical company committed to improving the lives of people
living with serious medical conditions. We have leveraged our research and development efforts as well as licensing
relationships with third parties, to develop a portfolio of meaningfully differentiated products for use in the treatment of
moderate to severe pain. 

Xtampza ER

In April 2016, the FDA approved our New Drug Application (“NDA”) for Xtampza ER (extended-release oxycodone) for
the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which
alternative treatment options are inadequate. The approved labeling for Xtampza ER includes human abuse potential
studies, as well as data supporting the administration of the product as a sprinkle or through feeding tubes. In June 2016,
we launched Xtampza ER in the United States. Xtampza ER is formulated using our novel abuse-deterrent technology
platform, DETERx, which provides extended-release delivery, while also providing barriers to common methods of abuse
and misuse (e.g., crushing, chewing, heating and injecting). This technology combines an active opioid ingredient with a
fatty acid and waxes to form microspheres that are filled into a capsule. These wax-based microspheres are designed to
resist particle size reduction and dose dumping when subjected to physical and chemical manipulation. Xtampza ER’s label
indicates a dosing regimen of one capsule every 12 hours, and it must be taken with food.

Xtampza ER, OxyContin from Purdue, and the authorized generic version of OxyContin (which is identical to the branded
version) are the only extended-release oxycodone products marketed in the United States as of January 2021. In 2021, the
extended-release oxycodone (OER) market generated approximately $1.3 billion in gross U.S. sales and there were
approximately 2.2 million prescriptions written. OxyContin is the largest selling extended-release oxycodone (and largest-
selling branded extended-release opioid) in the United States by dollars and prescription volume, with approximately $0.9
billion in U.S. gross sales and approximately 1.5 million prescriptions written in 2021. Relative to 2020, dollars generated
by sales for OxyContin and its authorized generic forms written in the United States in 2021

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declined 19%, with a 20% decline prescription volume. In 2021, approximately 681,000 prescriptions for Xtampza ER
were written.

Xtampza ER and OxyContin (along with its authorized generic) feature the same active pharmaceutical ingredient
(oxycodone) and feature abuse-deterrent technologies – though the abuse deterrent technologies are designed differently. In
November 2017, we announced FDA approval of a Supplemental New Drug Application (“sNDA”) for Xtampza ER to
include comparative oral pharmacokinetic data from a clinical study evaluating the effect of physical manipulation by
crushing Xtampza ER compared with OxyContin and a control (oxycodone hydrochloride immediate-release). In the study,
Xtampza ER maintained its extended-release pharmacokinetic profile when crushed, while OxyContin showed a rapid
release of oxycodone when crushed with common household tools; crushed OxyContin was bioequivalent to crushed
oxycodone IR. The sNDA also added results from an oral human abuse potential study and an oral abuse deterrent claim to
the label, making Xtampza ER the only single-agent extended-release oxycodone with oral, intranasal, and intravenous
abuse-deterrent labeling.

We are committed to ongoing monitoring and public dissemination of our real-world abuse and diversion data, regardless
of the results. The two main sources of real-world abuse, misuse, and diversion data are RADARS® and Inflexxion, an
IBH Company. The Researched Abuse, Diversion and Addiction-Related Surveillance (RADARS) System collects
product-and geographically-specific data on abuse, misuse, and diversion of prescription drugs through its multiple data
sources. Abuse, misuse, and diversion of Xtampza ER has remained low compared to commonly abused schedule II opioid
analgesics for three years after introduction into the U.S. market. Methods to defeat the tamper resistant properties of
Xtampza ER are reported but there is no indication of widespread or expanding abuse or misuse in the data streams
evaluated. Potential limitations are based upon the fact that the Poison Center and Treatment Center Program cases involve
self-reporting which may lead to: 1) differential misidentification among drug groups which may affect observed
differences, and 2) case counts of drug groups comprised primarily of branded products (Other ADF ER opioids) may be
overestimated when based on self-reporting and drug groups comprised primarily of generic products (non-ADF ER
opioids and IR oxycodone) may be underestimated. The RADARS data represents a single snapshot in time and is subject
to change. Therefore, we plan to continue monitoring real world data characterizing the rate of abuse, misuse, and
diversion of Xtampza.

We believe Xtampza ER is well-positioned to capture a significant share of extended-release oxycodone market.

Nucynta ER and Nucynta IR

Nucynta ER is an extended-release formulation of tapentadol that is indicated for the management of pain severe enough
to require daily, around-the-clock, long term opioid treatment, and for which alternate treatment options are inadequate.
Nucynta ER is also the only extended-release opioid approved by the FDA for management of the neuropathic pain
associated with diabetic peripheral neuropathy. Nucynta IR is an immediate-release formulation of tapentadol that is
indicated for the management of acute pain severe enough to require an opioid analgesic and for which alternative
treatments are inadequate in adults. Nucynta ER and Nucynta IR are the only tapentadol-based products marketed in the
United States and the drug substance is patent-protected.

Nucynta ER’s label includes data from separate clinical trials that demonstrate its efficacy in improving pain intensity for
patients suffering from chronic low back pain and neuropathic pain associated with diabetic peripheral neuropathy.
Nucynta IR’s label includes data from a clinical trial that demonstrates its efficacy in improving pain intensity for post-
surgical acute pain.

In December 2017, we entered into the Nucynta Commercialization Agreement, pursuant to which Assertio agreed to grant
us a sublicense of certain of its intellectual property related to the Nucynta Products for commercialization of such products
in the United States. On January 9, 2018, we amended the Nucynta Commercialization Agreement and consummated the
transactions contemplated thereby. On February 13, 2020, we closed the Nucynta Acquisition.

We began shipping and recognizing product sales on the Nucynta Products on January 9, 2018, and we began commercial
promotion of the Nucynta Products in February 2018. Upon the closing of the Nucynta Acquisition and the termination of
the Nucynta Commercialization Agreement (except for certain sections that survive in accordance with the Nucynta
Purchase Agreement), we assumed all commercialization responsibilities, including sales and marketing, for the Nucynta
Products, through the assumption of a license from Grünenthal Gmbh (the “Grünenthal License”). Our prior

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royalty obligation to Assertio ceased and our only remaining royalty obligation is to pay 14% of net sales of the Nucynta
Products directly to Grünenthal Gmbh under the Grünenthal License.

Manufacturing of Our Products

Overview

Xtampza ER is manufactured using a proprietary process. This process is reproducible, scalable and cost-efficient, and we
believe that the microsphere formulation — and the related manufacturing process — is unique in the extended-release
opioid market. To date, we have produced Xtampza ER through a contract manufacturing organization, Patheon, a
subsidiary of Thermo Fisher Scientific, Inc. Our microsphere production is currently conducted in a dedicated
manufacturing suite as we transitioned the microsphere production to the new suite in 2021. Patheon has an established
record of manufacturing FDA-approved products in the United States, including products containing controlled substances.
We own all of the intellectual property, including know-how and specialized manufacturing equipment, necessary to be
able to qualify the manufacturing equipment currently located at Patheon’s facility as an alternative location (and with an
alternative vendor) if necessary.

Nucynta ER is produced at a Janssen facility in Puerto Rico pursuant to a supply agreement that we assumed from Assertio
in connection with the Nucynta Acquisition. Collegium continues to execute the transfer of the Nucynta ER manufacturing
process through a technology transfer program to enable manufacturing of Nucynta ER at Patheon in Cincinnati, Ohio.
Collegium expects the Nucynta ER process to be completed in 2022. Nucynta IR is produced at a contract manufacturing
organization, Cambrex, pursuant to a supply agreement.

Drug Substances

The active pharmaceutical ingredient used to formulate Xtampza ER is oxycodone base, which presents as myristate salt in
the Xtampza ER formulation. We currently procure this active pharmaceutical ingredient pursuant to a supply agreement
with a single U.S.-based manufacturer. As part of our business continuity program, we are in the process of qualifying a
secondary active pharmaceutical ingredient manufacturer.

The active pharmaceutical ingredient used in the Nucynta Products is tapentadol, which is supplied by a single U.S.-based
manufacturer. As part of our business continuity program, we are in the process of qualifying a secondary active
pharmaceutical ingredient manufacturer.

Oxycodone base and tapentadol are classified as narcotic controlled substances under U.S. federal law. Xtampza ER and
the Nucynta Products are classified by the DEA as Schedule II controlled substances, meaning that they have a high
potential for abuse and dependence but are recognized as having an accepted medical use. Consequently, the
manufacturing, shipping, dispensing and storing of our products are subject to a high degree of regulation, as described in
more detail under the caption “— Governmental Regulation — DEA and Opioid Regulation.”

Marketing and Commercialization

We commercialize Xtampza ER and the Nucynta Products in the United States with a dedicated field sales force, consisting
of approximately 94 sales representatives and managers, to call on the approximately 10,000 health care professionals who
write approximately 62% of the branded extended-release opioid prescriptions in the United States, with a primary focus
on pain specialists. We also employ a market-access team to support our formulary approval and payor contracting.

Our marketing strategy focuses on increasing awareness of the differentiated features of Xtampza ER and the Nucynta
Products. As an integral part of educating clinicians regarding the properties and differentiated profiles of our products, our
sales force is trained to share information relating to significant risks associated with prescription opioids, including risks
relating to addiction, abuse and misuse.

We primarily sell our products to wholesalers that, in turn, distribute our products to retail outlets (such as drug store and 
supermarket chains and independent pharmacies), managed health care organizations and government agencies.  Customers 
in the managed health care market include health maintenance organizations, nursing homes, hospitals, clinics, pharmacy 
benefit management companies and mail order customers. Three of our customers comprised more 

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than 10% of our revenue during the year ended December 31, 2021. These customers comprised 35%, 31% and 29% of
revenue, respectively.

Intellectual Property

The protection of patents, designs, trademarks and other proprietary rights that we own or license is critical to our success
and competitive position. Xtampza ER is protected by nineteen issued patents in the United States (which cover both the
abuse-deterrent technology and methods of using it to treat patients), one granted and two pending applications in the
European Patent Office, two issued patents in Canada, and one issued patent in each of Japan and Australia. Finally, we
have six patent applications pending in the United States, one pending patent application in each of Canada and Japan, and
one pending PCT application. Our issued U.S. patents are projected to expire in 2023, 2025, 2030, and 2036 and our
pending patent applications in the United States, if issued, would be projected to expire in 2023, 2030, and 2036. In
addition, we use a unique and proprietary process to manufacture our products that requires significant know how, which
we currently protect as trade secrets.

We have concluded that some of our technology is best protected as proprietary know-how, rather than through obtaining
patents. Except for licenses from Grünenthal GmbH to commercialize the Nucynta Products in the United States and its
territories, our technology and products are not in-licensed from any third party, and we own all of the rights to Xtampza
ER. We believe we have freedom to operate in the United States and other countries, but there can be no assurance 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
trademark registration for Collegium Pharmaceutical, Inc., DETERx, and Xtampza ER in the United States, and acquired
trademarks associated with the Nucynta Products in connection with the Nucynta Acquisition.

Our business depends upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of
our advisors, consultants and other contractors. To help protect our proprietary know-how that is not patentable, we rely on
trade secret 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 to our business. Additionally, these confidentiality agreements require that our employees, consultants
and advisors do not bring to us, or use without proper authorization, any third party’s proprietary technology.

Competition

Our industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary
products. We face competition and potential competition from a number of sources, including pharmaceutical and
biotechnology companies, generic drug companies, drug delivery companies and academic and research institutions. Most
of the existing and potential competitors have significantly more financial and other resources than we do. We believe the
key competitive factors that will affect the commercial success of our products include the therapeutic efficacy,
convenience of dosing and distribution and, in the case of Xtampza ER, the degree of abuse deterrence of competing
products, as well as their safety, cost and tolerability profiles.

Xtampza ER

Currently, the only extended-release opioid drugs on the market that have an abuse-deterrent product label, in addition to
Xtampza ER, are OxyContin and Hysingla®, both from Purdue. Hysingla is a once a day hydrocodone product.

Xtampza ER may also face competition from commercially available generic and branded extended-release and long-
acting opioid drugs other than oxycodone, including morphine sulfate, fentanyl, hydromorphone, oxymorphone and
methadone, as well as opioids that are currently in clinical development, including a generic version of Xtampza ER for
which Teva submitted an Abbreviated New Drug Application (“ANDA”) to the FDA. Pursuant to a settlement we reached
with Teva in September 2020, we agreed to grant Teva a license to market its generic version of Xtampza ER in the United
States beginning on or after September 2, 2033 (subject to FDA approval and acceleration under certain circumstances). As
a result of the settlement, Teva agreed to a consent judgment confirming that its proposed generic

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products infringe upon our asserted patents and that those patents are valid and enforceable with respect to Teva’s proposed
generic products.

Xtampza ER competes against all extended-release opioids, including Purdue’s OxyContin and its authorized generics.
Although Purdue lists 19 patents for OxyContin in the Orange Book, of which 10 list expiration dates between 2027 and
2030, it is possible that generic forms of OxyContin could become available sooner, in which case Xtampza ER would
compete with any such generic oxycodone extended-release products, in addition to all other extended-release opioids and
their respective generics.

The Nucynta Products

Nucynta ER competes primarily against other long-acting opioid medications, including: OxyContin; Butrans; Belbuca; 
and Hysingla. Nucynta ER may also face competition from commercially available generic and branded extended-release 
and long-acting opioid drugs including oxycodone, morphine sulfate, fentanyl, hydromorphone, oxymorphone and 
methadone.  

Nucynta IR competes primarily against short-acting opioids used for the management of acute pain severe enough to
require an opioid analgesic and for which alternative treatments are inadequate in adults. There are numerous such
medicines, including: generic hydrocodone acetaminophen; generic oxycodone; generic oxycodone acetaminophen; and
generic tramadol.

Government Regulation

FDA Approval Process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and
Cosmetic Act and other federal and state statutes and regulations govern 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 may
subject 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
result in a medication not being approved for marketing.

The process of developing a pharmaceutical product and obtaining FDA approval to market the medication in the United
States typically involves:

● completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s

good laboratory practices (“GLP”), regulation;

● submission to the FDA of an Investigational New Drug Application (“IND”) for human clinical testing, which

must become effective before human clinical trials may begin in the United States;

● approval by an independent institutional review board, at each clinical trial site before each trial may be initiated;
● performance of adequate and well-controlled human clinical trials in accordance with current good clinical

practices (“GCP”) to establish the safety and efficacy of the proposed drug product for each indication for which
FDA approval is sought;

● satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is

manufactured to assess compliance with the FDA’s cGMP regulations;

● submission to the FDA of an NDA or, in the case of a generic drug, an ANDA;
● satisfactory completion of a review by an FDA advisory committee, if convened; 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 vary
substantially 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 animal
studies to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests

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must comply with federal regulations and requirements, including GLPs. The results of preclinical testing are submitted to
the FDA as part of an IND along with other information, including information about product chemistry, manufacturing
and controls, and a proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity
and carcinogenicity, may continue after the IND is submitted.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or subjects under the
supervision 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 the roles
of clinical trial sponsors, administrators, and monitors; and (ii) under protocols detailing, among other things, the
objectives of the trial, the parameters to be used in monitoring safety, and any effectiveness criteria to be evaluated. Each
protocol involving testing on U.S. subjects and subsequent protocol amendments must be submitted to the FDA as part of
the IND.

Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases
may overlap or be combined.

● Phase 1: The drug is initially introduced into healthy human subjects or patients, and is tested to assess safety,

dose tolerance, absorption, metabolism, PK, pharmacological actions, side effects associated with increasing
doses, and, in some cases, early evidence of effectiveness.

● Phase 2: The drug is typically tested in a limited patient population to begin to determine the effectiveness of the
drug for a particular indication, dosage tolerance, and optimum dosage, and to identify common AEs and safety
risks. Multiple Phase 2 trials may be conducted by the sponsor to obtain information prior to beginning larger and
more extensive Phase 3 clinical trials.

● Phase 3: If a drug demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations,
Phase 3 trials (often called “pivotal trials”) are undertaken to obtain the additional information about clinical
efficacy and safety in a larger number of subjects, typically at geographically dispersed clinical trial sites, to
permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information
for the labeling of the drug. In most cases, the FDA requires two adequate and well controlled Phase 3 clinical
trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be
sufficient in rare instances where the clinical trial is a large multicenter trial demonstrating internal consistency
and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or
prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would
be practically or ethically impossible. Sponsors of clinical trials generally must register and report key parameters
of certain clinical trials at the NIH-maintained website ClinicalTrials.gov.

For products designed to deter abuse, FDA guidance regarding studies and clinical trials dictates what types of studies
should be conducted to demonstrate abuse-deterrence, how those studies and clinical trials will be evaluated, and what
product labeling claims may be approved based on the results of those studies and clinical trials. There are 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’s potentially abuse-deterrent properties under controlled conditions, while
Category 4, post-marketing clinical trials and studies, assesses the real-world impact of abuse-deterrent formulations. The
final guidance also provides examples of product label claims that may be made based on the results of the corresponding
studies and clinical trials.

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. The FDA conducts a
preliminary review of all NDAs within the first 60 days after submission before accepting them for filing. Pursuant to
agreements reached during reauthorization of the Prescription Drug User Fee Act (“PDUFA”), the FDA has a goal of
acting on most original NDAs within six months or ten months of the application submission or filing date, depending on
the nature of the drug. The FDA has a number of programs intended to help expedite testing, review, and approval of drug
candidates that meet certain eligibility criteria. The FDA may refer applications for novel drug products, or drug products
that present difficult questions of safety or efficacy, 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 bound by the recommendation of an advisory committee, but it generally follows
such recommendations.

If the FDA’s evaluations of the NDA and of the sponsor’s manufacturing facilities are favorable, the FDA will issue an
approval letter, and the sponsor may begin marketing the drug for the approved indications, subject to any post-approval
requirements, described further below. If the FDA determines it cannot approve the NDA in its current form, it will issue

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a complete response letter indicating that the application will not be approved in its current form. The complete response
letter usually describes the specific deficiencies that the FDA identified in the application and may require additional
clinical or other data or impose other conditions that must be met in order to obtain approval of the NDA. After receiving a
complete response letter, the applicant may resubmit the application addressing all deficiencies in the letter or withdraw the
application. Addressing the deficiencies noted by the FDA can be costly and can result in significant delays prior to
approval. Moreover, even if the applicant believes it has addressed the deficiencies, it is possible that approval may not
ultimately be obtained.

Where a sponsor wishes to expand the originally approved prescribing information, such as by adding a new indication, it
must submit and obtain approval of an sNDA. Changes to an indication generally require additional clinical studies, which
can be time-consuming and require the expenditure of substantial additional resources. Under PDUFA, the target timeframe
for the review of an sNDA to add a new clinical indication is six or ten months from the receipt date, depending on whether
or not the sNDA has priority review. As with an NDA, if the FDA determines that it cannot approve an sNDA in its current
form, it will issue a complete response letter as discussed above.

REMS

The FDA has the authority to require a Risk Evaluation and Mitigation Strategy (“REMS”), either as a condition of the
approval of an NDA or after approval to ensure that the benefits of a drug outweigh its risks. If the FDA determines a
REMS is necessary for a new drug, the drug sponsor must submit a proposed REMS plan as part of its NDA prior to
approval. The FDA may also impose a REMS requirement on a drug already on the market if the FDA determines, based
on new safety information, that a REMS is necessary to ensure that the drug’s benefits continue to outweigh its risks. A
REMS can include medication guides, communication plans for healthcare professionals, and Elements To Assure Safe
Use (“ETASU”). In addition, the REMS must include a timetable for periodically assessing the strategy, at a minimum, at
18 months, three years, and seven years after the REMS approval. The requirement for a REMS can materially affect the
potential market and profitability of a drug.

In July 2012, the FDA 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 to have a
REMS. Manufacturers subject to this class-wide REMS must work together to implement the REMS as part of a single
shared system to reduce the burden of the REMS on the healthcare system. The central component of the extended-
release/long-acting opioid REMS program is an education program for prescribers and patients. Specifically, the REMS
includes 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 that they can use to educate patients in the safe use, storage, and disposal of opioids; and information provided
to prescribers about the existence of the REMS and the strong recommendation that they complete the available training.
Prescriber training required to be offered as part of the REMS is conducted by accredited, independent continuing
education providers, without cost to healthcare professionals, under unrestricted grants funded by the opioid analgesic
manufacturers. Moreover, REMS assessments must be submitted on an annual basis to assess the extent to which the
ETASU are meeting the goals of the REMS and whether the goals or elements should be modified.

In September 2018, and pursuant to its Opioids Action Plan, the FDA approved the final class-wide REMS, which includes
several measures to facilitate communication of the risks associated with opioid pain medications to patients and health
care professionals and, for the first time, applies to immediate-release and extended-release/long-acting opioid analgesics
intended for use in an outpatient setting. The REMS requires that training be made available to health care providers who
are involved in the management of patients with pain (including nurses and pharmacists) and requires that the education
cover broad information about appropriate pain management, including alternatives to opioids for the treatment of pain. In
connection with the 2018 REMS, the FDA also approved new product labeling containing information about the health
care provider education available through the 2018 REMS.

Advertising and Promotion

The FDA and other federal regulatory agencies closely regulate the marketing and promotion of drugs through, among
other things, guidance 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 cannot
be commercially promoted before it is approved. After approval, product promotion can include only those claims relating
to safety and efficacy that are consistent with the labeling approved by the FDA. Healthcare providers are

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permitted to prescribe drugs for “off-label” uses — that is, uses not approved by the FDA and therefore not described in the
drug’s labeling — because the FDA does not regulate the practice of medicine. However, FDA regulations impose
stringent restrictions on manufacturers’ communications regarding off-label uses. Failure to comply with applicable FDA
requirements and 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 a company to a range of penalties that could have a significant commercial impact, including civil and criminal
fines and agreements that materially restrict the manner in which a company promotes or distributes drug products.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among
other things, requirements relating to drug listing and registration, recordkeeping, periodic reporting, product sampling and
distribution, 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 also
may require, in addition to REMS discussed above, post-market testing, known as Phase 4 testing, and surveillance to
monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the
distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must
continue to conform to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to
register their establishments with the FDA and certain state agencies. Registration subjects entities to periodic announced
or unannounced inspections by the FDA or these state agencies, during which the agency inspects manufacturing facilities
to assess compliance with cGMPs. Regulatory authorities may withdraw product approvals, request product recalls, or take
other punitive action if a company fails to comply with regulatory standards, if it encounters problems following initial
marketing, or if previously unrecognized problems are subsequently discovered.

The FDA may require post-approval studies and clinical trials if the FDA finds that scientific data, including information
regarding related drugs, warrant them. The purpose of such studies would be to assess a known serious risk or signals of
serious risk related to the drug or to identify an unexpected serious risk when available data indicate the potential for such a
risk. The FDA may also require a labeling change if it becomes aware of new safety information that it believes should 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 with claims that
cover the applicant’s product. Upon approval of a drug, each of the patents listed in the application for the drug is then
published in 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 an ANDA. An ANDA provides for marketing of a drug product that has the same active pharmaceutical
ingredient in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to
be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants
are not required to conduct, or submit results of, preclinical or clinical tests to prove the safety or efficacy of their drug
product. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be
substituted by pharmacists under 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 approved
product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not
been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and
approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product.
The ANDA 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
listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDA application will not be
approved until all the listed patents claiming the referenced product have expired.

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A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are
invalid, 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
been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in
response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the
receipt of a Paragraph 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
ANDA applicant.

For further detail regarding our litigation with Teva with respect to Teva’s ANDA relating to Xtampza ER, refer to “Item 3.
Legal Proceedings”.

Exclusivity

Upon approval of an NDA for a new chemical entity (“NCE”), which is a drug that contains no active moiety that has been
approved by FDA in any other NDA, that drug receives five years of marketing exclusivity during which FDA cannot
receive any ANDA seeking approval of a generic version of that drug or any Section 505(b)(2) NDA, discussed in more
detail below, that relies on the FDA’s findings regarding that drug. A sponsor may obtain a three-year period of exclusivity
for a change to an approved drug, such as the addition of a new indication to the labeling or a new formulation, if the
supplement includes reports of new clinical trials (other than bioavailability clinical 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 no
listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before
the expiration of the exclusivity period. No ANDA application will receive final approval before any applicable non patent
exclusivity listed in the Orange Book for the referenced product has expired.

Section 505(b)(2) NDAs

A Section 505(b)(2) NDA is a special type of NDA often used by applicants seeking approval for new or improved 
formulations or new uses of previously approved active moieties.  Under Section 505(b)(2) of the Federal Food, Drug, and 
Cosmetic Act, in lieu of developing all of the information normally required for approval of an NDA, an applicant may 
rely, in part, on data developed by another party and for which the applicant has not obtained a right of reference.  Most 
commonly, 505(b)(2) applicants rely on the FDA’s findings of safety and efficacy in a prior approval of a similar product 
(although they may also rely on information in published literature).  A 505(b)(2) application that references a prior 
approval may seek approve for some or all of the referenced product’s labeled indications and/or for a different indication 
not included in the referenced product’s label.

To the extent that the Section 505(b)(2) applicant is relying on the FDA’s findings of safety and effectiveness for an already
approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in
the Orange Book to the same extent that an ANDA applicant would. Thus approval of a Section 505(b)(2) NDA can be
stalled until all the listed patents claiming the referenced product have expired; until any non-patent exclusivity listed in the
Orange Book for the referenced product has expired; and, in the case of a Paragraph IV certification and subsequent patent
infringement suit, until the earlier of 30 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 has determined that the applicant meets the standards for approval as of the date that the
tentative approval is granted. Final regulatory approval can only be granted if the FDA is assured that there is no new
information that would affect final regulatory approval. As with traditional NDAs, a Section 505(b)(2) NDA may be
eligible for three-year marketing exclusivity, assuming the NDA includes reports of new clinical trials (other than
bioavailability clinical trials) essential to the approval of the NDA. For further detail regarding our litigation with Purdue
regarding our Section 505(b)(2) NDA for Xtampza ER, refer to “Item 3. Legal Proceedings”.

DEA and Opioid Regulation

Our products are regulated as “controlled substances” as defined in the Controlled Substances Act (“CSA”), which
establishes registration, security, recordkeeping, reporting, storage, distribution, importation, exportation and other
requirements administered by the DEA.

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The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition
have no established medicinal use and may not be marketed or sold in the United States. A pharmaceutical product may be
listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and
Schedule V substances the lowest relative risk of abuse among such substances.

Xtampza ER and the Nucynta Products are listed by the DEA as a Schedule II controlled substance under the CSA.
Consequently, the manufacturing, shipping, storing, selling and using of our products is subject to a high degree of
regulation. 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
be signed by a physician, presented to a pharmacist and may not be refilled without a new prescription.

Annual DEA registration is required for any facility that manufactures, distributes, dispenses, imports or exports any
controlled substance. 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 of controlled substances are authorized.

In addition, a DEA quota system, which was amended in 2018 to require sponsors to strengthen controls over diversion of
controlled substances, controls and limits the availability and production of controlled substances in Schedule I or II. In
November 2017, the DEA reduced the amount of almost every Schedule II opiate and opioid medication that may be
manufactured in the U.S. in calendar year 2018 by 20%. For 2019, the DEA proposed decreased manufacturing quotas for
the six most frequently misused opioids, including oxycodone, by an average of 10% as compared to the 2018 quotas. The
DEA proposed further decreasing manufacturing quotas in 2020 for five of the six opioids (fentanyl, hydrocodone,
hydromorphone, oxycodone, oxymorphone), by an average of 28%. In October 2019, the DEA proposed additional
regulations to amend the manner in which the agency grants quotas to manufacturers. If finalized, the proposed regulations
will establish use-specific quotas, including commercial sales, product development, transfer, replacement and packaging.
To decrease the risk of diversion and increase accountability, inventory allowances will be reduced, and procurement quota
certifications will be required. In April 2020 in response to the COVID-19 pandemic, the DEA adjusted the established
2020 aggregate production quotas and assessment of annual needs for select Schedule II substances. The DEA took this
action to ensure that the country has an adequate and uninterrupted supply of these substances during the public health
emergency.

Distributions of any Schedule I or II controlled substance must also be accompanied by special order forms, with copies
provided to the DEA. Because Xtampza ER and the Nucynta Products are regulated as a Schedule II controlled substances,
they are subject to the DEA’s production and procurement quota scheme. The DEA establishes annually an aggregate quota
for how much active opioid ingredients, such as oxycodone and tapentadol, may be produced in total in the United States
based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. The limited
aggregate amount of opioids that the DEA allows to be produced in the United States each year is allocated among
individual companies, who must submit applications annually to the DEA for individual production and procurement
quotas. We and our contract manufacturers must receive an annual quota from the DEA in order to produce or procure any
Schedule I or Schedule II substance, including oxycodone base for use in manufacturing Xtampza ER. In addition, we and
our contract manufacturers must receive an annual quota from the DEA in order to produce or procure tapentadol for use in
manufacturing the Nucynta Products. The DEA may adjust aggregate production quotas and individual production and
procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to
make such adjustments.

The DEA also requires drug manufacturers to design and implement a system that identifies suspicious orders of controlled
substances, such as those of unusual size, those that deviate substantially from a normal pattern and those of unusual
frequency, prior to completion of the sale. A compliant suspicious order monitoring system includes well-defined due
diligence, “know your customer” efforts and order monitoring.

To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle controlled
substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion,
can result in administrative, civil or criminal enforcement action that could have a material adverse effect on our business,
results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary

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registrations or initiate administrative proceedings to revoke those registrations. In certain circumstances, violations could
result in criminal proceedings.

Individual states also independently regulate controlled substances. We and our contract manufacturers are subject to state
regulation on distribution of these products.

Federal laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use. In
2016, the Comprehensive Addiction and Recovery Act (“CARA”), was enacted to address the national epidemics of
prescription opioid abuse and heroin use. CARA expands the availability of naloxone for law enforcement and other first
responders, forms an interagency task force to develop best practices for pain management with opioid medications and
provides resources to improve state monitoring of opioids. The Substance Use-Disorder Prevention that Promotes Opioid
Recovery and Treatment for Patients and Communities Act (“SUPPORT Act”), which was signed into law in November
2018, includes a number of measures directed towards regulation and improvement of treatment for substance use-disorder
and increased coverage by CMS of medically-assisted treatment options. In addition, the SUPPORT Act requires HHS to
report to Congress on existing barriers to access to abuse-deterrent opioid formulations by Medicare Part C and D
beneficiaries.

Healthcare Fraud and Abuse Laws and Compliance Requirements

We are subject to federal, state and local laws targeting fraud and abuse in the healthcare industry, violations of which can
lead to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare
programs. These laws are potentially applicable to us as both a manufacturer and a supplier of products and they also apply
to hospitals, physicians and other potential purchasers of our products. The applicable federal fraud and abuse laws apply
to products or services reimbursed by federal healthcare programs. Some states, however, have applicable fraud and abuse
laws that apply more broadly to include products or services reimbursed by private payors.

The federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits knowingly and willfully soliciting, receiving,
offering or providing remuneration, directly or indirectly, to induce 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 as the Medicare and Medicaid programs. Remuneration is not defined in the federal Anti-Kickback Statute and has
been broadly interpreted to include anything of value, including for example, gifts, discounts, coupons, the furnishing of
supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing
anything at less than its fair market value. Under the federal Anti-Kickback Statute and the applicable criminal healthcare
fraud statutes contained within 42 U.S.C. § 1320a-7b, a person or entity need not have actual knowledge of this statute or
specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim
including items or services resulting from a violation of 42 U.S.C. § 1320a-7b, constitutes a false or fraudulent claim for
purposes of the civil False Claims Act (discussed below) or the civil monetary penalties statute, which imposes fines
against any person who is determined to have presented or caused to be presented claims to a federal healthcare program
that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal Anti-Kickback Statute and implementing regulations provide for certain exceptions for “safe harbors” for
certain discounting, rebating or personal services arrangements, among other things. However, the lack of uniform court
interpretation of the Anti-Kickback Statute makes compliance with the law difficult. Violations of the federal Anti-
Kickback Statute can result in significant criminal fines, exclusion from participation in Medicare and Medicaid and
follow-on civil litigation, among other things, for both entities and individuals.

Other federal healthcare fraud-related laws also provide criminal liability for violations. The Criminal Healthcare Fraud
statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program,
including private third-party payers. Federal criminal law at 18 U.S.C. § 1001, among other sections, prohibits knowingly
and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services.

The civil False Claims Act and similar state laws impose liability on any person or entity who, among other things,
knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The
qui tam provisions of the False Claims Act and similar state laws allow a private individual to bring civil actions on behalf
of the federal or state government and to share in any monetary recovery. The Federal Physician Payments Sunshine Act
and similar state laws impose reporting requirements for various types of payments to physicians and teaching hospitals.
Failure to comply with required reporting requirements under these laws could subject manufacturers

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and others to substantial civil monetary penalties. In addition, government entities and private litigants have asserted claims
under state consumer protection statutes against pharmaceutical and medical device companies for alleged false or
misleading statements in connection with the marketing, promotion and/or sale of pharmaceutical and medical device
products, including state investigations and litigation by certain government entities regarding our marketing of opioid
products.

Third-Party Payor Coverage and Reimbursement

The commercial success of Xtampza ER and the Nucynta Products 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 care plans. These third-party
payors may deny coverage or reimbursement for a product or therapy in whole or in part if they determine that the product
or therapy was not medically appropriate or necessary. Also, third-party payors have attempted to control costs by limiting
coverage through the use of formularies and other cost-containment mechanisms and the amount of reimbursement for
particular procedures or drug treatments. In addition, some third-party payors also require preapproval of coverage for new
or innovative devices or drug therapies before they will reimburse healthcare providers who prescribe such therapies.

The cost of pharmaceuticals and devices continues to generate substantial governmental and third-party payor interest. We
expect that the pharmaceutical industry will experience pricing pressures due to the trend toward managed healthcare, the
increasing influence of managed care organizations and additional legislative proposals. Our results of operations and
business could be adversely affected by current and future third-party payor policies as well as healthcare legislative
reforms.

While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in
the future, these requirements or any announcement or adoption of such proposals could have a material adverse effect on
our ability to obtain adequate prices for Xtampza ER, the Nucynta Products and any other products we may seek to
commercialize, and to operate profitably.

Healthcare Reform

In the United States, there have been a number of legislative and regulatory changes to the healthcare system that could
affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S.
federal and state levels that seek to reduce healthcare costs. The Medicare Modernization Act imposed 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 of outpatient prescription drugs.
Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage 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 its own drug formulary
that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must
include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in
each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a
pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase
demand for our products. However, any negotiated prices for our products covered by a Part D prescription drug plan will
likely be lower than the prices we might otherwise obtain. Moreover, while the Medicare Modernization Act applies only
to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations
in setting their own payment rates. Any reduction in payment that results from Medicare Part D may result in a similar
reduction in payments from non-governmental payors.

In March 2010, the Affordable Care Act was enacted, which significantly changed the way healthcare is financed by both
governmental and private insurers. Among the provisions of the Affordable Care Act of importance to the pharmaceutical
and biotechnology industry are the following:

●

●

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and
biologic agents, apportioned among these entities according to their market share in certain government healthcare
programs;
an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13%
of the average manufacturer price for branded and generic drugs, respectively;

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●

●

●

●
●
●

●
●

a 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 their coverage 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
in Medicaid managed care organizations;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid
coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with
income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid
rebate 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 Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research;
a requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
establishment of a Center for Medicare Innovation at CMS in January 2011 to test innovative payment and service
delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

The Affordable Care Act has been subject to challenges in the courts. On December 14, 2018, a Texas U.S. District Court
Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed
by Congress. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is
unconstitutional and remanded the case to the Texas District Court to reconsider its earlier invalidation of the entire
Affordable Care Act. An appeal was taken to the U.S. Supreme Court which heard oral arguments in the case on November
10, 2020. On June 17, 2021, the Supreme Court ruled that the plaintiffs lacked standing to challenge the law as they had
not alleged personal injury traceable to the allegedly unlawful conduct. As a result, the Supreme Court did not rule on the
constitutionality of the ACA or any of its provisions.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. The
Joint Select Committee on Deficit Reduction (created under the Budget Control Act of 2011) did not achieve its targeted
deficit reduction of at least $1.2 trillion for the years 2012 through 2021, triggering automatic reductions to several
government programs, including aggregate reductions to Medicare payments to providers of up to 2% per fiscal year,
which will remain in effect through 2030 unless additional action is taken by Congress, although they have been suspended
by the Coronavirus Aid, Relief and Economic Security, or CARES, Act, until March 31, 2021. An Act to Prevent Across-
the-Board Direct Spending Cuts, and for Other Purposes, signed into law on April 14, 2021, extended the suspension
period to December 31, 2021.

The American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of
limitations period for the government to recover overpayments to providers from three to five years. These laws may result
in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our
customers and, accordingly, our financial operations.

In December 2017, the Tax Cuts and Jobs Act (“TCJA”) repealed the shared responsibility payment for individuals who
fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code, commonly referred to as
the individual mandate, beginning in 2019. The Joint Committee on Taxation estimates that the repeal will result in over 13
million Americans losing their health insurance coverage over the next ten years, and is likely to lead to increases in
insurance premiums. It is uncertain how or whether this legislation may affect our customers and, accordingly, our
financial operations.

Other Regulatory Requirements

We are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the
use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas,
as above, the FDA and other regulatory authorities have broad regulatory and enforcement powers, including, among other
things, the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and
withdraw approvals, any one or more of which could have a material adverse effect on us.

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Environmental and Social Issues

Environmental, social, and governance (“ESG “) is fundamental to our strategy, purpose and culture. We retained a third-
party consultant (NASDAQ) to review our ESG strategy and disclosures, with ultimate oversight maintained by our Board
of Directors and operationalized by our Nominating and Corporate Governance committee. We are currently surveying all
company departments with responsibility for activities that impact our ESG profile, including Commercial Operations,
Supply Chain Management, Research and Development, Clinical Operations, Human Resources and Legal, among others.
We are also committed to aligning our practices with stakeholder expectations and third-party frameworks including the
Sustainability Accounting Standards Board (SASB) Biotechnology & Pharmaceuticals standard, which affirms our
commitments to the safety of clinical trial participants, drug safety and other priorities important to our stakeholders.

Environment

In 2021, we began refreshing our environmental risk management policies through setting baselines and tracking resources
with a focus on reducing environmental impacts while exploring appropriate disclosures about future climate risks and the
material impacts on our company.

We conduct our operations in compliance with applicable laws, directives and regulations. Our current material handling
policies and management systems include procedures for assessing compliance with applicable laws and regulations and
reporting incidents of non-compliance to applicable governmental authorities.

Moreover, we are reviewing and updating our vendor performance management policies governing our manufacturing
vendors, as part of our commitment to environmental sustainability, in order to minimize resource use (e.g., energy and
water) and waste generation, optimize the use of raw materials, and undertake continuous improvement in environmental
performance, with an emphasis on recycling of packaging materials and working with sustainability opportunities in our
vendor supply chains.

Collegium Culture, Employee Engagement and Management of Human Capital Resources

As of February 15, 2022, we had a total of 152 employees (all full-time), 64 of whom are home office-based and 88 of 
whom are field-based. Our employees are foundational to our current and future success, and we believe that their 
engagement and commitment are among our most valuable assets. As we seek to build and sustain a challenging, inspiring, 
and inclusive environment for our employees, we have focused on safety and wellness; talent acquisition and retention; 
employee engagement, development, and training; diversity and inclusion; and compensation and pay equity.   

At Collegium, we recognize that we have a responsibility to hold ourselves to the highest standard of business and 
professional ethics. Our Core Values are the foundational principles of our organization and guide our work, how we 
interact with each other and our communities and influence the business strategies we employ to fulfill our mission.  Our 
Core Values are: maintain uncompromising Integrity in everything we say and do; embrace the Differences among us to 
make our ideas richer and better serve our communities; encourage Expression to push ourselves to think big and make our 
voices heard; and be Accountable to each other, our customers and our communities.  

As one reflection of our Core Values, Collegium is dedicated to being a responsible corporate citizen. We and our
employees strive to make a positive impact in the communities where we live and work by fostering a culture of
philanthropy, service, and mentorship, supporting the wellness of our communities, and working for equitable access to
education and educational resources. In addition, Collegium has a charitable matching gift program, which enables
employees to make matched charitable donations to any registered 501(c)(3) charity. Collegium has also established a
service initiative, which includes financial donations supporting local and national nonprofits with a focus on STEM
initiatives and community service. In 2021, Collegium donated over $140,000 and over 400 hours of service in support of 
these charitable initiatives.  

Employee Health & Safety

We believe that the success of our business is fundamentally connected to the well-being of our employees; accordingly,
we are committed to their health, safety, and wellness. We provide all employees and their families with access to a variety
of innovative, flexible and convenient health and wellness programs. These programs include benefits that

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provide protection and security so they can have peace of mind concerning events that may require time away from work
or that impact their financial well-being; that support their physical and mental health by providing tools and resources to
help them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer choice
where possible so they can customize their benefits to meet their needs and the needs of their families. In response to the
COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees,
as well as the community in which we operate, and which comply with government regulations. From March 2020 through
August 2021, we modified our remote work policies to enable our employees to work from home wherever possible, and
for employees who could not, or chose not to, work from home, we implemented safety measures to help prevent the
spread of COVID-19 in the workplace, such as mandatory face coverings, social distancing, hand hygiene, and limited
face-to-face meetings. Since August 2021, when all office-based employees returned to the office on a hybrid workweek
basis, both office-based and field-based employees (except in very limited circumstances) have been required to be fully
vaccinated against COVID-19.

Employee Engagement

None of our employees are represented by a labor organization or under any collective bargaining arrangements. We
consider our employee relations to be good. In December 2021, Collegium was recognized by the Boston Globe as a 2021
Massachusetts Top Place to Work. In February 2022, Collegium was recognized as a 2022 National Top Place to Work (for
the second year in a row). This award is based on an anonymous employee survey concerning engagement, leadership,
connection, company values, benefits, and other topics. These surveys are conducted annually; in 2021, the recognition
was based on participation and feedback from 78.3% of our workforce. We believe these recognitions reflect our dedication
to our four Core Values.

Talent Acquisition & Retention

We seek to identify, recruit, retain, incentivize, and integrate our existing and new employees, advisors and consultants.  
All full-time employees receive stock-based and cash-based compensation awards through the compensation cycle; stock-
based compensation includes restricted stock units, or RSUs, for the entire organization. The principal purposes of our 
equity and cash incentive plans are to attract, retain and reward personnel as they strive to increase stockholder value and 
contribute to the success of our company by motivating such individuals to perform to the best of their abilities and achieve 
our objectives. Collegium offers a comprehensive and competitive benefit package to all full-time employees that includes 
medical, dental and vision benefits; flexible spending account; life and disability insurance; paid parental and caregiver 
leave; a 401(k) with a dollar-for-dollar matching contribution on the first 5% contributed by the employee; an employee 
stock purchase plan; a hybrid workweek that allows most employees to work from home up to two days each week, and 
charitable matching up to $1,000 per employee per calendar year for donations to registered 501(c)(3) charity. In addition, 
we sponsor an employee recognition program that allows Collegium employees to reward their co-workers who have 
exhibited one of the Company's Core Values and/or Leadership Behaviors by awarding them points that can be redeemed 
for gift cards or merchandise. In 2021, we had 32 new hires and, as of February 15, 2022, our voluntary turnover rate was 
9.4% in the home office and 3.3% in the field.

Employee Training & Development

Collegium believes that career development begins with good conversations between employees and their managers that
ensure regular feedback, and the Company has implemented tools and annual processes that allow all employees in
conjunction with their managers to explore possibilities and drive development action. All employees work with their
managers to create annual Individual Development Plans with specific objectives and resource requirements. We encourage
our employees to develop both breadth and depth of experience, to build transferable skills, broaden perspective and to
hone technical skill sets. While career promotion is driven by business needs and sustained strong performance and
capabilities, we have identified and articulated leadership behaviors that drive career development within the organization,
and our people managers provide feedback to all employees that is tied to demonstration of these skills. We also conduct an
annual Leadership Summit that is focused on aligning leaders around a common set of organizational priorities; building
and fostering Collegium’s culture; facilitating knowledge exchange and development amongst Collegium’s leaders; and
fueling networking and collaboration across the organization.

Diversity, Equity, and Inclusion

We are unwavering in our commitment to treat our colleagues with equal humanity, and we will be open-minded and

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inclusive in our dealings with one other, both because these expectations flow from our Core Values and because creating a
diverse, equitable, and inclusive environment improves our performance and our business. When people feel appreciated
and included, they can be more creative, innovative, and successful, which in turn drives commercial success and enhances
shareholder value. Leveraging the contributions of a diverse employee population creates an environment in which
individual differences and capabilities are valued. We are therefore committed to employing people whose diverse
backgrounds contribute to innovation and allow our company to approach the complex issues that face our industry from
many different perspectives. Consistent with this belief, we are committed to ensuring that our employees are treated with
respect and dignity to drive a culture of inclusion that values the broad perspective of each employee and fully harnesses
the contributions they can make.

As of February 15, 2022, our workforce breakdown with respect to gender and self-reported race and ethnicity was as
follows:

Ethnicity
Asian (Not Hispanic or Latino)
Black or African American (Not Hispanic or Latino)
Hispanic or Latino
Prefer Not to Disclose
Two or More Races (Not Hispanic or Latino)
White (Not Hispanic or Latino)

Gender

Female
Male

#
13
7
5
2
1
124

#
78
74

%

8.5%
4.6%
3.3%
1.3%
0.7%
81.6%

%
51.3%
48.7%

As in everything we do, we are committed to continuous improvement in this area. In recent years, we launched a
Diversity, Inclusion and Equity Council (the “Council”) comprised of a cross-functional group of employees, and chaired
by our Chief Executive Officer, that focuses on listening to and learning from our lived experiences and aligning on actions
that we can take to improve the diversity and inclusivity of our organization. The Council is, among other activities,
working to enhance our training curriculum with ongoing, mandatory diversity, equity, and inclusion education. We have
also engaged in a review of our recruitment and hiring practices with the intention of improving the diversity of Collegium
at all levels. While we are proud of the diversity of backgrounds and identities that our workforce exhibits, we will make
the necessary investments of time, resources, and engagement to make sustained improvements in this area.

Executive Officers of the Company

The following table lists the positions, names and ages of our executive officers as of February 24, 2022:

Name
Joseph Ciaffoni

Colleen Tupper

Scott Dreyer

Shirley Kuhlmann

Richard Malamut

  Age

Position(s)

50   Director, President and Chief Executive

46

Officer
Executive Vice President and Chief
Financial Officer

49   Executive Vice President and Chief

38

62

Commercial Officer
Executive Vice President and General
Counsel
Executive Vice President and Chief
Medical Officer

Executive Officers

Joseph Ciaffoni, Director, President and Chief Executive Officer. Mr. Ciaffoni has served as our President and Chief
Executive Officer since July 2018, and prior to that, served as our Executive Vice President and Chief Operating Officer
since May 2017. Prior to joining us, Mr. Ciaffoni served as President, U.S. Branded Pharmaceuticals of Endo International
plc, a specialty pharmaceutical company, from August 2016 to December 2016. Before that, from April

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2012 to August 2016, Mr. Ciaffoni held various positions of increasing responsibility at Biogen Idec, including Senior Vice
President, Global Specialty Medicines Group, Senior Vice President, U.S. Commercial and Vice President, U.S. Neurology
Field Operations and Marketing. Prior to joining Biogen Idec, Mr. Ciaffoni was Executive Vice President and Chief
Operating Officer of Shionogi Inc. and President of Shionogi Pharmaceuticals from July 2008 to October 2010. Mr.
Ciaffoni also previously served as Vice President, Sales for Schering-Plough (now Merck) from May 2004 to June 2008,
where he was responsible for the cholesterol franchise, and has held several commercial leadership roles at Sanofi-
Synthelabo (now Sanofi) from January 2002 to April 2004 and Novartis from January 1994 to December 2001. Mr.
Ciaffoni received a B.A. in Communications in 1993 and an M.B.A. in 2000, both from Rutgers, The State University of
New Jersey. 

Colleen Tupper, Executive Vice President and Chief Financial Officer. Ms. Tupper has served as our Executive Vice
President and Chief Financial Officer since May 2021. Prior to joining Collegium, Ms. Tupper most recently served as
Chief Financial Officer, U.S. Business Unit as well as a member of the U.S. Business Unit Executive Leadership Team and
the Global Finance Leadership Team at Takeda from January 2019 to April 2021. Prior to that role, Ms. Tupper held
several roles of increasing responsibility at Shire Pharmaceuticals (acquired by Takeda in 2019) including Vice President,
U.S. Commercial Finance, Vice President, Finance Integration Lead, and Vice President, Head of Finance Global
Neuroscience and Ophthalmics. Earlier in her career, Ms. Tupper served in various finance and accounting roles at both
Shire Pharmaceuticals and Antigenics (now Agenus). Ms. Tupper received a B.S. in Accounting from Franklin Pierce
University.

Scott Dreyer, Executive Vice President and Chief Commercial Officer. Mr. Dreyer has served as our Executive Vice
President and Chief Commercial Officer since August 2018, and joined us in January 2018 as Senior Vice President, Sales,
Marketing and Training. Prior to joining us, Mr. Dreyer served as the Senior Vice President, Sales, Marketing and
Commercial Operations at The Medicines Company, a biopharmaceutical company, from September 2016 to December
2017; Vice President and Chief Marketing Officer – US at Biogen from June 2014 to September 2016; and Vice President,
Business Development at Publicis Touchpoint Solutions, a healthcare commercialization company, from October 2013 to
June 2014. Mr. Dreyer began his career in the pharmaceutical industry at Merck & Co., where he held roles of increasing
responsibility from 1994 to 2013, including Vice President of Hospital and Oncology Sales from 2011 to 2012, and Vice
President of Primary Care Sales from 2012 until 2013. Mr. Dreyer holds a B.S. in Biology from Messiah College in 1994.

Shirley Kuhlmann, Executive Vice President and General Counsel. Ms. Kuhlmann has served as our Executive Vice
President and General Counsel since March 2018. Prior to joining us, Ms. Kuhlmann was a corporate and securities
attorney at Pepper Hamilton LLP from September 2007 until March 2018. At Pepper Hamilton, where she was made a
partner effective January 2017, Ms. Kuhlmann advised private and public companies on a range of commercial and
transactional matters, including financings, corporate governance and disclosure matters, and mergers and acquisitions and
other business combination transactions. Ms. Kuhlmann holds a B.A. in Economics/Political Science from Columbia
University in 2004 and a J.D. from Emory University School of Law in 2007.

Richard Malamut, M.D., Executive Vice President and Chief Medical Officer. Dr. Malamut has served as our Chief
Medical Officer since April 2019. Prior to joining us, Dr. Malamut served as Chief Medical Officer, Head of Research and
Development and Senior Vice President at Braeburn Pharmaceuticals from June 2018 to January 2019; Chief Medical
Officer at Avanir Pharmaceuticals from November 2016 to June 2018; and Senior Vice President of Global Clinical
Development at Teva Pharmaceuticals Industries Ltd from March 2013 to November 2016. Dr. Malamut also previously
held roles of increasing responsibility at Bristol-Myers Squibb and AstraZeneca focusing on early clinical development and
translational medicine in neurology and analgesia. Dr. Malamut holds a medical degree from Hahnemann University in
June 1985 and a B.S. in Biology from Trinity College in May 1981. Dr. Malamut worked as a board-certified academic and
clinical neurologist for 17 years and has more than 50 publications in the fields of pain medicine, neuromuscular disease,
autonomic disease and neurodegenerative disease.

Our Corporate Information

We are headquartered in Stoughton, Massachusetts and our common stock trades on the NASDAQ Global Select Market
(“NASDAQ”) under the trading symbol “COLL.”

Our predecessor was incorporated in Delaware in April 2002 under the name Collegium Pharmaceuticals, Inc. and in
October 2003, our predecessor changed its name to Collegium Pharmaceutical, Inc. In July 2014, we reincorporated in

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the Commonwealth of Virginia pursuant to a merger whereby Collegium Pharmaceutical, Inc., a Delaware corporation,
merged with and into Collegium Pharmaceutical, Inc., a Virginia corporation, with the Virginia corporation surviving the
merger.

Available Information

We maintain a website at www.collegiumpharma.com. We make available, free of charge on our website, our Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as
reasonably practicable after we electronically file those reports with, or furnish them to, the Securities and Exchange
Commission (“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 copies of those filings are provided to us by those persons. The SEC also maintains a website, at www.sec.gov, that
contains reports, proxy and information statements and other information regarding us and other issuers that file
electronically. The information contained on, or that can be accessed through, our website is not a part of or incorporated
by reference in this Form 10-K.
Item 1A.  Risk Factors.

Investing in our common stock involves a high degree of risk. Investors should carefully consider the risks described
below, as well as all other information included in this Annual Report on Form 10-K, including our financial
statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.” If any of the following risks actually occurs, our business, financial condition, operating
results, prospects and ability to accomplish our strategic objectives could be materially harmed. As a result, the trading
price of our common stock could decline and investors could lose all or part of their investment. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations
and the market price of our common stock.

Risk Factors Summary

Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks
include, among others, the following principal risk factors that make an investment in our company speculative or risky.
You are encouraged to carefully review our full discussion of the material risk factors relevant to an investment in our
business, which follows the brief bulleted list of our principal risk factors set forth below:

● Our ability to maintain profitability is dependent upon our ability to continue successfully commercializing our products and
any products and future product candidates, if approved, that we may develop or acquire in the future. Our failure to do so
successfully could impair our growth strategy and plans and could have a material adverse effect on our business, financial
position, and operating results;

● We have substantial outstanding indebtedness, which may adversely affect our business, financial condition and results of

●

operations.
If we cannot continue successfully commercializing Xtampza ER or the Nucynta Products, our business, financial condition
and results of operations may be materially adversely affected and the price of our common stock may decline;

● Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on product labeling

of Xtampza ER and our ability to market Xtampza ER successfully may be adversely affected;

● Xtampza ER and the Nucynta Products are subject to mandatory REMS programs, which could increase the cost, burden and

liability associated with the commercialization of these products;

● We could fail to promote Xtampza ER’s abuse deterrent labeling in compliance with FDA regulations;
●

Failure to comply with ongoing governmental regulations for marketing any product, including Xtampza ER and the Nucynta
Products, could delay or inhibit our ability to generate revenues from their sale and could also expose us to claims or other
sanctions.

● Unfavorable outcomes in intellectual property litigation could be costly and potentially limit our ability to commercialize our

●

products;
If we are unable to obtain or maintain intellectual property rights for our technologies, products or any future product
candidates which we may develop, we may lose valuable assets or be unable to compete effectively in our market;
● We have been, and may continue to be, forced to litigate to enforce or defend our intellectual property, which could be

expensive, time consuming and unsuccessful, and result in the loss of valuable assets;

● 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 reduced or
eliminated for non-compliance with these requirements.

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●

●

If we are unable to utilize our own sales and marketing capabilities successfully or enter into strategic alliances with
marketing collaborators, we may not continue to be successful in commercializing our products and may be unable to generate
sufficient product revenue;
If the medical community, patients, and healthcare payors do not accept and use our products, we will not achieve sufficient
product revenues and our business will suffer;

● Our products contain, and our future product candidates may contain, controlled substances, the manufacture, use, sale,

importation, exportation and distribution of which are subject to regulation by state and federal law enforcement and other
regulatory agencies;
Current and future legislation may increase the difficulty and cost for us to continue to commercialize our products and may
reduce the prices we are able to obtain for our products;

●

● Our products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies,

which could have a material adverse effect on our business. Such pricing regulations may address the rebates that
manufacturers offer to pharmaceutical benefit managers, or the discounts that manufacturers provide others within the
pharmaceutical distribution chain;
Social issues around the abuse of opioids, including law enforcement concerns over diversion of opioids and regulatory and
enforcement efforts to combat abuse, could decrease the potential market for our products and may adversely impact external
investor perceptions of our business;
If the FDA or other applicable regulatory authorities approve generic products with abuse deterrent claims that compete with
our products, our sales could decline;
If the third-party manufacturers of Xtampza ER or the Nucynta Products fail to devote sufficient time and resources to these
products, or their performance is substandard, and/or we encounter challenges with our dedicated manufacturing suite at our
third-party manufacturer’s site for the manufacturing of Xtampza ER, our costs may be higher than expected and could have a
material adverse effect on our business;
Because we currently rely on a sole supplier to manufacture the active pharmaceutical ingredient of our products, any
production problems with our supplier could have a material adverse effect on us;

●

●

●

●

● We depend on wholesale pharmaceutical distributors for retail distribution of our products; if we lose any of our significant
wholesale pharmaceutical distributors or their distribution network is disrupted, our financial condition and results of
operations may be adversely affected;

● Our products could be subject to post-marketing requirements, which requirements may, in some cases, not be capable of

●

timely or satisfactory completion without participation in consortia over which we have limited control;
The announcement and pendency of our acquisition of BioDelivery Sciences International, Inc. (“BDSI”) may have an
adverse effect on our business, financial condition, operating results and cash flows;

● Our ability to realize the benefits of the acquisition of BDSI is substantially dependent on the projected cost savings resulting

from the timely and effective integration of the operations of Collegium and BDSI;

● Our business may continue to be adversely affected by the COVID-19 pandemic;
●
● We face substantial competition from other biotechnology and pharmaceutical companies, which may result in others

Litigation or regulatory action regarding opioid medications could negatively affect our business;

●

discovering, developing or commercializing products more successfully than we do;
Commercial sales of our products, and clinical trials of our products and any future product candidates, may expose us to
expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable terms or at
all.

● Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse, transparency, and other
healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government
healthcare programs, contractual damages, reputational harm, administrative burdens, and diminished profits and future
earnings; and
The price of our common stock may be volatile and you may lose all or part of your investment.

●

Risks Related to Our Financial Position and Capital Needs

Our ability to maintain profitability is dependent upon our ability to continue successfully commercializing our products
and any products and future product candidates, if approved, that we may develop or acquire in the future. Our failure
to do so successfully could impair our growth strategy and plans and could have a material adverse effect on our
business, financial position, and operating results.

Our ability to maintain profitability depends upon our ability to realize the full commercial potential of our products and to
commercialize successfully any other products and future product candidates, if approved, that we may develop, in-license
or acquire in the future. Our ability to generate revenue from our current or future products depends on a number of factors,
including our ability to:

● realize a commercially viable price for our products;
● manufacture commercial quantities of our products at acceptable cost levels;

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● sustain a commercial organization capable of sales, marketing and distribution for the products we sell;
● obtain coverage and adequate reimbursement from third parties, including government payors; and
● comply with existing and changing laws and regulations that apply to the pharmaceutical industry, including

opioid manufacturers, and to our products specifically, including FDA post-marketing requirements.

If we fail to maintain profitability on a continuing basis, then we may be unable to continue our operations at planned
levels and be forced to reduce our operations.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2021, we had a federal net operating loss (“NOL”) carryforward of approximately $119.3 million and
state NOL carryovers of approximately $103.0 million, which are available to offset future taxable income. The U.S.
federal and state NOL carryforwards expire at various dates through 2036. We also had U.S. federal tax credits of
approximately $4.5 million, and state tax credits of approximately $1.0 million. These tax attributes are generally subject to
a limited carryover/carryback period and are also subject to the annual limitations that may be imposed under Section 382
of the Internal Revenue Code of 1986, as amended. During the three months ended June 30, 2021, the Company released
the portion of the valuation allowance on deferred tax assets expected to be realized through future earnings. Refer to Note
16, Income Taxes, for more information.

We have outstanding indebtedness in the form of our 2.625% Convertible Senior Notes and our Loan Agreement with
BioPharma, which may adversely affect our business, financial condition and results of operations.

In February 2020, in connection with the Nucynta Acquisition, we incurred (i) $143.8 million in principal amount of
indebtedness in the form of 2.625% Convertible Senior Notes due in 2026 (the “Convertible Notes”) and (ii) $200.0
million in secured indebtedness pursuant to our Loan Agreement with BioPharma Credit PLC, as collateral agent and
lender, and BioPharma Credit Investments V (Master) LP, as lender (as amended from time to time, the “Loan
Agreement”). In addition, in connection with the announcement of the BDSI Acquisition, we entered into a commitment
letter with Pharmakon Advisors, L.P. pursuant to which funds managed by Pharmakon Advisors, L.P. have committed,
subject to customary conditions, to provide to us a four (4) year senior secured term loan facility in an aggregate principal
amount of $650.0 million. We may also incur additional indebtedness to meet future financing needs. Our existing and
future levels of indebtedness could have significant negative consequences for our security holders and our business,
results of operations and financial condition by, among other things:

●   requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness,

which will reduce the amount of cash available for operations, working capital, capital expenditures, expansion,
acquisitions or general corporate or other purposes;
limiting our ability to obtain additional financing;
limiting our flexibility to plan for, or react to, changes in our business;

●  
●  
●   diluting the interests of our existing shareholders as a result of issuing shares of our common stock upon

conversion of the convertible notes;

●   placing us at a possible competitive disadvantage with competitors that are less leveraged than we are or have

●  

better access to capital;
increasing our vulnerability to downturns in our business, our industry or the economy in general, including any
such downturn related to the impact of the COVID-19 pandemic.

Holders of our Convertible Notes will have the right to require us to repurchase our Convertible Notes for cash following a
fundamental change, or to pay any cash amounts due upon conversion of our Convertible Notes. Further, our noteholders,
subject to a limited exception described in the notes, may require us to repurchase their notes following a fundamental
change at a cash repurchase price generally equal to the principal amount of the notes to be repurchased, plus accrued and
unpaid interest, if any. In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless
we elect to settle conversions solely in shares of our common stock. We may not have enough available cash or be able to
obtain financing at the time we are required to repurchase the notes or pay the cash amounts due upon conversion.
Applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to
repurchase the notes or pay the cash amounts due upon conversion. Additionally, our Loan Agreement contains certain
covenants and obligations applicable to us, including, without limitation, covenants that require us and our subsidiaries to
maintain $200 million in annual net sales and covenants that limit our ability to incur

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additional indebtedness or liens, make acquisitions or other investments or dispose of assets outside the ordinary course of
business.

Failure to comply with covenants in the indenture governing the Convertible Notes or in the Loan Agreement would
constitute an event of default under these instruments, notwithstanding our ability to meet our debt service obligations. Our
failure to repurchase notes or to pay the cash amounts due upon conversion when required will constitute a default under
the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements
governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. In
such event, we may not have sufficient funds to satisfy all amounts due under our other indebtedness (including the Loan
Agreement) and the notes. The Loan Agreement includes various customary remedies for the lenders following an event of
default, including the acceleration of repayment of outstanding amounts under the Loan Agreement and execution upon the
collateral securing obligations under the Loan Agreement. If we fail to comply with such covenants and terms, we may be
in default and the maturity of the related debt could be accelerated and become immediately due and payable. In addition,
because our assets are pledged as a security under the Loan Agreement, if we are not able to cure any default or repay
outstanding borrowings, our assets are subject to the risk of foreclosure by our lenders. Moreover, a default on
indebtedness under the Loan Agreement could result in a default under the terms of the indenture governing our
Convertible Notes. There is no guarantee that we would be able to satisfy our obligations if any of our indebtedness is
accelerated.

Risks Related to our Products

If we cannot continue successfully commercializing Xtampza ER or the Nucynta Products, our business, financial
condition and results of operations may be materially adversely affected and the price of our common stock may decline.

To date, we have invested substantial resources in the development of Xtampza ER, which has been approved by the FDA.
In February 2018, we began marketing the Nucynta Products. Our business and future success are substantially dependent
on our ability to continue successfully commercializing these products.

Our ability to continue successfully commercializing Xtampza ER and the Nucynta Products will depend on many factors,
including but not limited to:

● our ability to manufacture commercial quantities of Xtampza ER at reasonable cost and with sufficient speed to

meet commercial demand;

● our ability to execute sales and marketing strategies successfully and continually;
● our success in educating physicians, patients and caregivers about the benefits, administration, use and coverage

of our products;

● the perceived availability and advantages, relative cost, relative safety and relative efficacy of other abuse-

deterrent products and treatments with similar indications;

● our ability to defend successfully any challenges to our intellectual property or suits asserting patent infringement

relating to our products;

● the availability and quality of coverage and adequate reimbursement for our products;
● a continued acceptable safety profile of our products; and
● our ability to comply with applicable legal and regulatory requirements, including any additional manufacturing

or packaging requirements that may become applicable to certain opioid products.

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 continue successfully commercializing or to generate
sufficient revenue from our products. If we cannot do so, or are significantly delayed in doing so, our business will be
materially harmed.

Despite receiving approval by the FDA, additional data may emerge that could change the FDA’s position on the
product labeling of Xtampza ER and our ability to market Xtampza ER successfully may be adversely affected.

Xtampza ER was approved with label language describing abuse-deterrent properties of the formulation with respect to the
nasal and IV routes of abuse, consistent with Guidance for Industry, “Abuse-Deterrent Opioids- Evaluation and Labeling.”
In November 2017, the FDA approved an sNDA for Xtampza ER to include comparative oral pharmacokinetic data from a
clinical study evaluating the effect of physical manipulation by crushing Xtampza ER

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compared with OxyContin and a control (oxycodone hydrochloride immediate-release), results from an oral human abuse
potential study and the addition of an oral abuse deterrent claim.

The FDA can require changes to the product labeling for Xtampza ER or the Nucynta Products at any time which can
impact our ability to generate product sales. In particular, if the FDA determines that our post-marketing data for Xtampza
ER does not demonstrate that the abuse-deterrent properties result in reduction of abuse, or demonstrates 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, which would have a material adverse effect on our ability to continue successfully
commercializing Xtampza ER.

Xtampza ER and the Nucynta Products are subject to mandatory REMS programs, which could increase the cost,
burden and liability associated with the commercialization of these products.

The FDA has imposed a class-wide REMS on all IR, ER and long-acting opioid drug products (known as the Opioid
Analgesic REMS). The FDA continually evaluates whether the REMS program is meeting its goal of ensuring that the
benefit of these drugs continue to outweigh their risks, and whether the goals or elements of the program should be
modified. Any modification of the Opioid Analgesic REMS by the FDA to impose additional or more burdensome
requirements could increase the costs associated with marketing our products and/or reduce the willingness of healthcare
providers to prescribe our products, which would have a material adverse effect on our ability to continue to successfully
commercialize and generate sufficient revenue from our products.

We could fail to promote Xtampza ER’s abuse deterrent labeling in compliance with FDA regulations.

Xtampza ER has FDA-approved product labeling that describes its abuse deterrent features, which allows us to promote
those features and differentiate Xtampza ER from other opioid products containing the same active pharmaceutical
ingredients. Because the FDA closely regulates promotional materials and other promotional activities, even though the
FDA approved product labeling includes a description of the abuse deterrent characteristics of Xtampza ER, the FDA may
object to our marketing 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 Xtampza ER.

Failure to comply with ongoing governmental regulations for marketing any product, including Xtampza ER and the
Nucynta Products, could delay or inhibit our ability to generate revenues from their sale and could also expose us to
claims or other sanctions.

Advertising and promotion of any pharmaceutical product marketed in the United States, including Xtampza ER and the
Nucynta Products, is heavily scrutinized by, among others, the FDA, the Department of Justice, the Office of Inspector
General for the U.S. Department of Health and Human Services (“HHS”), state attorneys general, members of Congress
and the public. Violations, including promotion of our products for unapproved or off-label uses, are subject to
enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA or other government
agencies.

Engaging in off-label promotion of our products could also subject us to false claims liability under federal and state
statutes, and other litigation and/or investigations, which could lead to civil and criminal penalties and fines, and could also
require us to enter into agreements that materially restrict the manner in which we promote or distribute our drug products.

In addition, after product approval, subsequent discovery of serious and unanticipated adverse events associated with the 
product;  the emergence of other problems with the product, manufacturer or facility; or our failure to make required 
regulatory submissions may result in adverse regulatory actions, including withdrawal of the product from the market or 
the requirement to add or strengthen label warnings about the product. The failure to obtain or maintain requisite 
governmental approvals or the imposition of additional or stronger warnings could delay or preclude us from further 
developing, marketing or realizing the full commercial potential of our products.

Risks Related to Intellectual Property

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Unfavorable outcomes in intellectual property litigation could be costly and potentially limit our ability to commercialize
our products.

Our commercial success depends upon our ability to commercialize products without infringing the intellectual property
rights of others. Our current or future products, or any uses of them, may now or in the future infringe third-party patents or
other intellectual property rights. We cannot currently determine the ultimate scope and validity of patents which may be
granted to third parties in the future or which patents might be asserted to be infringed by the manufacture, use and sale of
our products.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such
third party to continue developing or commercializing our products and technology. However, we may not be able to obtain
any required license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-
exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by
court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or
litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to
have willfully infringed a patent. A finding of infringement could prevent us from commercializing our products or force
us to cease some of our business operations.

Any litigation, including any interference or derivation proceedings to determine priority of inventions, oppositions or
other post-grant review proceedings to patents in the United States, or litigation against our collaborators may be costly and
time consuming and could have a material adverse effect on our operating results, our ability to raise capital needed to
commercialize products and our overall financial condition. We expect that litigation may be necessary in some instances
to determine the validity and scope of our proprietary rights. Litigation may be necessary in other instances to determine
the validity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture,
use or sale of our products. Ultimately, the outcome of such litigation, including our pending litigation with Purdue, could
compromise the validity and scope of our patents or other 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 technologies, products or any future product
candidates which we may develop, we may lose valuable assets or be unable to compete effectively in our market.

We depend on our ability to protect our proprietary technology. We rely on patent and trademark laws, unpatented trade
secrets and know-how, and confidentiality, licensing and other agreements with employees and third parties, all of which
offer only limited protection. Our success depends in large part on our ability to obtain and maintain patent protection in
the United States with respect to our proprietary technology and products.

The steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our
proprietary information or infringement of our intellectual property rights in the United States. The rights already granted
under any of our currently issued patents and those that may be granted under future issued patents may not provide us
with the proprietary protection or competitive advantages we are seeking.

We have been, and may continue to be, forced to litigate to enforce or defend our intellectual property, which could be
expensive, time consuming and unsuccessful, and result in the loss of valuable assets.

We have been, and may continue to be, forced to litigate to enforce or defend our intellectual property rights against
infringement and unauthorized use by competitors, and to protect our trade secrets. In so doing, we may place our
intellectual property at risk of being invalidated, rendered unenforceable or limited or narrowed in scope.
This litigation is expensive and time consuming. Many of our current and potential competitors have the ability to dedicate
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 our
intellectual property. Litigation could result in substantial costs and diversion of management resources, which could have
a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our
overall financial condition. In addition, an adverse result in any litigation proceeding could put one or more of our patents
at risk of being invalidated, held unenforceable or interpreted narrowly.

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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 and products, we rely on trade secrets, including unpatented
know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these
trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have 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 and disclose our
proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-
consuming, and the outcome is unpredictable. In addition, some courts in the United States may be less willing or
unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a
competitor, we would have no right to prevent such competitor, or those with whom they communicate, from using that
technology or information to compete with us. If any of our trade secrets were to be disclosed or independently developed,
our competitive position would be harmed.

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 reduced or eliminated for non-compliance with these requirements.

The USPTO requires compliance with a number of procedural, documentary, fee payment and other similar provisions
during the patent application process. In addition, periodic maintenance fees on issued patents are required to be paid to the
USPTO in several stages over the lifetime of the patents. While an inadvertent lapse can in many cases be cured by
payment of a late fee or by other means in accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the 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 and submit formal documents. If we fail to maintain the patents and patent
applications covering our products, our competitive position would be adversely affected.

Risks Related to the Commercialization of Our Products

If we are unable to utilize our own sales and marketing capabilities successfully or enter into strategic alliances with
marketing collaborators, we may not continue to be successful in commercializing our products and may be unable to
generate sufficient product revenue.

Our commercial organization continues to evolve and we cannot guarantee that we will continue to be successful in
marketing our products. In addition, we compete with other pharmaceutical and biotechnology companies with extensive
and well-funded sales and marketing operations to recruit, hire, train and retain sales and marketing personnel. If we are
unable to continue to grow and maintain adequate sales, marketing and distribution capabilities, whether independently or
with third parties, we may not be able to generate sufficient product revenue and may not remain profitable. Factors that
may inhibit our efforts to continue successfully commercializing our products in the United States include:
● our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
● the inability of sales personnel to reach adequate numbers of physicians who may prescribe our products; and
● unforeseen costs and expenses associated with creating and maintaining an independent sales and marketing

organization.

If we are not successful in retaining sales and marketing personnel or in maintaining our sales and marketing infrastructure
or if we do not preserve strategic alliances with marketing collaborators, agreements with contract sales organizations or
collaboration arrangements, we will have difficulty in continuing to commercialize our products.

Additionally, our sales, marketing and distribution capabilities may be hindered as a result of the COVID-19 outbreak.  The 
safety and well-being of our employees is our highest priority and we expect to maintain mitigating measures until such 
time as mandated closures or other restrictions are lifted and public health officials change their recommendations, and we 
have, and will continue to, equip our personnel with the tools and resources needed to effectively continue their sales and 
marketing efforts in a manner that complies with all relevant regulations, whether in person or from a remote setting. We 
face the risk, however, that limitations on activities within the healthcare sector and on economic activity 

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generally will impede our ability to continue successfully commercializing our products. Notwithstanding the lifting of 
some COVID-19 restrictions in many jurisdictions, and amidst continuing public health concerns relating to the spread of 
COVID-19, particularly variants thereof, weekly pain patient office visits continue to be depressed compared to pre-
COVID periods, which we believe in turn may account for fewer patients beginning therapy with our products. We believe 
that the disruptions caused by COVID-19 will continue and there remains substantial uncertainty as to when such 
disruptions will cease. If we are unable to successfully commercialize our products during the COVID-19 outbreak, our 
ability to generate sufficient product revenue may be adversely affected.

If the medical community, patients, and healthcare payors do not accept and use our products, we will not achieve
sufficient product revenues and our business will suffer.

Physicians and others in the medical community, patients, and healthcare payors may not accept and use our products.
Acceptance and use of our products will depend on a number of factors including:

●   approved indications, warnings and precautions language that may be less desirable than competitive products;
●   perceptions of physicians and other healthcare community members of the safety and efficacy of our products;
●   perceptions by members of the healthcare community, including physicians, about the relevance and efficacy of

our abuse deterrent technology;
the availability of competitive products;
the pricing and cost-effectiveness of our products relative to competing products;
the potential and perceived advantages of our products over alternative treatments;
the convenience and ease of administration to patients of our products;

●  
●  
●  
●  
●   actual and perceived availability and quality of coverage and reimbursement for our products from government or

other third-party payors;

the prevalence and severity of adverse side effects;

●   negative publicity related to our products or negative or positive publicity related to our competitors’ products;
●  
●   policy initiatives by FDA, HHS, DEA, or other federal or state agencies regarding opioids;
●   our ability to comply with the Opioid Analgesic REMS; and
●  

the effectiveness of marketing and distribution efforts by us and any licensees and distributors.

If our products fail to have an adequate level of acceptance by the medical community, patients, or healthcare payors, we
will not be able to generate sufficient revenue to remain profitable. Since we expect to rely on sales generated by Xtampza
ER and the Nucynta Products for substantially all of our revenues for the foreseeable future, the failure of Xtampza ER or
the Nucynta Products to maintain market acceptance would harm our business prospects.

Our products contain, and our future product candidates may contain, controlled substances, the manufacture, use,
sale, importation, exportation and distribution of which are subject to regulation by state and federal law enforcement
and other regulatory agencies.

Our products contain, and our future product candidates may contain, controlled substances that are subject to state and
federal laws and regulations regarding their manufacture, use, sale, importation, exportation and distribution. Xtampza
ER’s active ingredient, oxycodone, and the Nucynta Products’ active ingredient, tapentadol, are both classified as Schedule
II controlled substances under the CSA and regulations of the DEA. A number of states also independently regulate these
drugs, including oxycodone and tapentadol, as controlled substances. We and our suppliers, manufacturers, contractors,
customers and distributors are required to obtain and maintain applicable registrations from state and federal law
enforcement and regulatory agencies and comply with state and federal laws and regulations regarding the manufacture,
use, sale, importation, exportation and distribution of controlled substances.

Furthermore, the amount of Schedule II substances that can be obtained for clinical trials and commercial distribution is
limited by the CSA and DEA regulations. For more information, see the section in our Annual Report entitled “Business—
Government Regulation—DEA and Opioid Regulation.” We may not be able to obtain sufficient quantities of these
controlled substances in order to meet commercial demand. If commercial demand for Xtampza ER, or any of our other
approved products, increases and we cannot meet such demand in a timely fashion because of our limited supply of its
active pharmaceutical ingredient (in the case of Xtampza ER, oxycodone) then physicians may perceive such product as
unavailable and may be less likely to prescribe it in the future.

In addition, controlled substances are also subject to regulations governing manufacturing, labeling, packaging, testing,

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dispensing, production and procurement quotas, recordkeeping, reporting, handling, shipment and disposal. These
regulations increase the personnel needs and the expense associated with development and commercialization of our
products that include controlled substances. The DEA and some states conduct periodic inspections of registered
establishments that handle controlled substances.

Failure to obtain and maintain required registrations or to comply with any applicable regulations could delay or preclude
us from developing and commercializing our products that contain controlled substances and subject us to enforcement
action. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those
registrations. In some circumstances, violations could lead to criminal proceedings. Because of their restrictive nature,
these regulations could limit commercialization of our products containing controlled substances.

Current and future legislation may increase the difficulty and cost for us to continue to commercialize our products and
may reduce the prices we are able to obtain for our products.

In the United States, there have been a number of legislative and regulatory changes and proposed changes regarding the
healthcare system generally, and the manufacturing, distribution, and marketing of opioids in particular, that could prevent
or delay marketing approval of future product candidates, restrict or regulate post-approval activities or affect our ability to
profitably sell our products for which we obtain marketing approval. For example, several states, including New York,
have recently imposed taxes or fees on the sale of opioids. Other states, and even the federal government, as proposed in
the LifeBOAT Act introduced by a bipartisan group of Senators in May 2021, could impose similar taxes or fees, and such
laws and proposals can vary in the tax and fee amounts imposed and the means of calculation. Liabilities for taxes or
assessments under any such laws could have an adverse impact on our results of operations.

California and several other states have enacted legislation related to prescription drug pricing transparency and it is
unclear the effect this legislation will have on our business. Laws intended to broaden access to health insurance, reduce or
constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency
requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose
additional health policy reforms may continue the downward pressure on pharmaceutical pricing, especially under the
Medicare program, and may also increase our regulatory burdens and operating costs.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and
promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be
enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes
on the marketing of our products may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval
process may subject us to more stringent product labeling and post-marketing testing and other requirements.

Our products may become subject to unfavorable pricing regulations or third-party coverage and reimbursement
policies, which could have a material adverse effect on our business. Such pricing regulations may address the rebates
that manufacturers offer to pharmaceutical benefit managers, or the discounts that manufacturers provide others
within the pharmaceutical distribution chain.

The regulations that govern marketing approvals, pricing and reimbursement for new drug products can vary widely.
Current and future legislation may significantly change the approval requirements in ways that could involve additional
costs and cause delays in obtaining approvals. Pricing limitations may hinder our ability to recoup our investment in our
products.

Our ability to commercialize any product successfully will also depend in part on the extent to which coverage and
adequate reimbursement 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 determine which
medications they will cover and establish reimbursement levels and tiers of preference based on the perceived value and
innovation of a given product. A primary trend in the U.S. healthcare industry and elsewhere is cost containment.
Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount
of reimbursement for particular medications and establishing administrative hurdles that incentivize use of generic and/or
lower cost products first. Increasingly, third-party payors are requiring that drug companies provide them with discounts
and rebates from list prices and are challenging the prices charged for medical products. We have agreed to provide such
discounts and rebates to certain third-party payors. We expect increasing pressure to offer larger discounts and rebates.
Additionally, a greater number of third-party payors may seek discounts and rebates in order to

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offer or maintain access for our products. We cannot be sure that high-quality coverage and reimbursement will be
available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will
be and whether it will be satisfactory.

Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on
reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.
Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or
private payors and by any future relaxation of laws that presently restrict imports of drugs from policy and payment
limitations in setting their own reimbursement policies. Our inability to expand and maintain coverage and profitable
reimbursement rates from both government-funded and private payors for our products could have a material adverse effect
on our operating results, our ability to raise capital needed to continue to commercialize our products and our overall
financial condition.

The Affordable Care Act and any changes in healthcare law may increase the difficulty and cost for us to continue to
commercialize our products and affect the prices we may obtain.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the 
healthcare system that may affect our ability to profitably sell our product and product candidates, if approved.  The United 
States government, state legislatures and foreign governments also have shown significant interest in implementing cost-
containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on 
reimbursement and requirements for substitution of generic products for branded prescription drugs. 

The Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare 
spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance 
industries, impose new taxes and fees on the health industry and impose additional health policy reforms. There have been 
significant ongoing judicial, administrative, executive and legislative efforts to modify or eliminate the Affordable Care 
Act, and the Affordable Care Act has also been subject to challenges in the courts. See the section in our Annual Report 
entitled “Business—Government Regulation—Healthcare Reform.”  

Further changes to and under the Affordable Care Act remain possible, although the new Biden administration has signaled 
that it plans to build on the Affordable Care Act and expand the number of people who are eligible for subsidies under it. 
President Biden indicated that he intends to use executive orders to undo changes to the Affordable Care Act made by the 
Trump administration and would advocate for legislation to build on the Affordable Care Act.  It is unknown what form 
any such changes or any law proposed to replace the Affordable Care Act would take, and how or whether it may affect our 
business in the future. We expect that changes to the Affordable Care Act, the Medicare and Medicaid programs, changes 
allowing the federal government to directly negotiate drug prices and changes stemming from other healthcare reform 
measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a 
material adverse effect on the healthcare industry.

Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction
in payments from private payers. The implementation of cost containment measures or other healthcare reforms may
prevent us from being able to generate revenue and maintain profitability.

Social issues around the abuse of opioids, including law enforcement concerns over diversion of opioids and regulatory
and enforcement efforts to combat abuse, could decrease the potential market for our products and may adversely
impact external investor perceptions of our business.

Law enforcement and regulatory agencies may apply policies and guidelines that seek to limit the availability or use of
opioids. Such efforts may inhibit our ability to continue to commercialize our products.

Aggressive enforcement and unfavorable publicity regarding, for example, the use or misuse of oxycodone or other opioid
drugs; the limitations of abuse-resistant formulations; the ability of people who abuse drugs to discover previously
unknown ways to abuse opioid drugs, including Xtampza ER and the Nucynta Products; public inquiries and investigations
into prescription drug abuse; litigation; or regulatory activity regarding sales, marketing, distribution or storage of opioid
drugs could have a material adverse effect on our reputation. Such negative publicity could reduce the potential size of the
market for our products, decrease the revenues we are able to generate from their sale and adversely

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impact external investor perceptions of our business. Similarly, to the extent opioid abuse becomes less prevalent or less
urgent of a public health issue, regulators and third party payers may not be willing to pay a premium for abuse-deterrent
formulations of opioid.

Federal laws have been enacted to address the national epidemics of prescription opioid abuse and illicit opioid use, 
including the Comprehensive Addiction and Recovery Act and the Substance Use-Disorder Prevention that Promotes 
Opioid Recovery and Treatment for Patients and Communities Act.  These laws are described in more detail under the 
caption “Business— Governmental Regulation — DEA and Opioid Regulation.”

If the FDA or other applicable regulatory authorities approve generic products with abuse deterrent claims that compete
with our products, our sales could decline.

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 ANDA. The Federal Food, Drug, and
Cosmetic Act, 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. These generic equivalents would be significantly less costly than ours to bring to market and companies that
produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a
generic competitor, 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
revenues and therefore to obtain a return on the investments we have made in our products. In November 2017, FDA
issued a final guidance to assist industry in the development of generic versions of approved opioids with abuse-deterrent
formulations, including recommendations about the types of studies that companies should conduct to demonstrate that the
generic drug is no less abuse-deterrent than its brand-name counterpart. In the second half of 2018, the FDA posted three
revised product-specific guidances related to generic abuse-deterrent opioid formulations, including one guidance
specifically relating to Xtampza ER, which recommend specific in vivo studies and in vitro study considerations for abuse
deterrence evaluations. These guidances are part of FDA’s wider focus on assisting developers of generic abuse-deterrent
formulations navigate the regulatory path to market more quickly. Earlier market entry of generic abuse-deterrent
formulations could have a material adverse effect on our business.

Risks Related to Our Dependence on Third Parties

If the third-party manufacturers of Xtampza ER or the Nucynta Products fail to devote sufficient time and resources to
these products, or their performance is substandard, and/or we encounter challenges with our dedicated manufacturing
suite at our third-party manufacturer’s site for the manufacturing of Xtampza ER, our costs may be higher than
expected and could have a material adverse effect on our business.

We do not own any manufacturing facilities in drug development and commercial manufacturing. We currently have no
plans to build our own clinical or commercial scale manufacturing facility and do not have the resources and expertise to
manufacture and test, on a commercial scale, the technical performance of our products. We currently rely, and expect to
continue to rely, on a limited number of experienced personnel and contract manufacturers for our products, as well as
other vendors to formulate, test, supply, store and distribute our products, and we control only certain aspects of their
activities.

In 2020, we completed the build-out of a dedicated manufacturing suite at a site operated by our contract manufacturing
organization, Patheon, part of Thermo Fisher Scientific. This facility requires the maintenance of regulatory approvals and
other costs, all of which we will need to absorb. We cannot guarantee that we will be able to leverage the dedicated
manufacturing suite in a profitable manner. If the demand for Xtampza ER and any future related products never meets our
expectations and forecasts, or if we do not produce the output we plan, we may not be able to realize the return on
investment we anticipated, which would have a negative impact on our financial condition and results of operations.

We have initiated the activities required to transition commercial manufacturing for Nucynta ER from Janssen to Patheon,
which is an assumed obligation of the Nucynta Commercialization Agreement. We cannot guarantee we will be successful
in our efforts to demonstrate equivalence of product manufactured by Patheon with product manufactured by Janssen, and
we may encounter delays in obtaining regulatory approval for Patheon as a new manufacturer and supplier of Nucynta ER.
Additionally, we may be unsuccessful in validation activities, which could lead to delays in the transfer of manufacturing
obligations, higher costs of validation, and/or rejection of otherwise saleable batches of Nucynta ER,

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all of which could have an adverse effect on our business and results of operations. Even if we are successful in our
regulatory approval and validation activities, we could encounter issues in obtaining commercial supply from Patheon's
facility due to technical problems or challenges obtaining adequate and/or timely DEA procurement quota.

Although we have identified alternate sources for these services, it would be time-consuming, and require 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 ER and the future manufacturer of Nucynta ER, exposes us to the following risks, any of
which could impact commercialization of our products, 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 of

production needed to satisfy commercial demand, may experience technical issues that impact quality or
compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical
products, may be affected by natural disasters that interrupt or prevent manufacturing of our products including
the ongoing COVID-19 pandemic, may experience shortages of qualified personnel to adequately staff production
operations, may experience shortages of raw materials and may have difficulties finding replacement parts or
equipment.

● Our contract manufacturer could default on their agreement with us to meet our requirements for commercial
supplies of our products and/or we could experience technical problems in the operation of our dedicated
manufacturing suite.

● The use of alternate manufacturers may be difficult because the number of potential manufacturers that have the
necessary governmental licenses to produce narcotic products is limited. Additionally, the FDA and the DEA
must approve any alternative manufacturer of our products, 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.

Our contract manufacturer and vendors may not perform as agreed or may not remain in the contract
manufacturing business for the time required to produce, store and distribute our products successfully.
● If our contract manufacturer were to terminate our arrangement or fail to meet our commercial manufacturing

demands, we may be forced to delay our development and commercial programs.

Failure to obtain the necessary active pharmaceutical ingredients, excipients or components necessary to manufacture our
products could adversely affect our ability to continue to commercialize the product, which could in turn adversely affect
our results of operations and financial condition. Certain components of Xtampza ER are naturally derived products, for
which we rely on sole suppliers. The inability of any of our raw material suppliers to provide components that meet our
specifications and requirements could adversely impact our ability to manufacture our product. Furthermore, the quota
procurement process limits the amount of DEA-controlled active pharmaceutical ingredient we have available for
manufacture. Consequently, we are limited in our ability to execute a business strategy that builds appreciable safety stock
of finished drug product.

Our reliance on third parties reduces our control over our development and commercialization activities but does not
relieve us of our responsibility to ensure compliance with all required legal, regulatory and scientific standards. The FDA
and other regulatory authorities require our products to be manufactured according to cGMP. Any failure by our third-party
manufacturer to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver
sufficient quantities of products in a timely manner, could lead to a shortage of commercial product. Such failure could also
be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for products previously granted to us, or
take other regulatory or legal action, including recall or seizure, total or partial suspension of production, suspension of
ongoing clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal
to permit the import or export of products, injunction, imposing civil penalties or pursuing criminal prosecution.

Any stock out, or failure to obtain sufficient supplies of any of our products, or the necessary active pharmaceutical
ingredients, excipients or components necessary to manufacture each of our products, could adversely affect our ability to
commercialize such products, which could in turn adversely affect our results of operations and financial condition.

Because we currently rely on a sole supplier to manufacture the active pharmaceutical ingredient of our products, any
production problems with our supplier could have a material adverse effect on us.

We presently depend upon a single supplier for the active pharmaceutical ingredient for Xtampza ER (oxycodone base)

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and the Nucynta Products (tapentadol), and we contract with this supplier for commercial supply to manufacture our
products. Further, our sole supplier also supplies our primary competitor in the extended-release oxycodone space, Purdue.
Although we have identified an alternate source for oxycodone base for Xtampza ER, it would be time-consuming and
costly to qualify this source. Any changes that our supplier makes to the respective drug substance raw materials,
intermediates, or manufacturing processes would introduce technical and regulatory risks to our downstream drug product
supply. If our supplier were to terminate an arrangement for an active pharmaceutical ingredient, or fail to meet our supply
needs (including as a result of disruptions in personnel or the global supply chain resulting from the COVID-19 outbreak),
we might incur substantial costs and be forced to delay our development or commercialization programs. Any such delay
could have a material adverse effect on our business.

Manufacturing issues may arise that could increase product and regulatory approval costs, delay commercialization or
limit commercial supply.

In our current commercial manufacturing operations, and as we scale up manufacturing of our products and conduct
required stability testing, we may encounter product, packaging, equipment and process-related issues that may require
refinement or resolution in order to proceed with our planned clinical trials, obtain regulatory approval for commercial
marketing and build commercial supplies. In the future, we may identify impurities, which could result in increased
scrutiny by regulatory authorities, delays in our clinical programs and regulatory approval, increases in our operating
expenses, failure to obtain or maintain approval or limitations in our commercial supply.

We depend on wholesale pharmaceutical distributors for retail distribution of our products; if we lose any of our
significant wholesale pharmaceutical distributors or their distribution network is disrupted, our financial condition and
results of operations may be adversely affected.

A significant percentage of our product shipments are to a limited number of independent wholesale pharmaceutical
distributors. Three of our wholesale pharmaceutical distributors represented 35%, 31% and 29% of our product shipments
for the year ended December 31, 2021. Our loss of any of these wholesale pharmaceutical distributors’ accounts, or a
material reduction in their purchases or a significant disruption to transportation infrastructure or other means of
distribution of our products, including as a result of the ongoing COVID-19 outbreak, could have a material adverse effect
on our business, results of operations, financial condition and prospects. The significance of each wholesale pharmaceutical
distributor account to our business adversely impacts our ability to negotiate favorable commercial terms with each such
distributor, and as a result, we may be forced to accept terms that adversely impact our results of operations.

In addition, these wholesaler customers comprise a significant part of the distribution network for pharmaceutical products
in the United States. This distribution network has undergone, and may continue to undergo, significant consolidation
marked by mergers and acquisitions. As a result, a small number of large wholesale distributors control a significant share
of the market. Consolidation of drug wholesalers has increased, and may continue to increase, competitive and pricing
pressures on pharmaceutical products. We cannot guarantee that we can manage these pricing pressures or that wholesaler
purchases will not fluctuate unexpectedly from period to period. In addition, due to unprecedented and significant
disruptions in the processing of product returns by wholesale pharmaceutical distributors, as further disclosed in
Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company formally denied a
significant portion of unprocessed product claims under the Company’s return policy. The Company subsequently received
payment for only a portion of the denied claims and intends to vigorously pursue collections of the full amount of these
short-pay receivables. Additional unprocessed return claims have and are expected to continue to expire prior to their
physical return. Although the Company has and expects to continue to deny credit for product returns that are not in
accordance with its return policy, uncertainty exists related to the ultimate resolution of these claims. We intend to pursue
vigorously collections of the full amount of the receivable, but there can be no assurance that we will be able to do so or
that similar disruptions in the wholesaler distribution network will not occur in the future.

Our products could be subject to post-marketing requirements, which requirements may, in some cases, not be capable
of timely or satisfactory completion without participation in consortia over which we have limited control.

Our products are subject to a comprehensive regulatory scheme, including post-marketing requirements (“PMRs”) to
conduct epidemiological studies and clinical trials. We intend to fulfill our PMRs by virtue of our participation in the
Opioid PMR Consortium (“OPC”). Although we retain discretion in how to discharge such PMRs, the scale and scope of

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the studies required by the FDA make it cost prohibitive to discharge these requirements other than by joining the OPC that
was formed to conduct them. We are a member of OPC and engage in decision-making as a member of that organization,
but do not have a majority. If the OPC fails to conduct sufficiently rigorous studies or is unable to achieve the patient
enrollment or other requirements established by the FDA, we may be unable to satisfy our PMRs and the FDA may choose
to withdraw or otherwise restrict its approval of our products. Such withdrawal or restriction would have an adverse impact
on our business and financial condition.

We rely on third parties to conduct our non-clinical and clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, or if they terminate their agreement with us, we may not be able
to maintain regulatory approval for our products and our business could suffer a material adverse effect.

We have relied upon and plan to continue to rely upon contract research organizations (“CROs”) to monitor and manage
data for any non-clinical and clinical programs that we may conduct, including the OPC PMR studies discussed above. We
rely on these parties for execution of our non-clinical and clinical trials, and control only certain aspects of their activities.
Nevertheless, we are responsible for ensuring that each of our studies and clinical trials are conducted in accordance with
the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our
regulatory responsibilities. If we or any of our CROs fail to comply with applicable GCP and other regulations, including
as a result of any recent changes in such regulations, the clinical data generated in our clinical trials may be deemed
unreliable and the FDA or foreign regulatory authorities may require us to perform additional clinical trials before
approving our marketing applications. In addition, our clinical trials must be conducted with product produced under
cGMP requirements. While we have agreements governing the activities of our CROs, we have limited influence over their
actual performance. Failure to comply with applicable regulations in the conduct of the clinical trials for our products
would have an adverse impact on our commercial efforts.

Risks Related to Our Business and Strategy

The announcement and pendency of our acquisition of BioDelivery Sciences International, Inc. may have an adverse
effect on our business, financial condition, operating results and cash flows.

On February 14, 2022, we entered into a definitive agreement to acquire BioDelivery Sciences International, Inc. 
(“BDSI”).  The transaction (the “Acquisition”) is expected to close late in the first quarter 2022, subject to customary 
closing conditions. We have devoted, and will continue to devote, significant management and other internal resources 
towards the completion of the Acquisition and planning for integration. Completion of the Acquisition is subject to 
conditions beyond our control that may prevent, delay or otherwise adversely affect its completion in a material way. The 
failure to complete the Acquisition in a timely manner or at all could negatively impact the market price of our common 
stock as it currently reflects an assumption that the transaction will be completed. Furthermore, if the Acquisition is 
significantly delayed or not completed, we may suffer other consequences that could adversely affect our business, results 
of operations and stock price, including the following:

●   we would have incurred significant costs in connection with the Acquisition that we may be unable to recover;
●   we may be subject to negative publicity or be negatively perceived by the investment or business communities;
●   we may be subject to legal proceedings related to the Acquisition;
●   any disruptions to our business resulting from the announcement and pendency of the Acquisition, including any
adverse changes in our relationships with our customers, suppliers, other business partners and employees, may
continue or intensify in the event the Acquisition is not consummated; and

●   we may not be able to take advantage of alternative business opportunities or effectively respond to competitive

pressures.

There can be no assurance that our business, financial condition, operating results and cash flows will not be adversely
affected, as compared to prior to the announcement of the Acquisition, if the Acquisition is not consummated.

Our ability to realize the benefits from the acquisition of BDSI is substantially dependent on the cost savings resulting
from the timely and effective integration of the operations of Collegium and BDSI.

Our ability to realize the benefits from the acquisition of BDSI is substantially dependent on the cost savings resulting from
the timely and effective integration of the operations Collegium and BDSI. The process of integrating the operations of
Collegium and BDSI could encounter unexpected costs and delays, which include: the loss of key personnel; the loss of
key customers; the loss of key suppliers; and unanticipated issues in integrating sales, marketing and administrative
functions. If we are unable to timely and effectively integrate the operations of Collegium and BDSI,

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our costs could be adversely affected, and our business could suffer. Further, even if the integration is timely and effective,
we may never realize the cost savings expected from the integration of the operations of our two companies.

Our business may continue to be adversely affected by the COVID-19 pandemic.

The COVID-19 pandemic has, and will likely continue to have, a substantial impact on the delivery of healthcare services
in the United States. Healthcare providers have reduced staffing and limited access for non-patients, including our sales
professionals. Notwithstanding the lifting of COVID-19 restrictions in many jurisdictions, and amidst continuing public
health concerns relating to the spread of COVID-19, weekly pain patient office visits continue to be depressed compared to
pre-COVID periods, which in turn may account for fewer patients beginning therapy with our products. We believe that the
disruptions caused by COVID-19 will continue and there remains substantial uncertainty as to when such disruptions will
cease. These circumstances may result in reduced demand for our products and negatively impact our sales and results of
operations.

The extent to which the COVID-19 pandemic continues to impact our results of operation will depend on future
developments, which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of COVID-19, the rate and manner in which it spreads, the duration of the pandemic, travel
restrictions imposed by the United States and other countries, business closures or business disruption in the United States
and other countries, a reduction in time spent out of home and the actions taken throughout the world, including in our
markets, to contain COVID-19 or treat its impact. Although travel and other restrictions have been lifted in certain
jurisdictions, there remains substantial uncertainty as to the possibility of further surges in infections, including surges
resulting from the development of new variants of COVID-19 which could lead to travel and other restrictions being re-
imposed. These actions could have a material adverse impact on our business, financial condition and results of operations,
and we will continue to monitor the effects of the COVID-19 pandemic closely.

Litigation or regulatory action regarding opioid medications could negatively affect our business.

Beginning in 2018, lawsuits alleging damages related to opioids have been filed naming us as a defendant along with other 
manufacturers of prescription opioid medications. These lawsuits, filed in multiple jurisdictions, are brought by various 
local governments as well as private claimants, against various manufacturers, distributors and retail pharmacies. These 
lawsuits generally contend that we have engaged in improper marketing practices related to Xtampza ER and the Nucynta 
Products. Plaintiffs seek a variety of remedies, including abatement, restitution, civil penalties, disgorgement of profits, 
treble damages, attorneys’ fees and injunctive relief. Some plaintiffs have alleged joint and several liability among the 
defendants, meaning that any given defendant may be found liable for the activities of other defendants. None of the 
complaints specify the exact amount of damages at issue. These cases are generally in early stages of litigation.  
In addition, certain governmental and regulatory agencies are focused on the abuse of opioid medications, a concern we
share, and we have received Civil Investigative Demands or subpoenas from four state attorneys general investigating our
sales and marketing of opioids and seeking documents relating to the manufacture, marketing and sale of opioid
medications. We are cooperating fully in these investigations. Managing litigation and responding to governmental
investigations is costly and may involve a significant diversion of management attention. Such proceedings are
unpredictable and may develop over lengthy periods of time. An adverse resolution of any of these lawsuits or
investigations may involve injunctive relief or substantial monetary penalties, either or both of which could have a material
adverse effect on our reputation, business, results of operations and cash flows.

We face substantial competition from other biotechnology and pharmaceutical companies, which may result in others
discovering, developing or commercializing products more successfully than we do.

Competition in the pain and opioid market is intense. Our competitors include major multinational pharmaceutical
companies, biotechnology companies and universities and other research institutions. Our products compete with oral
opioids, transdermal opioids, local anesthetic patches, stimulants and implantable and external infusion pumps that can be
used for infusion of opioids and local anesthetics. Products of these types are marketed by Actavis, BioDelivery Sciences,
Endo, Mallinckrodt, Purdue, Teva, and others. Some of these current and potential future competitors may be addressing
the same therapeutic areas or indications as we are. Many of our current and potential future competitors have significantly
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. Our
competitors have developed or may develop technologies that are, or may be, the basis for competitive products that are
safer, more effective or less costly than our products. Moreover, oral medications, transdermal drug

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delivery systems, such as drug patches, injectable products and implantable drug delivery devices are currently 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 products and the established use of these competitive products may limit the potential for
our products to receive widespread acceptance.

Commercial sales of our products, and clinical trials of our products and any future product candidates, may expose us
to expensive product liability claims, and we may not be able to maintain product liability insurance on reasonable
terms or at all.

We currently carry product liability insurance. Product liability claims may be brought against us by patients; clinical trial
participants; healthcare providers; or others using, administering or selling our products. If we cannot successfully defend
ourselves against claims that our products caused injuries, we could incur substantial liabilities. We may not be able to
maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Regardless of merit or eventual outcome, liability claims may cause us to incur significant costs to defend the litigation.

Our relationships with customers and payors are subject to applicable anti-kickback, fraud and abuse, transparency,
and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from
government healthcare programs, contractual damages, reputational harm, administrative burdens, and diminished
profits and future earnings.

Healthcare providers, physicians and payors play a primary role in the recommendation and prescription of our products. 
Our arrangements with payors and customers may expose us to broadly applicable fraud and abuse and other healthcare 
laws and regulations that may constrain the business or financial arrangements and relationships through which we market, 
sell and distribute our products and any product candidates for which we may obtain marketing approval.  Even though we 
do not and will not control referrals of healthcare services or bill Medicare, Medicaid or other third-party payors directly, 
we may provide reimbursement guidance and support regarding our products to our customers and patients. Federal and 
state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our 
business. If a government authority were to conclude that we provided improper advice to our customers and/or 
encouraged the submission of false claims for reimbursement, we could face action by government authorities. If our 
operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we 
may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from 
participation in government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or 
restructuring of our operations.

We or the third parties upon whom we depend may be adversely affected by natural disasters and/or health epidemics,
and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of
operations, financial condition and prospects. If a natural disaster, power outage, health epidemic (such as the ongoing
COVID-19 pandemic) or other event occurred that prevented us from using all or a significant portion of our facilities, that
damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that
otherwise disrupted operations, it might become difficult or, in certain cases, impossible for us to continue our business,
and any disruption could last for a substantial period of time.

The disaster recovery and business continuity plans we have in place, and the technology that we may rely upon to
implement such plans, may prove inadequate in the event of a serious disaster or similar event. We may incur substantial
expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a
material adverse effect on our business, financial condition and results of operation.

Risks Related to Our Common Stock

The 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 numerous
factors described in these Risk Factors, some of which are beyond our control. The stock market in general, and
pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations. Broad
market and industry factors may negatively affect the market price of our common stock, regardless of our

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business model, prospects or actual operating performance. The realization of any of these risks, or any of a broad range of
other risks discussed in this report, could have a material adverse effect on the market price of our common stock.

We are subject to anti-takeover provisions in our second amended and restated articles of incorporation and amended
and restated bylaws and under Virginia law that could delay or prevent an acquisition of our company, even if the
acquisition would be beneficial to our shareholders.

Certain provisions of Virginia law, the state in which we are incorporated, and our second amended and restated articles of
incorporation and amended and restated bylaws could hamper a third party’s acquisition of us, or discourage a third party
from attempting to acquire control of us. These provisions could limit the price that certain investors might be willing to
pay in the future for shares of our common stock. In addition, these provisions make it more difficult for our shareholders
to remove our Board of Directors or management or elect new directors to our Board of Directors.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to report our
financial condition, results of operations or cash flows accurately, which may adversely affect investor confidence in us
and, 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.
We are required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things,
the effectiveness of our internal control over financial reporting. If we identify one or more material weaknesses in our
internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is
effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control
over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit
our ability to accurately report our financial condition, results of operations or cash flows. Further, we could lose investor
confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline,
and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities. Failure to
remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective
control systems required of public companies, could also restrict our future access to capital markets.

Sales of our common stock in the public market, either by us or by our current shareholders, or the perception that
these sales could occur, could cause a decline in the market price of our securities. Moreover, the exercise of options
and warrants and other issuances of shares of common stock or securities convertible into or exercisable for shares of
common stock will dilute your ownership interests and may adversely affect the future market price 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
sales could occur, could cause a decline in the market price of our securities. All of the shares of our common stock held by
our current shareholders may be immediately eligible for resale in the open market either in compliance with an exemption
under Rule 144 promulgated under the Securities Act, or pursuant to an effective resale registration statement that we have
previously filed with the SEC. Such sales, along with any other market transactions, could adversely affect the market price
of our common stock. As of December 31, 2021, there were outstanding options to purchase an aggregate of 2,728,169
shares of our common stock at a weighted average exercise price of $18.33 per share, of which options to purchase
2,220,889 shares of our common stock were then exercisable. In addition, as of December 31, 2021, we had an outstanding
warrant to purchase 1,041,667 shares of our common stock at an exercise price of $19.20 per share. The exercise of options
and warrants at prices 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 or manufacturing arrangements or in connection with other financing efforts.

There can be no assurance that we will repurchase shares additional shares of our common stock at all or at favorable
prices.

In August 2021, our board of directors authorized a share repurchase program to repurchase up to $100 million of our
common stock at any time or times through December 31, 2022 (the “Repurchase Program”), and as of December 31,
2021, the remaining value of shares that may be repurchased pursuant to the Repurchase Program was $57.1 million. Any
additional share repurchases will depend upon, among other factors, our cash balances and potential future capital
requirements, our results of operations and financial condition, the price of our common stock on the NASDAQ Global

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Select Market, and other factors that we may deem relevant. We can provide no assurance that we will continue to
repurchase shares of our Common Stock at favorable prices, if at all.

Item 1B.  Unresolved Staff Comments

Not applicable.

Item 2.  Properties

Our corporate headquarters are located in Stoughton, Massachusetts, where we lease 50,678 square feet of office and
laboratory space. We use this facility for research and development, commercial and general and administrative purposes.
The corporate headquarters lease expires in July 2029 and the lease term may be extended for two additional five-year
terms at our election.

We believe that our existing facilities are adequate for our current and expected future needs. We may seek to negotiate
new leases or evaluate additional or alternate space for our operations. We believe that appropriate alternative space is
readily available on commercially reasonable terms.

Item 3.  Legal Proceedings

Discussion of legal matters is incorporated by reference from Note 11 to the Consolidated Financial Statements included in
Item 8 of Part II of this Annual Report on Form 10-K.

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Market Information

Our  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.

Holders

As of January 31, 2022, there were 18 holders of record of our common stock. The number of holders of record does not
include beneficial owners whose shares are held by nominees in street name.

Dividends

We have never declared or paid cash dividends on our common stock, and we do not expect to pay any cash dividends on
our common stock in the foreseeable future.

Stock Performance Graph

The following graph shows a comparison from May 7, 2015, the date on which our common stock first began trading on
the NASDAQ Global Select Market, of the total cumulative shareholder return on an assumed investment of $100.00 in
cash in our common stock as compared to the same investment in the NASDAQ Composite Index and the NASDAQ
Biotechnology Index, all through December 31, 2021. Such returns are based on historical results and are not intended to

39

Table of Contents

suggest future performance. 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.

$100 investment in stock or index
Collegium Pharmaceutical, Inc. (COLL)
NASDAQ Composite Index (IXIC)
NASDAQ Biotechnology Index (NBI)

May 7, 2015

December 31,
2020

December 31,
2021

$
$
$

 100.00 $
 100.00 $
 100.00 $

 162.98 $
 260.60 $
 132.14 $

 151.99
 316.35
 131.30

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
extent that we specifically incorporate it by reference into such filing.

Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities during the period covered by this Form 10-K.

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets forth shares of Common Stock repurchased under our Repurchase Program, as well as shares
transferred to us from employees in satisfaction of minimum tax withholding obligations associated with the vesting of
performance share units and restricted stock units during the three months ended December 31, 2021:

(a) Total
number of
shares
purchased
Period
October 1, 2021 through October 31, 2021
 244,318
November 1, 2021 through November 30, 2021  1,047,359
December 1, 2021 through December 31, 2021

 — $

(b)
Average
Price
Paid per
Share
$  20.19
$  19.52
 —

(c) Total number of
shares purchased as
part of publicly
announced plans or
programs (1)

(d) Maximum
approximate dollar
value of Shares that
may yet be purchased
under the plans or
programs

 244,318
 1,047,359
 —

 77,588
 57,139
 57,139

Total

 1,291,677

(2) $  19.65

 1,291,677

(2)

(1) The Repurchase Program was announced on August 16, 2021. The Repurchase Program provides for the
repurchase of up to $100 million of outstanding shares of our common stock at any time or times through
December 31, 2022. The Repurchase Program did not expire during the three months ended December 31, 2021,
nor does the Company currently plan to terminate the Repurchase Program prior to expiration. However, there
can be no assurance as to the timing or number of shares of any repurchases in the future.

(2) The difference, if any, between the total number of shares purchased and the total number of shares purchased as
part of a publicly announced program relates to common stock withheld by us for employees to satisfy their tax
withholding obligations arising upon the vesting of performance share units and restricted stock units granted
under our Amended and Restated 2014 Stock Incentive Plan.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our
consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The following discussion
contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of
certain events could differ materially from those anticipated in these forward-looking statements as a result of many
factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Form
10-K, including those set forth under “Forward-looking Statements” and “Risk Factors”, as revised and supplemented by
those risks described from time to time in other reports which we file with the SEC.

Overview

We are building a leading, diversified specialty pharmaceutical company committed to improving the lives of people living
with serious medical conditions. Our portfolio includes Xtampza ER, an abuse-deterrent, extended-release, oral
formulation of oxycodone, and Nucynta ER and Nucynta IR (collectively, the “Nucynta Products”), which are extended-
release (“ER”) and immediate-release (“IR”) formulations of tapentadol.

Xtampza ER was approved by the FDA in April 2016 for the management of pain severe enough to require daily, around-
the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. We commercially
launched Xtampza ER in June 2016.

Nucynta ER is indicated for the management of pain severe enough to require daily, around the clock, long-term opioid
treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and for which alternate
treatment options are inadequate. Nucynta IR is indicated for the management of acute pain severe enough to require an
opioid analgesic and for which alternative treatments are inadequate in adults. We began shipping and recognizing product
sales on the Nucynta Products on January 9, 2018 and began marketing the Nucynta Products in February 2018. We
initially licensed the right to commercialize the Nucynta Products in the United States through a Commercialization

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Agreement with Assertio Therapeutics, Inc. (formerly known as Depomed) (“Assertio”) entered into in December 2017
(the “Nucynta Commercialization Agreement”). On February 6, 2020, we entered into an Asset Purchase Agreement with
Assertio (the “Nucynta Purchase Agreement”), pursuant to which we agreed to acquire from Assertio certain assets related
to the Nucynta Products (the “Nucynta Acquisition”), including the license from Grünenthal GmbH (“Grünenthal”), for an
aggregate purchase price of $375.0 million. On February 13, 2020, we closed the Nucynta Acquisition in accordance with
the Nucynta Purchase Agreement. Upon closing, the Nucynta Commercialization Agreement was effectively terminated.
Our prior royalty obligation to Assertio ceased and our only remaining royalty obligation is to pay 14% of net sales of the
Nucynta Products directly to Grünenthal.

For the fiscal year ended December 31, 2021, we generated $276.9 million in net revenues, comprised of $103.7 million
from sales of Xtampza ER and $173.2 million from sales of the Nucynta Products.

Outlook

We expect to continue to incur significant commercialization expenses related to marketing, manufacturing, distribution,
selling and reimbursement activities. We are promoting Xtampza ER to approximately 10,000 health care professionals
who write approximately 62% of the branded extended-release oral opioid prescriptions in the United States with a sales
team of approximately 94 sales representatives and managers. We are promoting the Nucynta Products to the same health
care professionals to whom we promote Xtampza ER, leveraging our existing sales organization. We have historically paid
royalties to Assertio on all revenues from the sale of Nucynta Products based on certain net sales thresholds. Upon the
closing of the Nucynta Acquisition and the termination of the Nucynta Commercialization Agreement (except for certain
sections that survive in accordance with the Nucynta Purchase Agreement) in February 2020, our prior royalty obligation
to Assertio ceased and our only remaining royalty obligation is to pay 14% of net sales of the Nucynta Products directly to
Grünenthal.

We were historically not profitable and incurred net losses in each year since inception until 2020. However, we generated
net income of $71.5 million and $26.8 million in the years ended December 31, 2021 and December 31, 2020, respectively.
As of December 31, 2021, we had an accumulated deficit of $256.3 million.

We believe that our cash and cash equivalents at December 31, 2021, together with expected cash inflows from the
commercialization of our products, will enable us to fund our operating expenses, debt service and capital expenditure
requirements under our current business plan for the foreseeable future.

As of the date of the filing of this Annual Report on Form 10-K, we expect the COVID-19 pandemic and actions taken to
contain it to continue to impact our revenue. Notwithstanding the lifting of COVID-19 restrictions in many jurisdictions,
and amidst continuing public health concerns relating to the spread of COVID-19, weekly pain patient office visits
continue to be depressed compared to pre-COVID periods, which in turn may account for fewer patients beginning therapy
with our products. We believe that the disruptions caused by COVID-19 will continue and there remains substantial
uncertainty as to when such disruptions will cease.

Financial Operations Overview

Product Revenues

Product revenue through the year ended December 31, 2021 has been generated from product sales of Xtampza ER and the
Nucynta Products. In accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts
with Customers, product sales are recorded upon delivery of products to customers, net of a provision for estimated
chargebacks, rebates, sales incentives and allowances, distribution service fees, and returns.

Cost of Product Revenues

Cost of product revenues include amortization of the intangible asset acquired in connection with the Nucynta Acquisition
and the prior Nucynta Commercialization Agreement (“Nucynta Intangible Asset”), royalty expense, the cost of active
pharmaceutical ingredient, the cost of producing finished goods that correspond with revenue for the reporting period, as
well as certain period costs related to freight, packaging, stability and quality testing. Please refer to Note 4, License
Agreements, and Note 9, Intangible Assets, for further detail around the Nucynta Intangible Asset and royalty expense.

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Research and Development Expenses

Research and development expenses consist of costs associated with our research and development activities for our
products. These costs are expensed as incurred and include compensation and employee-related costs, including stock-
based compensation; costs associated with conducting our clinical and non-clinical activities, including clinical and non-
clinical trials that we conduct for post-marketing requirements; and costs for laboratory supplies, depreciation of lab
equipment, and other expenses including allocated expenses for rent and maintenance of facilities.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries and employee-related costs, including stock-
based compensation and travel expenses for our employees 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. As we continue
to invest in the commercialization of our products, we expect our selling, general and administrative expenses to continue
to be substantial for the foreseeable future.

Interest Expense

Interest expense consists primarily of cash and non-cash interest costs related to the term notes and convertible notes issued
in February 2020 in connection with the Nucynta Acquisition. Historically, interest expense also related to the Nucynta
Commercialization Agreement and cash interest costs from the Loan and Security Agreement with Silicon Valley Bank
(“SVB”). However, in January 2020, the Company prepaid the outstanding principal, accrued interest, and required
prepayment fees on the SVB term loan and recognized an immaterial loss on extinguishment as a component of interest
expense.

Interest Income

Interest income consists of interest earned on our cash and cash equivalents.

Provision for Income Taxes

The provision for income taxes reflects expense for federal and state income taxes. During the year ended December 31,
2021, the Company removed its valuation allowance on the substantial majority of its deferred tax assets, resulting in a tax
benefit in 2021. Given the valuation allowance that was recorded on deferred tax assets during the year ended December
31, 2020, the provision for 2020 income taxes consisted of state income tax for certain states that enacted changes in tax
laws that prevented us from using our state-level NOLs to offset taxable income.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our
consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles
in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent
assets and liabilities in our consolidated financial statements. Estimates include revenue recognition, including the
estimates of product returns, discounts and allowances related to commercial sales of our products, estimates utilized in the
valuation of inventory, estimates of useful lives with respect to intangible assets, accounting for stock-based compensation,
contingencies, intangible assets and tax valuation allowances. We base our estimates and assumptions on historical
experience when available and on various factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these
estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2, Summary of Significant Accounting
Policies, to our consolidated financial statements appearing elsewhere in this on Form 10-K, we believe the following
accounting policies to be most critical to the significant judgments and estimates used in the preparation of our
consolidated financial statements.

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Revenue Recognition

Our accounting policy for revenue recognition will have a substantial impact on reported results and relies on certain
estimates. Estimates are based on historical experience, current conditions and various other assumptions that we believe
are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and
equity and the amounts of revenues and expenses. Actual results may differ from these estimates under different
assumptions or conditions.

Product Revenue

Our only source of revenue to date has been generated by sales of our products, which are primarily sold to distributors
(“customers”), which in turn sell the product to pharmacies and others for the treatment of patients (“end users”). Revenue
for product sales is recognized when a customer obtains control of promised goods or services, in an amount that reflects
the consideration which the entity expects to receive in exchange for those goods or services. This generally occurs upon
delivery to our customers when estimated provisions for chargebacks, rebates, sales incentives and allowances, distribution
service fees, and returns are reasonably determinable. Therefore, product sales are recorded upon delivery to our customers
net of estimated chargebacks, rebates, sales incentives and allowances, distribution service fees, as well as estimated
product returns.

Sales Deductions

Sales deductions consist primarily of provisions for (1) rebates and incentives, including managed care rebates, 
government rebates, co-pay program incentives, and sales incentives and allowances; (2) product returns, including return 
estimates for both the Nucynta Products and Xtampza ER; and (3) trade allowances and chargebacks, including fees for 
distribution service fees, prompt pay discounts, and chargebacks. We estimate the amount of variable consideration that 
should be included in revenue under the expected value method for all sales deductions other than trade allowances, which 
are estimated under the most likely amount method. These provisions reflect our best estimates of the amount of revenue to 
which we are entitled based on the terms of our contracts.  

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

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

Provisions for product returns are based on product-level returns rates, recent unprocessed return claims, as well as relevant
market events and other factors. Our return policy requires that product is physically returned within an 18-month window
beginning six months prior to expiration and up until twelve months after expiration. Estimates of the future product
returns are made at the time of revenue recognition to determine the amount of consideration to which we expect to be
entitled (that is, excluding the products expected to be returned). To the extent we receive amounts in excess of what we
expect to be entitled to receive due to a product return, we do not recognize revenue when we transfer products to
customers but instead recognize those excess amounts received as a refund liability. We update the measurement of the
refund liability at the end of each reporting period for changes in expectations about the amount of refunds with the
corresponding adjustments recognized as revenue (or reductions of revenue).

Historically, estimates of the refund liability for product returned for Nucynta Products were based on historical returns
rates as these products have been commercially sold in the US since 2009 for Nucynta IR and since 2011 for Nucynta ER.
Because the Company began selling the Nucynta Products in 2018, the majority of Nucynta Products sold to customers by
the Company were not eligible for return until the year ended December 31, 2021, or beyond. For Xtampza

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ER, estimates of the refund liability for product returns were historically based on a combination of historical actual returns
processed to date, taking into consideration the expiration date of product upon delivery to customers, as well as forecasted
customer buying and return patterns, channel inventory levels, and other specifically known market events and trends.
Refer to Note 3, Revenue from Contracts with Customers, for more information.

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

Intangible Assets

We record the fair value of finite-lived intangible assets as of the transaction date. Intangible assets are then amortized over
their estimated useful lives using either the straight-line method, or if reliably determinable, based on the pattern in which
the economic benefit of the asset is expected to be utilized. We test intangible assets for potential impairment whenever
triggering events or circumstances present an indication of impairment. If the sum of expected undiscounted future cash
flows of the intangible assets is less than the carrying amount of such assets, the intangible assets would be written down to
the estimated fair value, calculated based on the present value of expected future cash flows. As of December 31, 2021, our
only intangible asset is related to the Nucynta Intangible Asset. There have been no triggering events that indicate that the
carrying value is not recoverable from undiscounted cash flows.

Income Taxes

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets
and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse.

The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In
determining the extent to which a valuation allowance for deferred tax assets is required, the Company evaluates all
available evidence including projections of future taxable income, carry back opportunities, reversal of certain deferred tax
liabilities, and other tax planning strategies. Prior to generating income during the year ended December 31, 2020, the
Company had a history of operating losses and a valuation allowance was maintained on the majority of the Company’s
deferred tax assets through March 31, 2021.

As a result of sustained positive earnings history as demonstrated through recent cumulative earnings, as of June 30, 2021,
the Company began using projections of future taxable income as a source of realizing its deferred tax assets. Accordingly,
the Company released the portion of the valuation allowance on deferred tax assets expected to be realized through future
earnings in the three months ended June 30, 2021, and subsequent quarters. The Company has maintained a valuation
allowance on the portion of its deferred tax assets that are not more likely than not to be realized due to tax limitation or
other conditions of $2.0 million as of December 31, 2021. The Company recognized a total tax benefit of $74.9 million for
the year ended December 31, 2021, which included a deferred tax benefit of $78.0 million.

Significant judgment is required in making these assessments to maintain or reverse our valuation allowances, and, to the
extent our future expectations change we would have to assess the recoverability of these deferred tax assets at that time.

Results of Operations

In this section, we discuss the results of our operations for the year ended December 31, 2021 compared to the year ended
December 31, 2020. For a discussion of the year ended December 31, 2020 compared to the year ended December 31,
2019, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes the results of our operations for the years ended December 31, 2021 and 2020:

Product revenues, net
Cost of product revenues

Cost of product revenues (excluding intangible asset amortization)
Intangible asset amortization
Total cost of products revenues
Gross profit
Operating expenses

Research and development
Selling, general and administrative
Restructuring

Total operating expenses
Income from operations
Interest expense
Interest income

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net income

Years ended December 31, 
2020
2021

(in thousands)

$

 276,868      $

 310,016

 59,070
 67,181
 126,251
 150,617

 9,451
 118,960
 4,578
 132,989
 17,628
 (21,014)
 12
 (3,374)
 (74,891)
 71,517

$

 69,500
 60,680
 130,180
 179,836

 9,772
 113,832
 —
 123,604
 56,232
 (28,882)
 232
 27,582
 830
 26,752

Product revenues, net were $276.9 million for the year ended December 31, 2021 (“2021”), compared to $310.0 million for
the year ended December 31, 2020 (“2020”), representing a $33.1 million decrease. For 2021, Xtampza product revenue
was $103.7 million compared to $128.0 million for 2020. The $24.3 million decrease for Xtampza revenue was due to
higher gross-to-net adjustments, primarily related to rebates and provisions for returns, partially offset by a benefit from an
increase in sales volume and price. For 2021, Nucynta IR and ER revenue was $102.2 million and $71.0 million,
respectively, compared to $116.3 million and $65.7 million, respectively, for 2020. The $8.8 million decrease for Nucynta
Products revenue was due to a decrease in sales volume and higher provisions for returns, partially offset by a benefit from
lower gross-to-net adjustments primarily related to rebates.

Cost of product revenues (excluding intangible asset amortization) was $59.1 million for 2021, compared to $69.5 million
for 2020. The $10.4 million decrease was primarily related to a decrease in royalty expense for the
Nucynta Products, partially offset by an increase in sales volume for Xtampza. Investments in manufacturing, including the 
transfer of the Nucynta ER manufacturing process, which is expected to be completed in 2022, may impact the relationship 
between revenue and costs of product revenues (excluding intangible asset amortization) in future periods.  In the 2020 
Period, we recognized $14.2 million in sales-based royalty expense due to Assertio under the terms of the Nucynta 
Commercialization Agreement. Our sales-based royalty obligations to Assertio ceased upon closing of the Nucynta 
Acquisition on February 13, 2020.

Intangible asset amortization was $67.2 million for 2021, compared to $60.7 million for 2020. The $6.5 million increase
was primarily related to the Nucynta Acquisition, in which $367.1 million of consideration was allocated to the existing
intangible asset as incremental cost in 2020. The intangible asset is being amortized on a straight-line basis over its
estimated useful life of approximately six years.

Research and development expenses were $9.5 million for 2021, compared to $9.8 million for 2020. The $300,000
decrease was primarily related to a decrease in salaries, wages and benefits, partially offset by an increase in trial related
costs.

Selling, general and administrative expenses were $119.0 million for 2021, compared to $113.8 million for 2020. The $5.2
million increase was primarily related to:

● an increase in audit, legal, and other professional fees of $3.5 million, primarily related to higher costs associated

with ongoing intellectual property litigation;

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● an increase in litigation settlements of $2.9 million due to the Company executing a settlement framework to
resolve 27 pending opioid-related lawsuits. Refer to Note 11, Commitments and Contingencies, for further
information;

● an increase in salaries, wages and benefits of $1.6 million, primarily due to stock-based compensation expense,
● an increase in insurance of $747,000, primarily due to higher premiums; partially offset by
● a decrease in sales, marketing and consulting costs of $3.6 million, primarily due to lower costs incurred in 2021

to support the ongoing commercialization of our products.

Restructuring expenses were $4.6 million for 2021, compared to zero for 2020. The increase in restructuring expenses is
due to the Company entering into a plan to reduce its workforce, primarily related to its salesforce in 2021. The
arrangements included the payment of a cash severance benefit near the time of separation, together with continued
medical benefits and related services. Refer to Note 2, Significant Accounting Policies, for further information.

Interest expense was $21.0 million for 2021, compared to $28.9 million for 2020. The $7.9 million decrease was primarily
due to lower non-cash interest expense associated with the Company’s convertible notes in 2021 as a result of the adoption
of ASU 2020-06 in 2021 combined with lower cash interest expense associated with the Company’s term note due to
continued principal payments.

Interest income was $12,000 for 2021, compared to $232,000 for 2020. The $220,000 decrease was primarily due to lower
interest rates earned on money market funds.

Benefit from income taxes was $74.9 million for 2021, which includes a $78.0 million tax benefit related to the release of
the Company’s valuation allowance on the majority of its net operating losses and other deferred tax assets, compared to a
provision for income taxes of $830,000 for 2020. The $75.7 million increase was primarily due to the Company’s valuation
allowance release in 2021.

Liquidity and Capital Resources

Sources of liquidity

We have historically incurred net losses in each year since inception until 2020. Historically, we have funded our
operations primarily through the private placements of our preferred stock and convertible notes, public offerings of
common stock and convertible notes, and commercial bank debt. As of December 31, 2021, we had $186.4 million in cash
and cash equivalents. We believe that our cash and cash equivalents at December 31, 2021, together with expected cash
inflows from operations, will enable us to fund our operating expenses, debt service and capital expenditure requirements
under our current business plan for the foreseeable future.

Borrowing Arrangements and Equity Offerings

The following transactions represent the material borrowing arrangements and equity offerings.

Pharmakon Term Notes

On February 6, 2020, in connection with the execution of the Nucynta Purchase Agreement, we, together with our
subsidiary, Collegium Securities Corporation, entered into the Loan Agreement with BioPharma Credit PLC, as collateral
agent and lender; and BioPharma Credit Investments V (Master) LP, as lender. The Loan Agreement provides for a $200.0
million secured term loan (the “term notes”), the proceeds of which were used to finance a portion of the purchase price
paid pursuant to the Nucynta Purchase Agreement. The outstanding principal balance for the term notes as of December
31, 2021 is $112,500, including $50,000 of obligations due in the first twelve months after period end.

The term notes will mature on the calendar quarter end immediately following the 48-month anniversary of the closing of
the Nucynta Acquisition, and is guaranteed by our material domestic subsidiaries and is also secured by substantially all of
our material domestic assets. The term notes will bear interest at a rate based upon LIBOR (subject to a LIBOR floor of
2.0%), plus a margin of 7.5% per annum. We are required to repay the term notes by making equal quarterly payments.

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The Loan Agreement contains certain covenants and obligations of the parties, including, without limitation, covenants that
require us to maintain $200.0 million in annual net sales and covenants that limit our ability to incur additional
indebtedness or liens, make acquisitions or other investments or dispose of assets outside the ordinary course of business.
Failure to comply with these covenants would constitute an event of default under the Loan Agreement, notwithstanding
our ability to meet its debt service obligations. The Loan Agreement also includes various customary remedies for the
lenders following an event of default, including the acceleration of repayment of outstanding amounts under the Loan
Agreement and execution upon the collateral securing obligations under the Loan Agreement. As of December 31, 2021,
the Company was in compliance with all of its covenants.

2026 Convertible Notes

On February 13, 2020, in connection with the execution of the Nucynta Purchase Agreement, we issued 2.625%
convertible senior notes due 2026 (the “convertible notes”), in the aggregate principal amount of $143.8 million, in a
public offering registered under the Securities Act of 1933, as amended. The proceeds were used to finance a portion of the
purchase price paid pursuant to the Nucynta Purchase Agreement.

The convertible notes are senior, unsecured obligations and will accrue interest at a rate of 2.625% per annum, payable
semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. The notes will mature
on February 15, 2026, unless earlier repurchased, redeemed or converted. Before August 15, 2025, noteholders will have
the right to convert their notes only upon the occurrence of certain events. From and after August 15, 2025, noteholders
may convert their notes at any time at their election until the close of business on the scheduled trading day immediately
before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our common
stock or a combination of cash and shares of our common stock, at our election. The initial conversion rate is 34.2618
shares of common stock per $1,000 principal amount of notes, which represents an initial conversion price of
approximately $29.19 per share of common stock. The conversion rate and conversion price will be subject to adjustment
upon the occurrence of certain events. The outstanding principal balance for the convertible notes as of December 31, 2021
is $143,750. There are no principal repayment obligations due in the first twelve months after period end.

Debt Commitment Letter

On February 14, 2022, in connection with the definitive agreement to acquire BioDelivery Sciences International, Inc.
(“BDSI”) (the “Merger Agreement”), we entered into a commitment letter (the “Debt Commitment Letter”) with
Pharmakon Advisors, L.P. pursuant to which funds managed by Pharmakon Advisors, L.P. have committed, subject to
customary conditions, to provide to Collegium a four (4) year senior secured term loan facility in an aggregate principal
amount of $650.0 million (the “Term Facility”), including $100.0 million of principal repayment obligations due in the first
twelve months of the loan.

Proceeds will be used to finance a portion of Collegium’s acquisition of BDSI, as well as to repay the outstanding debt of
Collegium and BDSI and pay certain fees and expenses related thereto. Under the terms of the Debt Commitment Letter,
the Term Facility will have $100 million in amortization payments during the first year and the remaining $550 million
balance will amortize in equal quarterly installments over the remaining three (3) years. The loan will initially bear interest
at 3-month LIBOR plus 7.50% per annum subject to a 1.20% floor, and Collegium will pay a one-time fee of 2% due at
signing and 1% due at closing. The obligation of Pharmakon Advisors, L.P. to provide the financing under the Debt
Commitment Letter is subject to a number of conditions, including the receipt by Pharmakon Advisors, L.P. of executed
loan documentation, the accuracy of certain representations and warranties in all material respects and consummation of
the Transactions as contemplated by the Merger Agreement.

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Cash flows

In this section, we discuss cash flows for the year ended December 31, 2021 compared to the year ended
December 31, 2020. For a discussion of the year ended December 31, 2020 compared to the year ended December 31,
2019, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Net increase in cash, cash equivalents and restricted cash

Years ended December 31, 

2021
 103,557      $

 (1,944)
 (89,303)
 12,310

$

2020

 93,942
 (373,772)
 286,474
 6,644

$

$

Operating activities. Cash provided by operating activities was $103.6 million in 2021, compared to $93.9 million in 2020.
The $9.7 million increase in cash provided by operating activities was primarily due to changes in working capital,
including accounts receivable and accrued rebates, returns, and discounts, and accrued expenses, as well as higher net
income exclusive of non-cash items.

Investing activities. Cash used in investing activities was $1.9 million in 2021, compared to $373.8 million in 2020. The
$371.9 million increase in cash used in investing activities was primarily related to the Nucynta Acquisition. The
remaining change is related to the timing of purchases of property, plant, and equipment primarily for the dedicated
manufacturing suite at our contract manufacturing organization.

Financing activities. Cash used in financing activities was $89.3 million in 2021, compared to cash provided by financing
activities of $286.5 million in 2020. The $375.8 million decrease was primarily related to net proceeds from the term notes
of $192.1 million and issuance of the convertible notes of $138.3 million, both of which were issued in 2020. The
remaining change is primarily related to repurchases of common stock of $47.9 million, including the ASR Program, and
changes in payments made for employee restricted stock tax withholdings, partially offset by proceeds from exercises of
stock options.

Funding requirements

We believe that our cash and cash equivalents at December 31, 2021, together with expected cash inflows from the
commercialization of our products, will enable us to fund our operating expenses, debt service and capital expenditure
requirements under our current business plan for the foreseeable future. However, we are subject to all the risks common to
the commercialization and development of new pharmaceutical products, and we may encounter unforeseen expenses,
difficulties, complications, delays and other unknown factors that may adversely affect our business.

Certain economic or strategic considerations may cause us to seek additional cash through private or public debt or equity
offerings. Such funds may not be available when needed, or, we may not be able to obtain funding on favorable terms, or at
all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to
significantly delay, scale back or discontinue the development or commercialization of one or more of our products. If we
raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing
shareholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of
our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our 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 could adversely impact our ability
to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

Our forecast that our financial resources will be adequate to support our operations is a forward-looking statement and
involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this
estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we

49

 
 
 
 
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currently expect. The amount and timing of future funding requirements, both near- and long-term, will depend on many
factors, including:

● the generation of reasonable levels of revenue from products sales;
● the cost of growing and maintaining sales, marketing and distribution capabilities for our products;
● the cost of patent infringement litigation, including our litigation with Purdue, relating to Xtampza ER and the

Nucynta Products, which may be expensive to defend;

● the cost of litigation related to opioid marketing and distribution practices;
● the timing and costs associated with manufacturing our products, for commercial sale and clinical trials
● our need to expand our regulatory and compliance functions; and
● the effect of competing technological and market developments.

If we cannot capitalize on our business opportunities because we lack sufficient capital, our business, financial condition
and results of operations could be materially adversely affected.

Contractual Obligations

The Company’s contractual obligations as of December 31, 2021 that will affect our future liquidity include our term notes,
including interest, convertible senior notes, including interest, operating lease obligations, and purchase obligations. For
further detail regarding our term notes and convertible senior notes, refer to Note 12, Debt. For further detail regarding our
operating lease obligations, refer to Note 13, Leases.

The Company’s purchase obligations represent the minimum purchase obligations of up to $3.0 million per year with our
contract manufacturer which are in effect as of December 31, 2021 and will remain in effect each year until the termination
of our manufacturing agreement.

We also have employment agreements with executive officers that would require us to make severance payments to them if
we terminate their employment without cause or the executives resign for good cause. These payments are contingent upon
the  occurrence  of  various  future  events,  and  the  amounts  payable  under  these  provisions  depend  upon  the  level  of
compensation at the time of termination of employment, and therefore, are not calculable at this time.

Non-GAAP Financial Measures

To supplement our financial results presented on a GAAP basis, we have included information about certain non-GAAP
financial measures such as adjusted EBITDA and adjusted operating expenses. We use these non-GAAP financial
measures to understand, manage and evaluate our business as we believe they provide additional information on the
performance of our business. We believe that the presentation of these non-GAAP financial measures, taken in conjunction
with our results under GAAP, provide analysts, investors, lenders and other third parties insight into our view and
assessment of our ongoing operating performance. In addition, we believe that the presentation of these non-GAAP
financial measures, when viewed with our results under GAAP and the accompanying reconciliations, provide
supplementary information that may be useful to analysts, investors, lenders, and other third parties in assessing our
performance and results from period to period. We report these non-GAAP financial measures to portray the results of our
operations prior to considering certain income statement elements. These non-GAAP financial measures should be
considered in addition to, and not as a substitute for, or superior to, net income or other financial measures calculated in
accordance with GAAP.

In our quarterly and annual reports, earnings press releases and conference calls, we may discuss the following financial
measures that are not calculated in accordance with GAAP, to supplement our consolidated financial statements presented
on a GAAP basis.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income adjusted to exclude interest
expense, interest income, the benefit from or provision for income taxes, depreciation, amortization, stock-based
compensation, restructuring expenses, and litigation settlements. Adjusted EBITDA, as used by us, may be calculated
differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

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There are several limitations related to the use of adjusted EBITDA rather than net income, which is the nearest GAAP
equivalent, such as:

● adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets
being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not
reflected in adjusted EBITDA;

● we exclude stock-based compensation expense from adjusted EBITDA although (a) it has been, and will continue
to be for the foreseeable future, a significant recurring expense for our business and an important part of our
compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based
compensation, the cash salary expense included in operating expenses would be higher, which would affect our
cash position;

● adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;
● adjusted EBITDA does not reflect the benefit from or provision for income taxes or the cash requirements to pay

taxes;

● adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or

contractual commitments;

● we exclude restructuring expenses from adjusted EBITDA. Restructuring expenses primarily include employee
severance and contract termination costs. The amount and/or frequency of these restructuring expenses are not
part of our underlying business; and

● we exclude litigation settlements from adjusted EBITDA, as well as any applicable income items or credit

adjustments due to subsequent changes in estimates. This does not include our legal fees to defend claims, which
are expensed as incurred.

Adjusted EBITDA for the years ended December 31, 2021 and 2020 was as follows:

GAAP net income
Adjustments:

Interest expense
Interest income
(Benefit from) provision for income taxes
Depreciation
Amortization
Stock-based compensation expense
Restructuring
Litigation settlements
Total adjustments

Adjusted EBITDA

Years ended
December 31, 

2021

2020

 71,517

$

 21,014
 (12)
 (74,891)
 1,736
 67,181
 24,255
 4,578
 2,935
 46,796
 118,313

$
$

 26,752

 28,882
 (232)
 830
 870
 60,680
 21,910
 —
 —
 112,940
 139,692

$

$
$

Adjusted EBITDA was $118.3 million for 2021 compared to $139.7 million for 2020. The $21.4 million decrease was
primarily due to higher GAAP net income of $44.8 million and higher adjustments for amortization expense of $6.5
million, restructuring expenses of $4.6 million, litigation settlements of $2.9 million, stock-based compensation expense of
$2.3 million, depreciation expense of $866,000, and interest income of $220,000, partially offset by lower adjustments for
income taxes of $75.7 million, primarily due to the impact of the Company’s valuation allowance release, and interest
expense of $7.9 million.

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Table of Contents

The following is a summary of 2021 quarterly Adjusted EBITDA through December 31, 2021:

GAAP net income (loss)
Adjustments:

Interest expense
Interest income
(Benefit from) provision for income
taxes
Depreciation
Amortization
Stock-based compensation expense
Restructuring
Litigation settlements
Total adjustments

Adjusted EBITDA

Adjusted Operating Expenses

First Quarter

2021

Second
Quarter
2021

Third Quarter

2021

Fourth
Quarter
2021

$

 15,662 $

 72,843 $

 8,046 $

 (25,034)

 5,721
 (3)

 (188)
 439
 16,795
 6,879
 —
 —
 29,643 $
 45,305 $

 5,421
 (3)

 (61,852)
 425
 16,795
 6,516
 —
 —
 (32,698) $
 40,145 $

$
$

 5,115
 (3)

 991
 448
 16,796
 5,948
 —
 —
 29,295 $
 37,341 $

 4,757
 (3)

 (13,842)
 424
 16,795
 4,912
 4,578
 2,935
 20,556
 (4,478)

Adjusted operating expenses is a non-GAAP financial measure that represents GAAP operating expenses adjusted to
exclude stock-based compensation expense, restructuring, and litigation settlements.

Adjusted operating expenses for the years ended December 31, 2021 and 2020 were as follows:

GAAP Operating expenses
Adjustments:

Stock-based compensation
Restructuring
Litigation settlements
Total adjustments

Adjusted operating expenses

Years ended
December 31, 

2021

132,989

$

24,255
4,578
2,935
 31,768
 101,221

$

2020

123,604

21,910
 —
 —
 21,910
 101,694

$

$

Adjusted operating expenses were $101.2 million for 2021 compared to $101.7 million for 2020. The $500,000 decrease
was primarily related to an increase in GAAP operating expenses of $9.4 million due to the increase in selling, general and
administrative expenses, partially offset by the decrease in research and development expenses, and higher adjustments for
stock-based compensation expense, restructuring, and litigation settlements as described above in “Results of Operations.”

The following is a summary of 2021 quarterly adjusted operating expenses through December 31, 2021:

First Quarter
2021

Second Quarter
2021

Third Quarter
2021

Fourth Quarter
2021

GAAP Operating expenses
Adjustments:

Stock-based compensation
Restructuring
Litigation settlements
Total adjustments

Adjusted operating expenses

$

$

34,406

$

33,830

$

31,964

$

6,516
 —
 —
 6,516
 27,314

$

5,948
 —
 —
 5,948
 26,016

$

6,879
 —
 —
 6,879
 27,527

$

52

32,789

4,912
4,578
2,935
 12,425
 20,364

Table of Contents

The following is a summary of 2020 quarterly adjusted operating expenses for the year ended December 31, 2020.

GAAP Operating expenses
Adjustments:

Stock-based compensation
Restructuring
Litigation settlements
Total adjustments

Adjusted operating expenses

First Quarter
2020

Second Quarter
2020

Third Quarter
2020

Fourth Quarter
2020

$

33,926 $

31,815 $

28,567 $

29,296

4,951
 —
 —
 4,951
 28,975 $

$

5,584
 —
 —
 5,584
 26,231 $

5,165
 —
 —
 5,165
 23,402 $

6,210
 —
 —
 6,210
 23,086

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, 2021, we had cash and cash
equivalents consisting of cash and money market funds of $186.4 million. Our primary exposure to market risk is interest
rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our money
market funds are short-term highly liquid investments and our term notes with Pharmakon, which bear interest based on the
three-month LIBOR rate, subject to a LIBOR floor of 2.0%, plus a margin of 7.5% per annum. Due to the short-term
duration and the low risk profile of our investments, an immediate 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 Data

Our consolidated financial statements, together with the reports of our independent registered public accounting firms,
begin on page F-1 of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the
effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act, as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2021.

Management’s Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive
Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements
for external purposes in accordance with generally accepted accounting principles, and includes those policies and
procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;

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(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated
financial statements in accordance with generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and directors; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the consolidated financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives
because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over
financial reporting also can be circumvented by collusion or improper management override. Also, projections of any
evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures
may deteriorate. Because of such limitations, there is a risk that material misstatements may not be prevented or detected
on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate,
this risk.

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such
term is defined in Rules 13a 15(f) and 15d 15(f) under the Exchange Act. Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report
entitled “Internal Control—Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) to evaluate the effectiveness of our internal control over financial reporting. Based on its
evaluation, management has concluded that our internal control over financial reporting was effective as of
December 31, 2021.

Changes in Internal Control Over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our Chief Executive Officer and our Chief
Financial Officer, conducted an evaluation of the internal control over financial reporting to determine whether any
changes occurred during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer did not identify any change in our internal control over financial reporting during the fiscal quarter
ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  

To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Collegium Pharmaceutical, Inc. and subsidiaries (the
“Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company
and our report dated February 24, 2022, expressed an unqualified opinion on those financial statements and included an
explanatory paragraph regarding the Company’s change in accounting principle applied to its convertible debt effective
January 1, 2021.

Basis for Opinion  

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Boston, Massachusetts
February 24, 2022

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Table of Contents

Item 9B.  Other Information

Not applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Item 10.  Directors, Executive Officers, and Corporate Governance

PART III

Other 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
by reference to our definitive proxy statement for the 2022 Annual Meeting of the Shareholders.

Our Board of Directors has adopted a Code of Ethics applicable to all of our employees, executive officers and directors.
The Code of Ethics is available on our website at www.collegiumpharma.com. Our Board of Directors is responsible for
overseeing compliance with the Code of Ethics, and our Board of Directors or an appropriate committee thereof must
approve any waivers of the Code of Ethics for employees, executive officers or directors. Disclosure regarding any
amendments to the Code of Ethics, or any waivers of its requirements, will be made on our website.

Item 11. Executive Compensation

The information required by this Item 11 is incorporated herein by reference from our definitive proxy statement for the
2022 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 is incorporated herein by reference from our definitive proxy statement for the
2022 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item 13 is incorporated herein by reference from our definitive proxy statement for the
2022 Annual Meeting of Shareholders.

Item 14.  Principal Accountant Fees and Services

The information required by this Item 14 is incorporated herein by reference from our definitive proxy statement for the
2022 Annual Meeting of Shareholders.

Item 15.  Exhibits and Financial Statement Schedules

Consolidated Financial Statements

PART IV

See Part II, Item 8 for the Consolidated Financial Statements required to be included in this Form 10-K.

Consolidated Financial Statement Schedules

All financial statement schedules are omitted because they are not applicable or the required information is included in the
consolidated financial statements or notes thereto.

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Exhibits

Exhibit
Number

Exhibit Description

2.1† Agreement and Plan of Merger, dated July 10, 2014, by and between Collegium Pharmaceutical, Inc., a

Delaware corporation, and Collegium Pharmaceutical, Inc., a Virginia corporation.(1)
3.1† Third Amended and Restated Articles of Incorporation of Collegium Pharmaceutical, Inc.(2)
3.2† Amended and Restated Bylaws of Collegium Pharmaceutical, Inc.(3)
4.1† Warrant to Purchase Stock, dated November 8, 2018, issued by Collegium Pharmaceutical, Inc. to Assertio

Therapeutics, Inc.(4)

4.2† Indenture, dated as of February 13, 2020, between Collegium Pharmaceutical, Inc. and The Bank of New

York Mellon Trust Company, N.A., as trustee. (5)

4.3† First Supplemental Indenture, dated as of February 13, 2020, between Collegium Pharmaceutical, Inc. and

The Bank of New York Mellon Trust Company, N.A., as trustee. (5)

4.4† Form of certificate representing the 2.625% Convertible Senior Notes due 2026 (included as Exhibit A to

Exhibit 4.3) (5)

4.5 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act

of 1934 (filed herewith).

10.1† Office Lease agreement by and between Campanelli-Trigate 100 TCD Stoughton, LLC, and Collegium

Pharmaceutical, Inc as of March 23, 2018. (6)

10.2+† 2015 Employee Stock Purchase Plan.(7)
10.3+† Performance Bonus Plan. (8)

10.4(a)+† Amended and Restated 2014 Stock Incentive Plan. (7)
10.4(b)+† Form of Incentive Stock Option Agreement under the Amended and Restated 2014 Stock Incentive Plan. (7)
10.4(c)+† Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2014 Stock Incentive

Plan. (7)

10.4(d)+† Form of Restricted Stock Award Agreement under the Amended and Restated 2014 Stock Incentive Plan. (7)
10.4(e)+† Form of Performance Share Unit Agreement under the Amended and Restated 2014 Stock Incentive

Plan. (9)

10.5† Form of Indemnification Agreement. (8)

10.6+†    Amended & Restated Employment Agreement, dated December 27, 2020, by and between Collegium

Pharmaceutical, Inc. and Joseph Ciaffoni.(10)

10.7+† Amended & Restated Employment Agreement, dated December 27, 2020, by and between Shirley

Kuhlmann and Collegium Pharmaceutical, Inc. (10)

10.8+† Letter Agreement dated June 4, 2018, by and between Collegium Pharmaceutical, Inc. and Michael T.

Heffernan.(11)

10.9+† Amended & Restated Employment Agreement, dated December 27, 2020, by and between Collegium

Pharmaceutical, Inc. and Scott Dreyer.(10)

10.10+† Amended & Restated Employment Agreement, effective as of December 27, 2020, by and between

Richard Malamut, M.D. and Collegium Pharmaceutical, Inc.(10)

10.11*† Commercialization Agreement, by and among, Assertio, Inc., Collegium Pharmaceutical, Inc. and

Collegium NF, LLC, dated as of December 4, 2017.(12)

10.12† Amendment dated January 9, 2018 to Commercialization Agreement by and among Assertio, Inc. and

Collegium Pharmaceutical, Inc. and Collegium NF, LLC.(12)

10.13† Amendment No. 2 to Commercialization Agreement, dated August 29, 2018, by and among Collegium

Pharmaceutical, Inc., Collegium NF, LLC, and Assertio Therapeutics, Inc.(14)

10.14† Amendment No. 3 to Commercialization Agreement, dated November 8, 2018, by and among Collegium

Pharmaceutical, Inc., Collegium NF, LLC, and Assertio Therapeutics, Inc.(4)

10.15† Purchase Agreement, dated as of February 6, 2020, by and between Collegium Pharmaceutical, Inc. and

Assertio Therapeutics, Inc.(15)

10.16† Loan Agreement, dated as of February 6, 2020, by and among the Company, its subsidiaries, BioPharma
Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V (Master) LP, as lender.(15)

57

 
 
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10.17† First Amendment to Loan Agreement, dated as of February 24, 2020, by and among the Company, its

subsidiaries, BioPharma Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V
(Master) LP, as lender.(16)

10.18† Second Amendment to Loan Agreement, dated as of May 27, 2020, by and among the Company,

Collegium Securities Corporation, BioPharma Credit PLC, as collateral agent, BPCR Limited Partnership,
as lender, and BioPharma Credit Investments V (Master) LP, as lender.(2)

10.19† License Agreement (U.S.), dated as of January 13, 2015, by and among Grünenthal GmbH, Janssen
Research & Development, LLC, Assertio Therapeutics, Inc. and Collegium Pharmaceutical, Inc.(16)
10.20† Consent Agreement, dated January 30, 2020, by and among Grünenthal GmbH, Assertio Therapeutics, Inc.

and Collegium Pharmaceutical, Inc.(16)

10.21† Settlement Agreement, dated September 29, 2020, by and among Collegium Pharmaceutical, Inc. and Teva

Pharmaceuticals USA, Inc.(17)

10.22+† Employment Agreement, dated May 24, 2021, by and between Colleen Tupper and Collegium

Pharmaceutical, Inc.(18)

21.1  Subsidiaries of Collegium Pharmaceutical, Inc.
23.1  Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
31.1  Certifying Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of

2002.

31.2  Certifying Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of

2002.

32.1  Certifying Statement of the Chief Executive Officer pursuant to Section 1350 of Title 18 of the United

States Code.

32.2  Certifying Statement of the Chief Financial Officer pursuant to Section 1350 of Title 18 of the United

States Code.

101  The following financial information from this Annual Report on Form 10-K for the year ended December
31, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets as of December 31, 2021, 2020, (ii)
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, (iii)
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2021, 2020 and 2019,
(iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019, and
(v) Notes to Consolidated Financial Statements, tagged as blocks of text.

104  Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

†Previously filed.

+Indicates management contract or compensatory plan.

* Certain portions of the exhibits that are not material and would be competitively harmful if publicly disclosed have been
redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. Copies of the unredacted exhibits will be furnished to the
Commission upon request.

(1) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1 (File No. 333-203208) filed with

the Commission on April 2, 2015.

(2) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30,

2020 filed with the Commission on August 5, 2020.

(3) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on December

4, 2017.

(4) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on November

8, 2018.

(5) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on February

13, 2020.

(6) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March

31, 2018 filed with the Commission on May 9, 2018.

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Table of Contents

(7) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-8 (File No. 333-207744) filed with

the Commission on November 2, 2015.

(8) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1/A (File No. 333-203208) filed with

the Commission on April 27, 2015.

(9) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March

31, 2019 filed with the Commission on May 8, 2019.

(10) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on December

30, 2020.

(11) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on June 4,

2018.

(12) Previously filed as an exhibit to the registrant’s Annual Report on Form 10-K filed with the Commission on March 7,

2018.

(13) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended

September 30, 2018 filed with the Commission on November 8, 2018.

(14) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended

September 30, 2018 filed with the Commission on November 8, 2018.

(15) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on February

10, 2020.

(16) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March

31, 2020 filed with the Commission on May 7, 2020.

(17) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K filed with the Commission on September

30, 2020.

(18) Previously filed as an exhibit to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June

30, 2021 filed with the Commission August 5, 2021.

Item 16. Form 10-K Summary

None.

59

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the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,

SIGNATURES

COLLEGIUM PHARMACEUTICAL, INC.

By: /s/ Joseph Ciaffoni.
Joseph Ciaffoni
Chief Executive Officer

Title

Date

President and Chief Executive Officer (Principal Executive Officer) and
Director

February 24,
2022

Executive Vice President and Chief Financial Officer (Principal Financial and
Accounting Officer)

February 24,
2022

Chairman of the Board

Director

Signature

/s/ Joseph Ciaffoni

Joseph Ciaffoni

/s/ Colleen Tupper

Colleen Tupper

/s/ Michael T. Heffernan,
R.Ph.
Michael T. Heffernan,
R.Ph.

/s/ Rita Balice-Gordon,
Ph.D.
Rita Balice-Gordon,
Ph.D.

/s/ Garen G. Bohlin

Director

Garen G. Bohlin

/s/ John A. Fallon, M.D. Director

John A. Fallon, M.D.

/s/ John G. Freund, M.D. Director

John G. Freund, M.D.

/s/ Gwen Melincoff

Director

Gwen Melincoff

/s/ Gino Santini

Director

Gino Santini

February 24,
2022

February 24,
2022

February 24,
2022

February 24,
2022

February 24,
2022

February 24,
2022

February 24,
2022

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by

the following persons in the capacities and on the dates indicated

60

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COLLEGIUM PHARMACEUTICAL, INC.
Index to Consolidated Financial Statements

Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 34)

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020, and 2019

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019

Notes to Consolidated Financial Statements

F-1

Pages

F-2

F-4

F-5

F-6

F-7

F-8

 
 
 
 
 
 
 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Collegium Pharmaceutical, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Collegium Pharmaceutical, Inc. and subsidiaries (the
"Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, shareholders' equity,
and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively
referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally
accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's
internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company changed its method of accounting for convertible debt in
2021  due  to  the  adoption  of  ASU  2020-06,  Accounting  for  Convertible  Instruments  and  Contracts  in  an  Entity’s  Own
Equity, using the modified retrospective approach.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Product Return Liability– Refer to Note 3 to the Financial Statements

Critical Audit Matter Description

Revenue is recognized when control is transferred to the customer, which occurs upon delivery, and revenue is measured as
the amount of consideration the Company expects to receive in exchange for transferring products to a customer
(“transaction price”). The transaction price for product sales includes variable consideration related to sales deductions and
a refund liability is established for estimated product returns. At the end of each reporting period, the Company

F-2

Table of Contents

updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration
is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in
circumstances during the reporting period. Variable consideration, including the risk of customer concessions, is included
in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty is subsequently resolved. The Company updates the measurement of the
refund liability at the end of each reporting period for changes in expectations about the amount of refunds with the
corresponding adjustments recognized as revenue (or reductions of revenue).

Estimating the variable consideration and the provision for the refund liability requires significant judgment by
management. Given the complexity and significant estimation involved in calculating variable consideration and the refund
liability, our audit in this area required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the revenue deductions and the refund liability (the “return adjustments”) included the
following, among others:

● We tested the effectiveness of controls over the measurement and recognition of return adjustments, including

management's controls over product returns and revenue data.

● We evaluated the Company's methodology and significant assumptions made in developing the return

adjustments.

● We tested the completeness and accuracy of the data underlying the measurement of return adjustments.
● We tested the mathematical accuracy of management's underlying calculation of return adjustments.
● We tested the reasonableness of management's estimate through corroboration with management outside of 

accounting and finance and evaluated evidence related to return adjustments.  

● We evaluated management's ability to accurately forecast product return activity by performing a retrospective
review, comparing prior period product return estimates to actual product returns processed in the subsequent
year to identify potential bias or unanticipated trends in the determination of the refund liability.

● We developed independent estimates of the return adjustments using historical sales and returns activity, product

dating and expiration dates, and other information.

/s/ Deloitte & Touche LLP

Boston, Massachusetts  
February 24, 2022  

We have served as the Company's auditor since 2016.

F-3

Table of Contents

COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

Assets
Current assets

Cash and cash equivalents
Accounts receivable, net
Inventory
Prepaid expenses and other current assets

Total current assets

Property and equipment, net
Operating lease assets
Intangible asset, net
Restricted cash
Deferred tax assets
Other noncurrent assets

Total assets
Liabilities and shareholders' equity
Current liabilities

Accounts payable
Accrued expenses
Accrued rebates, returns and discounts
Current portion of term notes payable
Current portion of operating lease liabilities

Total current liabilities

Term notes payable, net of current portion
Convertible senior notes
Operating lease liabilities, net of current portion

Total liabilities

Commitments and contingencies (see Note 11)

Shareholders’ equity:

December 31, 
2021

December 31, 
2020

$

$

$

$

$

$

186,426
105,844
17,394
5,879
315,543
19,491
7,644
268,723
2,547
78,042
87
692,077

4,189
29,214
196,996
48,353
814
279,566
61,666
139,966
7,951
489,149

174,116
83,320
15,614
4,838
277,888
18,988
8,391
335,904
2,547
—
123
643,841

10,016
24,656
156,554
47,495
730
239,451
110,019
99,575
8,765
457,810

Preferred stock, $0.001 par value; authorized shares - 5,000,000
Common stock, $0.001 par value; authorized shares - 100,000,000; 35,806,119
issued and 33,655,402 outstanding shares at December 31, 2021 and 34,612,054
issued and outstanding at December 31, 2020
Additional paid-in capital
Accumulated deficit
Treasury stock, at cost; 2,150,717 shares at December 31, 2021 and none at
December 31, 2020
Total shareholders’ equity
Total liabilities and shareholders’ equity

—

—

36
502,095
(256,342)

(42,861)
202,928
692,077

$

$

35
519,143
(333,147)

—
186,031
643,841

The accompanying notes are an integral part of these consolidated financial statements.

F-4

 
    
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents

COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)

Product revenues, net
Cost of product revenues

Cost of product revenues (excluding intangible asset
amortization)
Intangible asset amortization
Total cost of products revenues
Gross profit
Operating expenses

Research and development
Selling, general and administrative
Restructuring

Total operating expenses
Income (loss) from operations

Interest expense
Interest income

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net income (loss)

Earnings (loss) per share — basic
Weighted-average shares — basic

Earnings (loss) per share — diluted
Weighted-average shares — diluted

Years ended December 31, 
2020

2021

2019

$

276,868 $

310,016 $

296,701

59,070
67,181
126,251  
150,617

9,451
118,960
4,578
132,989
17,628
(21,014)
12
(3,374)
(74,891)
71,517 $

69,500
60,680
130,180  
179,836

9,772
113,832
—
123,604
56,232
(28,882)
232
27,582
830
26,752 $

178,908
14,752
193,660
103,041

10,340
116,449
—
126,789
(23,748)
(909)
1,935
(22,722)
—
(22,722)

2.05 $

0.78 $

34,936,817

34,407,959

1.86 $

0.76 $

41,045,805

35,151,353

(0.68)
33,453,844

(0.68)
33,453,844

$

$

$

The accompanying notes are an integral part of these consolidated financial statements.

F-5

 
 
 
 
 
 
 
Table of Contents

Balance at December 31, 2018
Exercise of common stock
options
Issuance for employee stock
purchase plan
Vesting of RSUs
Shares withheld for employee
taxes upon vesting of RSUs
Stock-based compensation
Net loss

Balance at December 31, 2019
Exercise of common stock
options
Issuance for employee stock
purchase plan
Vesting of RSUs
Shares withheld for employee
taxes upon vesting of RSUs
Stock-based compensation
Equity component of 2020
Convertible Notes, net of
issuance costs of $1,773
Net loss

Balance at December 31, 2020

Cumulative effect of
adjustment for adoption of
ASU 2020-06
Exercise of common stock
options
Issuance for employee stock
purchase plan
Vesting of RSUs and PSUs
Shares withheld for employee
taxes upon vesting of RSUs
and PSUs
Share repurchases
Forward contract on ASR
agreement
Stock-based compensation
Net income

Balance at December 31, 2021

$

$

Shares
33,265,629

201,308

74,142
196,139

(58,378)
—
—
33,678,840

637,924

67,512
335,524

(107,746)
—

—
—
34,612,054

$

—

803,485

43,719
511,743

(164,882)
—

—
—
—
35,806,119

$

COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)

Common Stock

     Additional    
Paid-In  

       Amount  

  Capital
428,729
$

2,046

816
—

(822)
16,528
—
447,297

$

6,656

758
—

(2,255)
21,910

Treasury Stock

  Accumulated   Shareholders’

Shares

      Amount

  Deficit

Equity

— $

— $

(337,177)

$

91,585

Total

—

—
—

—

—
—

—

—
—

—
—
—
— $

—
—
—
— $

—
—
(22,722)
(359,899)

$

—

—
—

—
—

—

—
—

—
—

—

—
—

—
—

2,046

817
—

(822)
16,528
(22,722)
87,432

6,657

758
—

(2,255)
21,910

44,777
—
519,143

$

—
—
— $

—
—
— $

—
26,752
(333,147)

$

44,777
26,752
186,031

5,288

(39,489)

(44,777)

11,868

755
—

—

—

—
—

—

—

—
—

(4,149)

—
— (2,150,717)

—
(42,861)

—

—
—

—
—

(5,000)
24,255
—
502,095

—
—
—
(2,150,717)

—
—
—
$ (42,861)

$

$

—
—
71,517
(256,342)

$

11,869

755
—

(4,149)
(42,861)

(5,000)
24,255
71,517
202,928

33

—

1
—

—
—
—
34

1

—
—

—
—

—
—
35

—

1

—
—

—
—

—
—
—
36

The accompanying notes are an integral part of these consolidated financial statements

F-6

    
    
 
 
 
 
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COLLEGIUM PHARMACEUTICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:

Amortization expense
Depreciation expense
Deferred income taxes
Stock-based compensation expense
Non-cash lease expense
Non-cash interest expense for amortization of debt discount and issuance costs

Changes in operating assets and liabilities:

Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Accrued rebates, returns and discounts
Operating lease assets and liabilities
Other long-term liabilities

Net cash provided by operating activities
Investing activities

Purchase of intangible asset
Purchases of property and equipment

Net cash used in investing activities
Financing activities

Proceeds from issuances of common stock from employee stock purchase plans
Proceeds from the exercise of stock options
Payments made for employee stock tax withholdings
Repurchases of common stock, including the ASR agreement
Proceeds from issuance of term note, net of issuance costs of $2,456
Proceeds from convertible senior notes, net of issuance costs of $5,473
Repayment of term notes
Repayment of term loan

Net cash (used in) provided by financing activities

Net increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period

Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:

Cash and cash equivalents
Restricted cash

Total cash, cash equivalents and restricted cash

Supplemental disclosure of cash flow information

Cash paid for offering costs
Cash paid for interest
Cash paid for income taxes

Supplemental disclosure of non-cash activities

Acquisition of property and equipment in accounts payable and accrued expenses
Accrued royalties discharged upon closing of asset acquisition
Inventory used in the construction and installation of property and equipment
Receivable from stock option exercises in other current assets
Operating lease assets assumed
Operating lease liabilities assumed

Years ended December 31, 
2020

2021

2019

$

71,517

$

26,752

$

(22,722)

67,181
1,736
(78,042)
24,255
18
3,406

(22,524)
(2,296)
(1,086)
(5,827)
4,777
40,442
—
—
103,557

—
(1,944)
(1,944)

755
11,952
(4,149)
(47,861)
—
—
(50,000)
—
(89,303)

12,310
176,663
188,973

186,426
2,547
188,973

60,680
870
—
21,910
57
8,972

(10,367)
(8,270)
(1,598)
3,769
(7,838)
(995)
—
—
93,942

(368,226)
(5,546)
(373,772)

758
6,577
(2,255)
—
192,117
138,277
(37,500)
(11,500)
286,474

14,752
731
—
16,528
313
—

4,993
(1,826)
2,037
(5,903)
6,056
12,766
734
(676)
27,783

—
(6,438)
(6,438)

817
2,046
(822)
—
—
—
—
—
2,041

6,644
170,019
176,663

$

23,386
146,633
170,019

174,116
2,547
176,663

170,019
—
170,019

$

$

$

— $
$
$

17,608
3,005

— $
$
$

18,967
483

72
$
— $
516
$
— $
— $
— $

$

293
1,145
2,299
$
80
— $
— $

30
709
—

134
—
—
—
9,957
10,691

$

$

$

$
$
$

$
$
$
$
$
$

The accompanying notes are an integral part of these consolidated financial statements.

F-7

    
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table of Contents

COLLEGIUM PHARMACEUTICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1. NATURE OF BUSINESS

Organization

Collegium Pharmaceutical, Inc. (the “Company”) was incorporated in Delaware in April 2002 and then reincorporated in
Virginia in July 2014. The Company has its principal operations in Stoughton, Massachusetts. The Company’s mission is to
build a leading, diversified specialty pharmaceutical company committed to improving the lives of people living with
serious medical conditions. The Company’s first product, Xtampza ER, is an abuse-deterrent, extended-release, oral
formulation of oxycodone. In April 2016, the United States Food and Drug Administration (the “FDA”) approved the
Company’s new drug application (“NDA”) for Xtampza ER for the management of pain severe enough to require daily,
around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. In June 2016, the
Company announced the commercial launch of Xtampza ER.

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

On February 6, 2020, the Company entered into an Asset Purchase Agreement with Assertio (the “Nucynta Purchase
Agreement”), pursuant to which the Company agreed to acquire from Assertio certain assets related to the Nucynta
Products (the “Nucynta Acquisition”), including the license from Grünenthal GmbH (“Grünenthal”), for an aggregate
purchase price of $375,000, subject to certain closing and post-closing adjustments as described in the Nucynta Purchase
Agreement. On February 13, 2020, the Company closed the Nucynta Acquisition in accordance with the Nucynta Purchase
Agreement. Upon closing, the Nucynta Commercialization Agreement was effectively terminated. Following the closing,
the Company's prior royalty obligation to Assertio ceased and the Company’s only remaining royalty obligation is to pay
14% of net sales of the Nucynta Products directly to Grünenthal.

The Company periodically reviews its accounting estimates in light of changes in circumstances, facts and experience. As
of the date of the filing of this Annual Report on Form 10-K, the Company expects the COVID-19 pandemic and actions
taken to contain it to continue to impact its revenue. Notwithstanding the lifting of COVID-19 restrictions in many
jurisdictions, and amidst continuing public health concerns relating to the spread of COVID-19, weekly pain patient office
visits continue to be depressed compared to pre-COVID periods, which in turn may account for fewer patients beginning
therapy with the Company’s products. The Company believes that the disruptions caused by COVID-19 will continue and
there remains substantial uncertainty as to when such disruptions will cease.

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

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Liquidity

The Company believes that its cash and cash equivalents at December 31, 2021, together with expected cash inflows from
the commercialization of its products, will enable the Company to fund its operating expenses, debt service and capital
expenditure requirements under its current business plan for the foreseeable future.

The Company historically experienced net losses in each year since its inception until 2020, and as of December 31, 2021,
had an accumulated deficit of $256,342.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The consolidated financial statements include the accounts of Collegium Pharmaceutical, Inc. as well as the accounts of its
subsidiaries Collegium Securities Corp. (a Massachusetts corporation), incorporated in December 2015, and Collegium NF
LLC (a Delaware limited liability company), incorporated in December 2017, both wholly owned subsidiaries requiring
consolidation. The consolidated financial statements are prepared in conformity with generally accepted accounting
principles in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in
consolidation.

Use of Estimates

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

Fair Value Measurements

Fair value measurements and disclosures describe the fair value hierarchy based on three levels of inputs as follows:

Level 1 inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 inputs:

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly

Level 3 inputs: Unobservable inputs that reflect the Company’s own assumptions about the assumptions market

participants would use in pricing the asset or liability

There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2021 and 2020.

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The following tables present the Company’s financial instruments carried at fair value using the lowest level input
applicable to each financial instrument at December 31, 2021 and 2020.

December 31, 2021

Money market funds, included in cash equivalents

December 31, 2020

Money market funds, included in cash equivalents

Total

45,078

45,069

$

$

$

$

Quoted Prices
in active
markets
(Level 1)

Significant
other
observable
inputs

(Level 2)     

Significant
unobservable
inputs
(Level 3)

45,078

45,069

$

$

— $

— $

—

—

The Company’s cash equivalents, which consist of money market funds, are measured at fair value on a recurring basis
using quoted market prices. Accordingly, these securities are categorized as Level 1.

The Company’s convertible senior notes fall into the Level 2 category within the fair value level hierarchy. The fair value
was determined based on data points other than quoted prices that are observable, either directly or indirectly, such as
broker quotes in a non-active market. As of December 31, 2021, the convertible senior notes had a fair value of
approximately $139,078 and a net carrying value of $139,966.

The Company’s term notes fall into the Level 2 category within the fair value level hierarchy and the fair value was
determined using quoted prices for similar liabilities in active markets, as well as inputs that are observable for the liability
(other than quoted prices), such as interest rates that are observable at commonly quoted intervals. As of December 31,
2021, the carrying amount of the term notes reasonably approximated the estimated fair value.

As of December 31, 2021, and December 31, 2020, the carrying amounts of the cash and cash equivalents, accounts
receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and accrued rebates, returns and
discounts, reasonably approximated the estimated fair values.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to significant concentration of credit risk, consist primarily
of cash and cash equivalents and accounts receivable. The Company maintains its cash deposits primarily with one
reputable and nationally recognized financial institution. In addition, as of December 31, 2021, the Company’s cash
equivalents were invested in money market funds. The Company has not experienced any material losses in such accounts
and management believes that the Company is not exposed to significant credit risk due to the financial position of the
financial institutions in which those deposits are held.

Three customers comprised 10% or more of the Company’s accounts receivable balance as of December 31, 2021. These
customers comprised 46%, 33% and 20% of the accounts receivable balance as of December 31, 2021; 46%, 34% and 17%
as of December 31, 2020; and 51%, 27%, and 19% as of December 31, 2019.

The same three customers comprised 10% or more of the Company’s revenue during the year ended December 31, 2021.
These customers comprised 35%, 31% and 29% of revenue during the year ended December 31, 2021; 34%, 31% and 31%
during the year ended December 31, 2020; and 34%, 31%, and 30% during the year ended December 31, 2019.

To date, the Company has not experienced any credit losses with respect to the collection of its accounts receivable and has
not recorded an allowance for credit losses as of December 31, 2021 or 2020. The Company has no financial instruments
with off balance sheet risk of loss.

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Cash and Cash Equivalents

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

Restricted Cash

Restricted cash is reported as non-current unless the restrictions are expected to be released in the next twelve months. As
of December 31, 2021 and 2020, the Company had restricted cash of $2,547, which represents cash held in a depository
account at a financial institution to collateralize conditional stand by letters of credit for the Company’s corporate credit
card program, its lease of its corporate headquarters, and its leases of vehicles for its field-based employees. 

Inventory

Inventories are stated at the lower of cost or net realizable value. Inventory costs consist of costs related to the
manufacturing of the Company’s products, which are primarily the costs of contract manufacturing and active
pharmaceutical ingredient. The Company determines the cost of its inventories on a specific identification basis, and
removes amounts from inventories on a first-in, first-out basis. If the Company identifies excess, obsolete or unsalable
items, inventories are written down to their realizable value in the period in which the impairment is identified. These
adjustments are recorded based upon various factors, including the level of product manufactured by the Company, the
level of product in the distribution channel, current and projected demand and the expected shelf-life of the inventory
components. As of December 31, 2021, cumulative estimates of excess inventory recorded as a component of cost of
product revenues were immaterial.

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

The Company has capitalized $17,394 of inventory as of December 31, 2021. The Company expects to use the inventory
over its operating cycle. 

Property and Equipment

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

Asset Category
Computers and office equipment
Laboratory equipment
Furniture and fixtures
Manufacturing equipment
Leasehold improvements

Estimated Useful Life
3-5 years
5 years
7 years
5-13 years
Lesser of remaining lease term and estimated useful life

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

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

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Intangible Assets

The Company records the fair value of finite-lived intangible assets as of the transaction date. Intangible assets are then
amortized over their estimated useful lives using either the straight-line method, or if reliably determinable, based on the
pattern in which the economic benefit of the asset is expected to be utilized. The Company tests intangible assets for
potential impairment whenever triggering events or circumstances present an indication of impairment. If the sum of
expected undiscounted future cash flows of the intangible assets is less than the carrying amount of such assets, the
intangible assets would be written down to the estimated fair value, calculated based on the present value of expected
future cash flows.

Leases

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

Revenue Recognition

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

Research and Development Costs

Research and development costs are charged to expense as incurred and consist of costs incurred to further the Company’s
research and development activities. These costs include compensation and employee related costs, including stock based
compensation; costs associated with conducting our clinical and non-clinical activities, including clinical and non-clinical
trials that the Company conducts for post-marketing requirements; and costs for laboratory supplies, depreciation of lab
equipment, and other expenses including allocated expenses for rent and maintenance of facilities.

Patent Costs

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

Advertising and Product Promotion Costs

Advertising and product promotion costs are included in selling, general and administrative expenses and were $4,186,
$5,368 and $9,527 in the years ended December 31, 2021, 2020, and 2019 respectively. Advertising and product promotion
costs are expensed as incurred.

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Stock-Based Compensation

The Company accounts for grants of stock options, restricted stock units and performance share units to employees, as well
as to the Board of Directors, based on the grant date fair value and recognizes compensation expense over the vesting
period, net of actual forfeitures. For employee awards with service conditions, the Company recognizes compensation
expense on a straight-line basis. The Company estimates the grant date fair value of stock options using the Black-Scholes
option pricing model. The Company estimates the grant date fair value of restricted stock units based on the fair value of
the underlying common stock. For awards with performance conditions, the Company estimates the number of shares that
will vest based upon the probability of achieving performance metrics. For employee awards with market conditions, the
Company recognizes compensation expense on an accelerated attribution basis. The Company estimates the grant date fair
value of awards with market conditions using the Monte Carlo model.

Restructuring

During the three months ended December 31, 2021, the Company executed a plan to reduce its workforce, primarily related
to its salesforce. The arrangements included the payment of a cash severance benefit near the time of separation, together
with continued medical benefits and related services. As a result, the Company recognized $4,578 in restructuring expense.
Of this amount, $1,335 was paid by December 31, 2021 and $2,980 was paid in January 2022, with the remaining $263
will be paid in the first half of 2022.

Income Taxes

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

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than
not to be realized. In making such a determination, management considers all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning
strategies and the absence of carryback available from results of recent operations.

The Company records uncertain tax positions on the basis of a two-step process whereby (i) management determines
whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position
and (ii) for those tax positions that meet the more likely than not recognition threshold, management recognizes the largest
amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company will recognize interest and penalties related to uncertain tax positions within income tax expense. Any
accrued interest and penalties will be included within the related tax liability. As of December 31, 2021, the Company had
no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s
statements of operations.

Earnings per Share

Basic earnings per share is calculated by dividing the net income (loss) attributable to common shareholders by the
weighted-average number of shares of common stock outstanding during the period, without consideration for potentially
dilutive securities. Diluted earnings per share is computed by dividing the net income (loss) attributable to common
shareholders by the weighted-average number of shares of common stock, plus potentially dilutive securities outstanding
for the period, as determined in accordance with the treasury stock, if-converted, or contingently issuable accounting
methods, depending on the nature of the security. For purposes of the diluted earnings per share calculation, stock options,
restricted stock units, performance share units, and shares potentially issuable in connection with our employee stock
purchase plan and Convertible Notes are considered potentially dilutive securities and included to the extent that their
addition is not anti-dilutive.

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Embedded Derivatives

The Company accounts for derivative financial instruments as either equity or liabilities in accordance with Accounting
Standards Codification Topic 815, Derivatives and Hedging, based on the characteristics and provisions of each instrument.
Embedded derivatives are required to be bifurcated from the host instruments and recorded at fair value if the derivatives
are not clearly and closely related to the host instruments on the date of issuance. The Company’s term notes and
convertible notes (refer to Note 12, Debt) contain certain features that, in accordance with ASC 815, are not clearly and
closely related to the host instrument and represent derivatives that are required to be re-measured at fair value each
reporting period. The Company determined that the estimated fair value of the derivatives at issuance and as of
December 31, 2021 were not material based on a scenario-based cash flow model that uses unobservable inputs that reflect
the Company’s own assumptions. Should the Company’s assessment of the probabilities around these scenarios change,
including due to changes in market conditions, there could be a change to the fair value.

Recently Adopted Accounting Pronouncements

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

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes. The amendments in ASU 2019-12 affect a wide variety of income tax
accounting standards with the objective of reducing their complexity. The new standard became effective for annual and
interim periods beginning after December 15, 2020. The Company adopted this standard effective January 1, 2021 and the
adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting, to ease the potential burden in accounting for reference rate reform. The amendments
in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that
reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The new standard
became effective immediately and may be applied prospectively to contracts and transactions through December 31, 2022.
Subsequent to issuance, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, in January 2021 to
refine and clarify some of its guidance on ASU 2020-04. Upon the transition of the Company’s contracts and transactions
to new reference rates in connection with reference rate reform, the Company will prospectively apply the standard and
disclose the effect on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments
and Contracts in an Entity's Own Equity. This ASU simplifies the complexity associated with applying U.S. GAAP for
certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the
guidance for convertible instruments and derivative scope exceptions for contracts in an entity’s own equity. Under ASU
2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with
conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in
substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument, such as the Company’s
convertible senior notes, will be accounted for as a single liability measured at its amortized cost, as long as no other
features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be
applied for all convertible instruments and requires additional disclosures.

The Company elected to early adopt this guidance on January 1, 2021 using the modified retrospective method. Under this
transition method, the cumulative effect of the accounting change was removing the impact of recognizing the equity
component of the Company’s convertible notes (at issuance and the subsequent accounting impact of additional interest
expense from debt discount amortization). The cumulative effect of the accounting change as of January 1, 2021 was an
increase to the carrying amount of the convertible notes of $39,489, a reduction to accumulated deficit of $5,288, and a
reduction to additional paid-in capital of $44,777. Interest expense of the convertible senior notes will be lower as a result
of adoption of this guidance and diluted net loss per share will be computed using the if-converted method for the

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convertible senior notes. As a result of the adoption of this guidance, interest expense decreased and net income increased
by $6,488, basic earnings per share was increased by $0.19, and diluted earnings per share was decreased by $0.06 for the
year ended December 31, 2021.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments
(Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s
Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-
Classified Written Call Options. This ASU clarifies and reduces diversity in an issuer’s accounting for modifications or
exchanges of freestanding equity-classified written call options that remain equity classified after modification or
exchange. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2021 and may be applied prospectively to modifications or exchanges occurring on or after
the effective date of the amendments. The Company will adopt this standard effective January 1, 2022 and the adoption is
not expected to have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Other recent accounting pronouncements issued, but not yet effective, are not expected to be applicable to the Company or
have a material effect on the consolidated financial statements upon future adoption.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

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

Revenue Recognition

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

The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period
of the assets is one year or less.

Performance Obligations

The Company determined that performance obligations are satisfied, and revenue is recognized when a customer takes
control of the Company’s product, which occurs at a point in time. This generally occurs upon delivery of the products to
customers (wholesalers), at which point the Company recognizes revenue and records accounts receivable. Payment is
typically received 30 to 90 days after satisfaction of the Company’s performance obligations.

Transaction Price and Variable Consideration

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products
or services to a customer (“transaction price”). The transaction price for product sales includes variable

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consideration related to sales deductions, including (1) rebates and incentives, including managed care rebates, government 
rebates, co-pay program incentives, and sales incentives and allowances; (2) product returns, including return estimates; 
and, (3) trade allowances and chargebacks, including fees for distribution service fees, prompt pay discounts, and 
chargebacks. The Company will estimate the amount of variable consideration that should be included in the transaction 
price under the expected value method for all sales deductions other than trade allowances, which are estimated under the 
most likely amount method. These provisions reflect the expected amount of consideration to which the Company is 
entitled based on the terms of the contract. In addition, the Company made a policy election to exclude from the 
measurement of the transaction price all taxes that are assessed by a governmental authority that are imposed on revenue-
producing transactions.  

The Company bases its estimates of variable consideration, which could include estimates of future rebates, returns, and
other adjustments, on historical data and other information. Estimates include: (i) timing of the rebates and returns incurred,
(ii) pricing adjustments related to rebates and returns, and (iii) the quantity of product that will be rebated or returned in the
future. Significant judgment is used in determining the appropriateness of these assumptions at each reporting period.

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

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

Provisions for product returns are based on product-level returns rates, recent unprocessed return claims, as well as relevant
market events and other factors. Estimates of the future product returns are made at the time of revenue recognition to
determine the amount of consideration to which the Company expects to be entitled (that is, excluding the products
expected to be returned). To the extent the Company receives amounts in excess of what it expects to be entitled to receive
due to a product return, the Company does not recognize revenue when it transfers products to customers but instead
recognizes those excess amounts received as a refund liability. The Company updates the measurement of the refund
liability at the end of each reporting period for changes in expectations about the amount of refunds with the corresponding
adjustments recognized as revenue (or reductions of revenue).

Historically, estimates of the refund liability for product returned for Nucynta Products were based on historical returns
rates as these products have been commercially sold in the US since 2009 for Nucynta IR and since 2011 for Nucynta ER.
Because the Company began selling the Nucynta Products in 2018, the majority of Nucynta Products sold to customers by
the Company were not eligible for return until the year ended December 31, 2021, or beyond. For Xtampza ER, estimates
of the refund liability for product returns were historically based on a combination of historical actual returns processed to
date, taking into consideration the expiration date of product upon delivery to customers, as well as forecasted customer
buying and return patterns, channel inventory levels, and other specifically known market events and trends. Sales of
Xtampza increased significantly starting in 2018; as a result, the majority of Xtampza sold to customers by the Company
has not been eligible for return until the year ended December 31, 2021, or beyond.

The Company’s customers short-pay an existing invoice upon notice of a product return claim. Adjustments to the
preliminary short-paid claims are processed when the product is physically returned and the return claim is validated and
finalized. The Company’s return policy requires that product is physically returned within an 18-month window beginning
six months prior to expiration and up until twelve months after expiration.

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During the year ended December 31, 2021, there were unprecedented and significant disruptions in the processing of
product returns. Specifically, the Company’s customers, via the third-party returns processor that they and many
pharmacies engage to process the majority of the Company’s product returns, failed to return products to the Company in
the ordinary course. The value of actual returned product during the year ended December 31, 2021 represented less than
20% of the value of the product returns claimed during that period. Due to the failure of the customers and their vendor to
return product timely in the ordinary course, the Company did not physically receive returned products corresponding to
the substantial majority of the returns claimed and could not validate or finalize customer return claims, nor determine if
the return was or would be eligible for refund upon the physical return. The lack of timely processing of requested product
returns obscures information related to the validation of product returns and increases uncertainty related to the actual
volume of product that will be physically returned and credited in accordance with the Company’s returns policy.

During the fourth quarter of 2021, after significant and sustained efforts with customers to resolve the unprocessed return
claims, the Company formally denied a significant portion of these claims under the Company’s return policy. The
Company subsequently received payment for only a portion of the denied claims and intends to vigorously pursue
collections of the full amount of these short-pay receivables. Additional unprocessed return claims have and are expected to
continue to expire prior to their physical return.

Although the Company has denied and expects to continue to deny credit for product returns that are not in accordance
with its return policy, uncertainty exists related to the ultimate resolution of these claims. At the end of each reporting
period, the Company updates the estimated transaction price (including updating its assessment of whether an estimate of
variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and
the changes in circumstances during the reporting period. Variable consideration, including the risk of customer
concessions, is included in the transaction price only to the extent that it is probable that a significant reversal in the amount
of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. In particular, resolution of
the unprocessed return claims includes the risk of concession for those that are outside of the Company’s return policy. As a
result of discussions with customers related to unprocessed return claims and the uncertainty associated with the ultimate
resolution, as well as the impact of unprocessed claims on estimates of future returns, the Company recorded an adjustment
to reduce product revenue, net of $38,329, with offsetting reductions in accounts receivable or increases in the refund 
liability for future product returns.  

Significant judgment is required to determine the variable consideration included in the transaction price as described
above. Adjustments to the estimated variable consideration included in the transaction price occurs when new information
indicates that the estimate should be revised. If the value of accepted and processed claims is different than the amount
estimated and included in variable consideration, then adjustments would impact product revenue, net and earnings in the
period such revisions become known. During the year ended December 31, 2021, the Company’s adjustment related the
transaction price of performance obligations satisfied in the prior year was $26,644, which includes $8,763 in adjustments 
to the refund liability. The amount of variable consideration ultimately received and included in the transaction price may 
materially differ from the Company’s estimates, resulting in additional adjustments recorded to increase or decrease 
product revenue, net.  

F-17

Table of Contents

The following table summarizes activity in each of the Company’s product revenue provision and allowance categories for
the years ended December 31, 2021, 2020, and 2019, respectively:

Balance at December 31, 2018
Provision related to current period sales
Changes in estimate related to prior period sales
Credits/payments made
Balance at December 31, 2019
Provision related to current period sales
Changes in estimate related to prior period sales
Credits/payments made
Balance at December 31, 2020
Provision related to current period sales
Changes in estimate related to prior period sales
Credits/payments made
Balance at December 31, 2021

Rebates and
Incentives (1)

Product
Returns (2)

$

$

$

$

129,318
263,315
(2,865)
(259,867)
129,901
326,280
(539)
(322,867)
132,775
378,694
1,121
(370,211)
142,379

$

$

$

$

15,465
14,991
—
(2,808)
27,648
10,900
—
(14,769)
23,779
27,229
8,763
(5,154)
54,617

$

Trade
Allowances and
Chargebacks (3)
14,841
$
65,155
—
(65,976)
14,020
75,554
(403)
(70,116)
19,055
84,470
4
(90,303)
13,226

$

$

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

(2) Provisions for product returns are deducted from gross revenues at the time revenues are recognized and are

included in accrued rebates, returns and discounts in the Company’s Consolidated Balance Sheets.

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

As of December 31, 2021, the Company did not have any transaction price allocated to remaining performance obligations
and any costs to obtain contracts with customers, including pre-contract costs and set up costs, were immaterial.

Disaggregation of Revenue

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

Xtampza ER
Nucynta Products(1)
Total product revenues, net

2021

Years ended December 31, 
2020

2019

$

$

103,708
173,160
276,868

$

127,984
182,032
310,016

$

$

105,012
191,689
296,701

(1) For the year ended December 31, 2021, the Company recognized Nucynta IR and Nucynta ER product revenues, net of
$102,222 and $70,938 respectively. For the year ended December 31, 2020, the Company recognized Nucynta IR and
Nucynta ER product revenues, net of $116,318 and $65,714, respectively. For the year ended December 31, 2019, the
Company recognized Nucynta IR and Nucynta ER product revenues, net of $117,680 and $74,009, respectively.

F-18

    
    
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4. LICENSE AGREEMENTS

The Company periodically enters into license agreements to develop and commercialize its products. As of
December 31, 2019, the Company’s only license agreement was the Nucynta Commercialization Agreement. Upon the
closing of the Nucynta Acquisition in February 2020, the Nucynta Commercialization Agreement was effectively
terminated.

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

5. EARNINGS PER SHARE

The following table presents the computations of basic and dilutive earnings (loss) per common share:

Numerator:

Net income (loss)
Adjustment for interest expense recognized on convertible
senior notes:
Net income (loss) — diluted

Denominator:

Weighted-average shares outstanding — basic
Effect of dilutive securities:

Stock options
Restricted stock units
Performance share units
Employee stock purchase plan
Warrants
Convertible senior notes

Weighted average shares outstanding — diluted

Earnings (loss) per share — basic
Earnings (loss) per share — diluted

Years ended December 31, 

2021

2020

2019

71,517

4,675
76,192

$

$

26,752

$

(22,722)

—
26,752

—
(22,722)

34,936,817     

34,407,959

33,453,844

504,699
461,471
85,229
1,198
131,257
4,925,134

431,524
271,542
27,002
567
12,759
—

—
—
—
—
—
—

41,045,805

35,151,353

33,453,844

2.05
1.86

$
$

0.78
0.76

$
$

(0.68)
(0.68)

$

$

$
$

The Company has the option to settle the conversion obligation for its convertible senior notes due in 2026 in cash, shares
or a combination of the two. Since the Company intends to settle the principal amount of the convertible senior notes in
cash, the Company used the treasury stock method for determining the potential dilution in the diluted earnings per share
computation for the year ended December 31, 2020. Effective for the year ended December 31, 2021, the Company used
the if-converted method for the convertible senior notes as a result of the adoption of ASU 2020-06, as described in
Recently Adopted Accounting Pronouncements above.

The following table presents dilutive securities excluded from the calculation of diluted earnings per share:

Stock options
Restricted stock units
Performance share units
Employee stock purchase plan
Warrants
Convertible senior notes

Years ended December 31, 

2021

1,202,403
22,605
242,714
—
—
—

2020
2,294,961
4,809
211,618
—
—
4,925,134

2019
3,955,887
849,679
99,400
—
1,041,667
—

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For performance share units, these securities were excluded from the calculation of diluted earnings per share as the
performance-based or market-based vesting conditions were not met as of the end of the reporting period. All other
securities presented in the table above were excluded from the calculation of diluted earnings per share as their inclusion
would have had an antidilutive effect.

As discussed in Note 14, the forward contract in connection with the Company’s ASR Agreement was outstanding as of
December 31, 2021. As the Company is entitled to receive additional shares of its common stock in connection with the
outstanding forward contract, the receipt of additional shares of common stock would be antidilutive. Therefore, no
adjustments were made in the computation of earnings per share for the period the forward was outstanding.

6. INVENTORY

Inventory consisted of the following:

Raw materials
Work in process
Finished goods
Total inventory

As of December 31, 

2021

2020

$

$

3,685
1,007
12,702
17,394

$

$

3,514
1,096
11,004
15,614

During the years ended December 31, 2021, 2020 and 2019, the aggregate charges related to excess inventory were
immaterial. These expenses were recorded as a component of cost of product revenues. During the years ended
December 31, 2021 and 2020, inventory used in the construction and installation of property and equipment was $516 and
$2,299, respectively. During the year ended December 31, 2019, inventory used in the construction and installation of
property and equipment was immaterial.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

Prepaid regulatory fees
Prepaid insurance
Other current assets
Prepaid development costs
Other prepaid expenses
Prepaid expenses and other current assets

$

$

As of December 31, 

2021

2020

3,602
864
27
—
1,386
5,879

$

$

3,280
656
60
392
450
4,838

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8. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

Computers and office equipment
Laboratory equipment
Furniture and fixtures
Manufacturing equipment
Leasehold improvements
Construction-in-process
Total property and equipment
Less: accumulated deprecation
Property and equipment, net

As of December 31, 

2021

2020

1,547
1,340     
1,079
14,498
541
5,182
24,187
(4,696)
19,491

$

$

1,429
1,299
1,073
14,119
541
3,583
22,044
(3,056)
18,988

$

$

Depreciation expense related to property and equipment amounted to $1,736, $870 and $731 for the years ended
December 31, 2021, 2020 and 2019, respectively. During the years ended December 31, 2021, 2020, and 2019 the
Company disposed of fully depreciated assets of $96, $102 and $280, respectively. The Company did not have any gains or
losses from the retirement, sale or disposal of property and equipment during the years ended December 31, 2021, 2020, or
2019.

9. INTANGIBLE ASSETS

As of December 31, 2021 and 2020, the Company’s only intangible asset (“Nucynta Intangible Asset”) is related to the
Nucynta Acquisition and the Nucynta Commercialization Agreement. The gross carrying amount and accumulated
amortization of the Nucynta Intangible Asset were as follows:

Gross carrying amount
Accumulated amortization
Intangible asset, net

Nucynta Acquisitions

As of December 31, 

2021

2020

$

$

521,170
(252,447)
268,723

$

$

521,170
(185,266)
335,904

In February 2020, the Company entered into the Nucynta Purchase Agreement with Assertio, pursuant to which the
Company acquired certain intellectual property and manufacturing rights related to the Nucynta Products, including U.S.
commercialization rights, U.S. manufacturing rights, and inventory, for an aggregate purchase price of $375,000, subject to
certain closing and post-closing adjustments. The Company also agreed to assume certain regulatory and supply chain
contracts, and obligations related to Nucynta Products (refer to Note 4, License Agreements). In February 2020, the
Company entered into a loan agreement (refer to Note 12, Debt) and issued convertible senior notes (refer to Note 12,
Debt) to finance a portion of the purchase price paid pursuant to the Nucynta Purchase Agreement.

The consideration transferred in the asset acquisition was measured at cost, including transaction costs, assets transferred
by the Company, and royalty obligations discharged by the seller. The table below represents the costs accumulated to

F-21

 
 
 
    
 
 
 
 
 
 
 
 
 
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acquire the commercial rights for the Nucynta Products based on the terms of the Nucynta Purchase Agreement, as
amended:

Acquisition consideration:

Base purchase price
Cash paid for inventory
Transaction costs
Reduction for 2020 cash transferred to Assertio under the prior Nucynta Commercialization Agreement(1)
Reduction for accrued royalty obligation discharged upon closing(1)

Total acquisition consideration:

$ 375,000
6,030
6,297
(13,071)
(1,145)
$ 373,111

(1) Represents $14,216 total reduction to the base purchase price comprising of $13,071 of cash payments transferred to Assertio under the prior
Nucynta Commercialization Agreement as well as a reduction for $1,145 of discharged pre-acquisition accrued royalties based on sales from
January 1, 2020 through closing.

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

Assets acquired:

Nucynta Intangible Asset
Inventory

Total consideration allocated to assets acquired:

$

$

367,081
6,030
373,111

The Company concluded that the consideration allocable to the Nucynta Intangible Asset for the additional intellectual
property and manufacturing rights it acquired as part of the Nucynta Acquisition were incremental costs associated with the
pre-existing intangible asset from the former Nucynta Commercialization Agreement, as such costs result in probable
future economic benefits. Specifically, the additional intellectual property rights acquired in the Nucynta Acquisition
enable the Company to eliminate royalty obligations otherwise payable to Assertio under the former Nucynta
Commercialization Agreement.

Under the original terms of the Nucynta Commercialization Agreement, the Company was obligated to make guaranteed
annual minimum royalty payments.

Effective February 13, 2020, upon the closing of the Nucynta Acquisition, the Nucynta Commercialization Agreement was
effectively terminated and the Company’s royalty payment obligations to Assertio thereunder ceased. Following the
closing, the Company no longer pay royalties to Assertio and the Company’s only remaining royalty obligation is to pay
14% of net sales of the Nucynta Products directly to Grünenthal.

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Table of Contents

The following table summarizes the gross carrying amount, accumulated amortization, and net book value of the Nucynta
Intangible Asset for the years ended December 31, 2021, 2020, and 2019:

Balance as of December 31, 2018

Amortization expense

Balance as of December 31, 2019

Amortization expense through Nucynta Acquisition
Additional cost incurred from Nucynta Acquisition
Amortization expense from Nucynta Acquisition through period end

Balance as of December 31, 2020

Amortization expense through period end

Balance as of December 31, 2021

Amortization

Gross
Carrying
Value

Accumulated
Amortization

Net Book
Value

$

$

$

$

154,089
—
154,089
—
367,081
—
521,170
—
521,170

$

$

$

$

(109,834) $
(14,752)
(124,586) $
(1,754)
—
(58,926)
(185,266) $
(67,181)
(252,447) $

44,255
(14,752)
29,503
(1,754)
367,081
(58,926)
335,904
(67,181)
268,723

The Company has been amortizing the Nucynta Intangible Asset over its useful life, which is the period over which the
asset is expected to contribute directly or indirectly to the future cash flows of the Company. The Company determined that
the useful life for the Nucynta Intangible Asset was approximately 5.9 years from the closing date of the Nucynta
Acquisition. The Company recognizes amortization expense as a component of cost of product revenues in the
Consolidated Statement of Operations on a straight-line basis over its useful life as it approximates the period of economic
benefits expected to be realized from future cash inflows from sales of the Nucynta Products. Prior to the Nucynta
Acquisition, the Company had recognized $126,340 of amortization expense related to the Nucynta Intangible Asset. As
the accumulated cost basis of the Nucynta Intangible Asset was increased with the Nucynta Acquisition, the Company will
continue to prospectively amortize the resulting net intangible asset on a straight-line basis over the remaining useful life.

The following table presents amortization expense recognized for the years ended December 31, 2021, 2020, and 2019:

Nucynta amortization expense included in cost
of product revenues

$

Years ended December 31, 

2021

2020

2019

67,181

$

60,680

$

14,752

As of December 31, 2021, the remaining amortization period is approximately 4.0 years and is expected to be recognized in
the following periods:

Years ended December 31,

2022
2023
2024
2025

Remaining amortization expense:

F-23

Amortization
Expense

$

$

67,181
67,181
67,181
67,180
268,723

Table of Contents

10. ACCRUED EXPENSES

Accrued expenses consisted of the following:

Accrued royalties
Accrued audit and legal
Accrued restructuring expenses
Accrued bonuses
Accrued product taxes and fees
Accrued interest
Accrued incentive compensation
Accrued payroll and related benefits
Accrued sales and marketing
Accrued income taxes
Accrued other operating costs
Total accrued expenses

As of December 31, 

2021

2020

9,930
3,623
3,222
2,634
2,570
1,415
851
807
697
622
2,843
29,214

$

$

12,954
445
—
4,571
1,817
1,415
1,417
892
261
—
884
24,656

$

$

As of December 31, 2021, the accrued audit and legal balance presented in the table above includes $2,750 related to
litigation costs incurred to execute a settlement framework to resolve 27 pending opioid-related lawsuits.

11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

Xtampza ER Litigation

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

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

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

F-24

 
 
 
 
 
  
    
  
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Purdue subsequently filed two follow-on lawsuits asserting infringement of two patents that had been late-listed in the
Orange Book and therefore could not trigger any stay of FDA approval: Purdue filed suit asserting infringement of Patent
No. 9,073,933 in November 2015, and asserted infringement of Patent No. 9,522,919 in April 2017. In addition, Purdue
filed suit on two patents that had not been listed in the Orange Book, filing suit in June 2016 asserting infringement of
Patent No. 9,155,717 and in September 2017, asserting infringement of Patent No. 9,693,961.

On March 13, 2018, the Company filed a Petition for Post-Grant Review (“PGR”) of the ʼ961 patent with the Patent Trial
and Appeal Board (“PTAB”). The PGR argues that the ʼ961 patent is invalid for lack of a written description, for lack of
enablement, for indefiniteness, and as being anticipated by prior art. The PTAB held oral argument on the proceedings on
July 10, 2019 and was scheduled to issue a decision on the patentability of the ʼ961 patent by no later than October 4, 2019.
On September 15, 2019, Purdue commenced a voluntary case under chapter 11 of title 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the Southern District of New York. On September 24, 2019, Purdue gave
the PTAB notice of its bankruptcy filing and sought the imposition of an automatic stay of the PGR proceedings. On
October 2, 2019, the PTAB extended the one-year period for issuing its decision by up to six months.

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

A claim construction hearing was held on June 1, 2017. On November 21, 2017, the Court issued its claim construction 
ruling, construing certain claims of the ʼ933, ʼ497, and ʼ717 patents. The Court issued an order on September 28, 2018 in 
which it granted in part a motion for summary judgment that the Company filed. Specifically, the Court ruled that the 
Xtampza ER formulation does not infringe the ʼ497 and ʼ717 patents.  On September 18, 2019, Purdue gave the Court 
notice of its bankruptcy filing and sought the imposition of an automatic stay of the proceedings. On September 20, 2019, 
the matter was stayed pending further order of the Court.

On September 1, 2020, the Bankruptcy Court entered an Order Granting Motions for Relief from the Automatic Stay,
lifting the automatic stays in both the District of Massachusetts and PTAB proceedings. The Company appealed the
Bankruptcy Court’s Order, in part, and that appeal is stayed, on consent by Purdue, pending the outcome of any appeal of
the PTAB proceedings. On September 11, 2020, Purdue filed a motion to terminate the PTAB action on the basis that those
proceedings had gone beyond the 18-month statutory period. The Company opposed Purdue’s motion. On November 19,
2021, the PTAB (i) denied Purdue’s motion to terminate the PGR and (ii) issued its Final Written Decision, finding that
claims 1-17 of the ʼ961 patent were invalid for lack of written description and anticipation. On December 17, 2021, Purdue
filed a Request for Director Review. That request was denied on February 7, 2022. On February 16, 2022, Purdue filed a
Federal Circuit notice of appeal.

On April 2, 2021, the Court granted Purdue’s Motion to Lift the Stay in the District of Massachusetts that was entered
following Purdue’s Notice of Bankruptcy. On April 9, 2021, Purdue filed another follow-on lawsuit asserting infringement
of U.S. Patent No. 10,407,434, which was late-listed in the Orange Book and therefore could not trigger any stay of FDA
approval. The Company responded to Purdue’s complaint asserting the ’434 patent with a motion to dismiss. On May 21,
2021, and in response to the Company’s motion to dismiss, Purdue filed an amended complaint asserting the ’434 patent.
The Company renewed its motion to dismiss on June 4, 2021, arguing: (i) Purdue cannot, as a matter of law, state a claim
for infringement under § 271(e)(2)(A); (ii) Purdue cannot, as a matter of law, state a claim for product-by-process
infringement under §271(g); and (iii) Purdue has not alleged facts sufficient to support any indirect infringement theory
under §271(b) or (c). The Court held a hearing on the Company’s motion to dismiss on October 13, 2021, and the motion is
pending before the Court.

Like the prior follow-on lawsuits, the ’434 patent litigation was consolidated into the lead case and a scheduling order was
entered. On October 5, 2021, the Court held a claim construction hearing for the ʼ961 patent and the ʼ434 patent. On
November 17, 2021, by stipulation of the parties, the Court set (i) the fact discovery deadline for June 3, 2022; and (ii)
expert witness depositions to conclude by August 19, 2022. The court has not set a deadline for dispositive motions or trial.

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The remaining patents-in-suit in the lead consolidated action in the District of Massachusetts are the ʼ933, ʼ919, ʼ434, and 
ʼ961 patents. Purdue has made a demand for monetary relief, and requested a judgment of infringement, an adjustment of 
the effective date of FDA approval, and an injunction on the sale of the Company’s products accused of infringement. The 
Company has denied all claims and has requested a judgment that the remaining asserted patents are invalid and/or not 
infringed; the Company is also seeking a judgment that the case is exceptional and has requested an award of the 
Company’s attorneys’ fees for defending the case.  

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

Nucynta Litigation

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

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

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

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

Opioid Litigation

As a result of the opioid epidemic, numerous state and local governments, healthcare providers, and other entities have
brought suit against manufacturers, wholesale distributors, and pharmacies alleging a variety of claims related to opioid
marketing and distribution practices. In late 2017, the U.S. Judicial Panel on Multidistrict Litigation ordered the
consolidation of what were then a few hundred cases pending around the country in federal court against opioid
manufacturers and distributors into a Multi-District Litigation (MDL) in the Northern District of Ohio. Currently, the
Opioid MDL consists of over 2,000 opioid-related cases brought primarily by states, cities, counties, and other local 
entities. Generally speaking, these suits do not seek damages for injuries to individuals but rather compensation for the cost 
of public services needed to address the consequences of addicted communities, ranging from emergency response 
capabilities to rehabilitation services. The Company has been named as a defendant in a small subset of the MDL cases.  Of 
the 21 MDL cases that have named the Company as a defendant, the allegations against it have been dismissed or
withdrawn in 13 cases. In addition, the Company has been dismissed from three non-MDL cases filed in Pennsylvania and
Arkansas state courts.

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Eight cases that name the Company as a defendant, originally filed in three states, remain pending in the MDL:

● Virginia. On January 11, 2019, the City of Portsmouth filed a lawsuit in Virginia Circuit Court against the

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

● New Jersey. On March 15, 2019, the Company was named in a lawsuit in the MDL by the City of Paterson, New 
Jersey. The lawsuit alleges violations of fraud, public nuisance, negligent misrepresentation, and violations of 
state consumer protection laws, and seeks, generally, penalties and/or injunctive relief.  On June 14, 2019, the 
City of Trenton filed a lawsuit in the New Jersey Superior Court against the Company and other pharmaceutical 
manufacturers and distributors. The lawsuit alleges a variety of claims related to opioid marketing and distribution 
practices including public nuisance, common law fraud, negligent misrepresentation, negligence, and violations of 
state consumer protection laws and the New Jersey Drug Dealer Liability Act. On December 18, 2019, the case 
was transferred to the MDL.

● Connecticut. On April 9, 2019, the City of Norwich, Connecticut and the Town of Enfield, Connecticut filed

lawsuits that name the Company in Connecticut Superior Court. The lawsuits allege violations of fraud, public
nuisance, negligent misrepresentation, and violations of state consumer protection laws. On June 28, 2019, both
cases were transferred to the MDL. In October 2019, the Company was named in two additional Connecticut
lawsuits: the City of Middletown and the Town of Wethersfield. These cases were both also transferred to the
MDL in July 2019. Finally, on January 15, 2020, the Town of Windham, Connecticut filed a lawsuit that names
the Company, among other pharmaceutical manufacturers, in Connecticut Superior Court. The lawsuit alleges
violations of fraud, public nuisance, negligent misrepresentation, and violations of state consumer protection
laws. On March 3, 2020, the lawsuit was transferred to the MDL.

Each of the lawsuits in the MDL naming the Company seeks, generally, penalties and injunctive relief. None of the
lawsuits naming the Company are designated as representative cases in the MDL, and therefore, are effectively currently
stayed.

Outside of the MDL, there are several cases pending against the Company in state courts in Pennsylvania and
Massachusetts:

In Pennsylvania, six lawsuits naming the Company have been consolidated for discovery purposes in the 

●
Delaware County Court of Common Pleas as part of a consolidated proceeding of similar lawsuits brought by 
numerous Pennsylvania counties against other pharmaceutical manufacturers and distributors.  These include 
lawsuits filed between May 2018 and July 2019 on behalf of Bucks County, Clinton County, Mercer County, 
Warrington Township, Warminster Township, and the City of Lock Haven, each of Pennsylvania, alleging claims 
related to opioid marketing and distribution, including negligence, fraud, unjust enrichment, public nuisance, and 
violations of state consumer protections laws. None of these cases has been designated a Track One case in which
discovery would commence, and therefore they are all effectively stayed at present.

In Massachusetts, there are lawsuits by the City of Worcester, the City of Salem, the City of Framingham,

●
the Town of Lynnfield, the City of Springfield, the City of Haverhill, the City of Gloucester, the Town of Canton,
the Town of Wakefield, the City of Chicopee, the Town of Natick, the City of Cambridge and the Town of
Randolph, all of which have been consolidated before the Business Litigation Session of the Superior Court. The
actions allege a variety of claims related to opioid marketing and distribution practices including public nuisance,
common law fraud, negligent misrepresentation, negligence, violations of Mass Gen. Laws ch. 93A, Section 11,
unjust enrichment and civil conspiracy. The case brought by the City of Springfield was selected to advance for
the purpose of motion practice, defendants’ motions to dismiss were denied on January 3, 2020. There is no trial
date set for this case.

On December 24, 2021, the Company entered into a settlement framework with Scott+Scott Attorneys at Law, LLP (the
“Scott Firm”), the law firm representing plaintiffs in each of the 27 cases described above. Pursuant to the terms of the
settlement framework, which is subject to approval by all parties of a final settlement agreement, the Company will pay

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an aggregate amount not to exceed $2,750,000 in exchange for the dismissal, with prejudice, of each plaintiff’s lawsuit
against the Company and a release of claims related to such lawsuits. The Company has entered into this settlement
framework to efficiently resolve this litigation and does not admit any liability or acknowledge any wrongdoing in
connection with such settlement framework. The Company currently expects to execute a final settlement agreement and
make the corresponding payment during the first quarter of 2022.

Opioid-Related Request and Subpoenas

The Company, like a number of other pharmaceutical companies, has received subpoenas or civil investigative demands
related to opioid sales and marketing. The Company has received such subpoenas or civil investigative demands from the
Offices of the Attorney General of each of Washington, New Hampshire, Maryland and Massachusetts.

On December 16, 2021, the Company entered into an Assurance of Discontinuance with the Massachusetts Attorney
General (the “AoD”). Pursuant to the AoD, the Company provided certain assurances and agreed to pay the Massachusetts
Attorney General $185,000, including $65,000 relating to that office’s costs of investigation, in exchange for closure of the
investigation and a release of claims pertaining to the subject matter of the investigation. The Company is currently
cooperating with each of the foregoing states in their respective investigations.

12. DEBT

Pharmakon Term Notes

On February 6, 2020, in connection with the execution of the Nucynta Purchase Agreement, the Company, together with its
subsidiary, Collegium Securities Corporation, entered into a Loan Agreement (the “Loan Agreement”) with BioPharma
Credit PLC, as collateral agent and lender, and BioPharma Credit Investments V (Master) LP, as lender (collectively
“Pharmakon”). The Loan Agreement provides for a $200,000 secured term loan (the “term notes”), the proceeds of which
were used to finance a portion of the purchase price paid pursuant to the Nucynta Purchase Agreement. On February 13,
2020 (the “Closing Date”), the Company received the net proceeds.

The term notes bear interest at a rate based upon the three-month LIBOR rate, subject to a LIBOR floor of 2.0%, plus a
margin of 7.5% per annum, payable quarterly in arrears. The Company is required to repay the term notes by making equal
quarterly payments of principal beginning in the first quarter immediately following the third month anniversary of the
Closing Date. The term notes will mature on the calendar quarter end immediately following the 48-month anniversary of
the Closing Date and is guaranteed by the Company’s material domestic subsidiaries and also secured by substantially all
of the Company’s material assets. On the Closing Date, the Company paid to Pharmakon a facility fee equal to 2.50% of
the aggregate principal amount of the term notes, or $5,000, in addition to $427 of other expenses incurred by Pharmakon
and reimbursed by the Company (together, the “discount”). Net proceeds of $194,573 were transferred to Assertio by the
Company as agent in partial satisfaction of the Nucynta Purchase Agreement. In addition, the Company capitalized $2,456
of term notes issuance costs, related to legal and advisory fees.

Except with respect to certain prepayments made with the proceeds from new equity issuances as described below, the
Loan Agreement permits voluntary prepayment at any time, subject to a prepayment premium. The prepayment premium is
equal to 3.00% of the principal amount being prepaid prior to the second-year anniversary of the Closing Date, 2.00% of
the principal amount being prepaid on or after the second-year anniversary, but on or prior to the third-year anniversary, of
the Closing Date, and 1.00% of the principal amount being prepaid on or after the third-year anniversary of the Closing
Date, but prior to the fourth-year anniversary of the Closing Date. The Loan Agreement also includes a make-whole
premium if there is a voluntary prepayment, a prepayment due to a change in control or acceleration following an Event of
Default on or prior to the second-year anniversary of the Closing Date in an amount equal to foregone interest from the date
of prepayment through the second-year anniversary of the Closing Date. A change of control triggers a mandatory
prepayment of the term notes.

The Loan Agreement also permits single voluntary prepayments of the Loan Agreement of less than or equal to $50,000
made solely from the proceeds of an equity issuance by the Company. If equity prepayment occurs prior to the second-

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year anniversary of the Closing Date, a prepayment premium of 5.00% would apply, with no make-whole premium.

The Loan Agreement contains certain covenants and obligations of the parties, including, without limitation, covenants that
require the Company to maintain $200,000 in annual net sales and covenants that limit the Company’s ability to incur
additional indebtedness or liens, make acquisitions or other investments or dispose of assets outside the ordinary course of
business, restrictions which limit the Company’s ability to pay dividends and restrictions of net assets of subsidiaries. The
Loan Agreement also contains customary events of default, including payment defaults, breaches of covenants, change of
control and a material adverse change default. Failure to comply with these covenants would constitute an event of default
under the Loan Agreement, notwithstanding the Company’s ability to meet its debt service obligations. The Loan
Agreement also includes various customary remedies for Pharmakon following an event of default, including the
acceleration of repayment of outstanding amounts under the Loan Agreement and execution upon the collateral securing
obligations under the Loan Agreement. Under certain circumstances, a default interest rate will apply on outstanding
obligations during the occurrence and continuance of an event of default.

During the years ended December 31, 2021, 2020, and 2019, the Company recognized interest expense of $16,339,
$19,034, and zero, respectively, related to the term notes.  

As of December 31, 2021, principal repayments under the term notes are estimated to be paid as follows:

Years ended December 31,

2022
2023
2024

Total before unamortized discount and issuance costs
Less: unamortized discount and issuance costs

Total term notes

Silicon Valley Bank Term Loan Facility

Principal Payments
50,000
$
50,000
12,500
112,500
(2,481)
110,019

$

$

From August 2012 until January 2020, the Company maintained a term loan facility with Silicon Valley Bank (“SVB”),
which was amended in connection with, and as a condition to, consummation of the transactions contemplated by the
Nucynta Commercialization Agreement. Under the amended term loan (“Consent and Amendment”), the Company had a
term loan facility in an amount of $11,500, which replaced the Company’s previously existing term loan facility. The
proceeds of the Consent and Amendment were used to finance certain payment obligations under the Nucynta
Commercialization Agreement and to repay the balance of the previously existing term loan.

The Consent and Amendment bore interest at a rate per annum of 0.75% above the prime rate (as defined in the Consent
and Amendment). The Company was eligible to repay the Consent and Amendment in equal consecutive monthly
installments of principal plus monthly payments of accrued interest, commencing in January 2020.

In January 2020, the Company prepaid the outstanding principal and accrued interest on the Consent and Amendment
along with the required prepayment fees. The loss on extinguishment of the term loan was immaterial and was recorded as
a component of interest expense.

Convertible Senior Notes

On February 13, 2020, the Company issued 2.625% convertible senior notes due in 2026 (the “convertible notes”) in the
aggregate principal amount of $143,750, in a public offering registered under the Securities Act of 1933, as amended. The
convertible notes were issued in connection with funding the Nucynta Acquisition, and the proceeds of the convertible
notes were used to finance a portion of the purchase price payable pursuant to the Nucynta Purchase Agreement. Some of
the Company’s existing investors participated in the convertible notes offering.

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The Company may, at its option, settle the convertible notes in cash, shares of the Company’s common stock or a
combination of cash and shares of the Company’s common stock. Accordingly, the Company separately accounted for the
liability component (the “Liability Component”) and the embedded derivative conversion option (the “Equity Component”)
of the convertible notes by allocating the proceeds between the Liability Component and the Equity Component. In
connection with the issuance of the convertible notes, the Company incurred approximately $5,473 of debt issuance costs,
which primarily consisted of underwriting, legal and other professional fees, and allocated these costs between the Liability
Component and the Equity Component based on the allocation of the proceeds. Of the total debt issuance costs, $1,773 was
allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $3,700 was allocated to the
Liability Component and recorded as a debt discount of the convertible notes. The portion allocated to the Liability
Component is amortized to interest expense using the effective interest method over six years.

Prior to the adoption of ASU 2020-06 on January 1, 2021, the initial carrying amount of the Liability Component of
$97,200 was calculated by measuring the fair value of a similar liability that does not have an associated convertible
feature. The allocation was performed in a manner that reflected the Company’s non-convertible borrowing rate for similar
debt. The Equity Component of the convertible notes of $46,550 was recognized as a debt discount. The excess of the
principal amount of the Liability Component over its carrying amount was amortized to interest expense using the effective
interest method over six years.

Subsequent to the adoption of ASU 2020-06 on January 1, 2021, which the Company elected to adopt using the modified
retrospective method, the Company removed the impact of recognizing the Equity Component of the senior convertible
notes (at issuance and the subsequent accounting impact of additional interest expense from debt discount amortization).
The cumulative effective of the accounting change as of January 1, 2021 was an increase to the carrying amount of the
convertible notes of $39,489, a reduction to accumulated deficit of $5,288, and a reduction to additional paid-in capital of
$44,777.

The convertible notes are the Company’s senior unsecured obligations and bear interest at a rate of 2.625% per year
payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. Before August
15, 2025, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after
August 15, 2025, noteholders may convert their notes at any time at their election until the close of business on the
scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering,
as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s
common stock, at the Company’s election. The notes will mature on February 15, 2026, unless earlier repurchased,
redeemed or converted. The initial conversion rate is 34.2618 shares of common stock per $1 principal amount of notes,
which represents an initial conversion price of approximately $29.19 per share of common stock. The conversion rate and
conversion price are subject to adjustment upon the occurrence of certain events.

Holders of the convertible notes may convert all or any portion of their convertible notes, in multiples of $1 principal
amount, at their option only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2020, if the last

reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for at
least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of
the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10
consecutive trading day period, the “measurement period”) in which the “trading price” per $1 principal
amount of the Notes for each trading day of the measurement period was less than 98% of the product of the
last reported sale price per share of the Company’s common stock on such trading day and the conversion rate
on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company’s common stock;
(4) if the Company calls the convertible notes for redemption; or
(5) at any time from, and including, August 15, 2025 until the close of business on the scheduled trading day

immediately before the maturity date.

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As of December 31, 2021, none of the above circumstances had occurred and as such, the convertible notes could not have
been converted.

The Company may not redeem the convertible notes prior to February 15, 2023. On or after February 15, 2023, the
Company may redeem the convertible notes, in whole and not in part, at a cash redemption price equal to the principal
amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of
the Company’s common stock exceeds 130% of the conversion price on:

(1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on,

and including, the trading day immediately before the date the Company sends the related redemption notice; and

(2) the trading day immediately before the date the Company sends such notice.

Calling any convertible note for redemption will constitute a make-whole fundamental change with respect to that
convertible note, in which case the conversion rate applicable to the conversion of that convertible note, if it is converted in
connection with the redemption, will be increased in certain circumstances for a specified period of time.

The convertible notes have customary default provisions, including (i) a default in the payment when due (whether at
maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption
price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest
on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture; (iv) a default
with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales; (v) certain
payment or other defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other
instruments for indebtedness for money borrowed of at least $20,000; and (vi) certain events of bankruptcy, insolvency and
reorganization with respect to the Company or any of its significant subsidiaries.

As of December 31, 2021, the convertible notes outstanding consisted of the following:

Principal
Less: unamortized issuance costs
Net carrying amount

$

$

143,750
(3,784)
139,966

The Company determined the expected life of the convertible notes was equal to its six-year term. Subsequent to the
adoption of ASU 2020-06, the effective interest rate on the convertible notes was 3.26%. As of December 31, 2021, the if-
converted value did not exceed the remaining principal amount of the convertible notes.

The following table presents the total interest expense recognized related to the convertible notes during the years ended
December 31, 2021 and 2020:

Contractual interest expense
Amortization of debt discount
Amortization of debt issuance costs
Total interest expense

Years ended December 31, 

2021

2020

3,773
—
902
4,675

$

$

3,323
5,628
447
9,398

$

$

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As of December 31, 2021, the future minimum payments on the convertible notes were as follows:

Years ended December 31,

2022
2023
2024
2025
2026

Total minimum payments

Less: interest
Less: unamortized issuance costs

Convertible senior notes

13. LEASES

Operating Lease Arrangements

Future Minimum Payments
3,773
$
3,773
3,773
3,773
145,638
160,730
(16,980)
(3,784)
139,966

$

$

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

In January 2016, the Company entered a non-cancellable contract with the contract manufacturing organization (“CMO”)
of Xtampza ER. The contract term continues through December 2022 and automatically renews for successive two-year
terms unless either party gives written notice of termination two-years in advance. Xtampza ER production is currently
conducted in an area of the manufacturing plant that is shared with other clients. Pursuant to the terms of the agreement,
since 2016 the CMO has reserved 3,267 square feet of existing manufacturing space for a dedicated manufacturing suite for
Xtampza ER, which was put into service in the year ended December 31, 2020. As the Company can direct the use of the
dedicated manufacturing suite and obtain substantially all the economic benefits of the dedicated space, the Company
determined that the arrangement was an embedded operating lease. The Company expects the lease term to continue at
least through December 2026 and separated the agreement’s lease and non-lease components in determining the operating
lease assets and liabilities. The Company determined its best estimate of stand-alone prices for each of the lease and
nonlease components by considering observable information including gross margins expected to be recovered from the
Company’s service provider and terms of similar lease contracts.

As of December 31, 2021, the Company had operating lease assets of $7,644 and operating lease liabilities of $8,765
primarily related to operating lease agreements for its corporate headquarters.

Short-Term Lease Arrangements

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

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Variable Lease Costs

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

The components of lease cost for the years ended December 31, 2021, 2020, and 2019 are as follows:

Years ended December 31, 
2020

2019

2021

Lease Cost

Operating lease cost
Short-term lease cost
Variable lease cost

Total lease cost

$

$

1,305
1,492
292
3,089

$

$

1,305
1,312
331
2,948

$

$

1,446
752
283
2,481

The lease term and discount rate for operating leases for the years ended December 31, 2021 and 2020 are as follows:

Lease Term and Discount Rate:
Weighted-average remaining lease term — operating leases (years)
Weighted-average discount rate — operating leases

As of December 31, 

2021

2020

7.6
6.1%

8.6
6.1%

Other information related to operating leases for the years ended December 31, 2021, 2020, and 2019 is as follows:

Other Information:
Cash paid for amounts included in the measurement of operating leases liabilities
Leased assets obtained in exchange for new operating lease liabilities

$

Years ended December 31, 
2020
2021
2019
1,249
1,286
—
—

1,133
—

$

$

The Company’s aggregate future minimum lease payments for its operating leases, including embedded operating lease
arrangements, as of December 31, 2021, are as follows:

2022
2023
2024
2025
2026
After 2026

Total minimum lease payments
Less: Present value discount
Present value of lease liabilities

14. EQUITY

Common Stock

$

$

$

1,325
1,363
1,401
1,439
1,477
4,060
11,065
2,300
8,765

In May 2015, the Company adopted the Amended and Restated 2014 Stock Incentive Plan (the “Plan”), under which an
aggregate of 2,700,000 shares of common stock were authorized for issuance to employees, officers, directors, consultants
and advisors of the Company, plus an annual increase on the first day of each fiscal year until the expiration

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of the Plan equal to 4% of the total number of outstanding shares of common stock on December 31st of the immediately 
preceding calendar year (or a lower amount as otherwise determined by the Company’s board of directors (“Board of 
Directors”) prior to January 1st). As of December 31, 2021, there were 1,588,735 shares of common stock available for 
issuance pursuant to the Plan. The Plan provides for granting of both Internal Revenue Service qualified incentive stock 
options and non-qualified options, restricted stock awards, restricted stock units and performance stock units. The 
Company’s qualified incentive stock options, non-qualified options and restricted stock units generally vest ratably over a 
four-year period of service. The stock options generally have a ten-year contractual life and, upon termination, vested 
options are generally exercisable between one and three months following the termination date, while unvested options are 
forfeited immediately upon termination. Refer to Note 15, Stock-based Compensation, for more information.

Warrants

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

Share Repurchases

In August 2021, the Company’s board of directors authorized the Repurchase Program to repurchase up to $100,000 of
outstanding shares of the Company’s common stock at any time or times through December 31, 2022. The Repurchase
Program permits the Company to effect repurchases through a variety of methods, including open-market purchases
(including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated
transactions, or otherwise in compliance with Rule 10b-18 of the Exchange Act. Shares repurchased under the Repurchase
Program will return to the Company’s pool of authorized but unissued shares available for reissuance. The timing and
amount of any such repurchases will be determined based on share price, market conditions, legal requirements, and other
relevant factors. The Repurchase Program can be discontinued at any time. There can be no assurance as to the timing or
number of shares of any repurchases in the future.

In October 2021, the Company’s board of directors authorized an ASR Program to repurchase $25,000 of the Company’s
common stock, as part of the Company’s existing $100,000 Repurchase Program. Under the terms of the Company's ASR
agreement with an investment bank (the “ASR Agreement”), the Company paid $25,000 on November 15, 2021, and
received 1,026,694 shares, representing 80% of the upfront payment on a price per share of $19.48, the closing price on the
date the agreement was executed. The remaining shares purchased by the Company was based on the volume-weighted
average price of its common stock through January 7, 2022, minus an agreed upon discount between the parties. On
January 7, 2022, the ASR Agreement settled and the Company received an additional 307,132 shares, bringing the total
shares repurchased pursuant to the ASR Agreement to 1,333,826.

The ASR Agreement was accounted for as two separate transactions (1) a repurchase of common stock in a treasury stock
transaction recorded on November 15, 2021 and (2) a forward contract indexed to the Company’s own common stock
which settled on January 7, 2022. The forward contract for the purchase of the remaining $5,000, representing remaining
shares to be delivered by the investment bank under the ASR Agreement, was recorded as a reduction to stockholders’
equity as of December 31, 2021.

Forward contracts to repurchase a variable number of the Company’s equity shares that require physical settlement are
accounted for in conformity with guidance in ASC 815-10-15. Under ASC 815-10-15-74, contracts issued or held by a
company that are both (1) indexed to its own stock and (2) classified in stockholders’ equity in its statement of financial
position are not considered to be derivative instruments. Based on the transaction structure, the Company concluded that
the forward purchase contract portion of the Company’s ASR Agreement satisfied these criteria and accordingly was
classified as an equity instrument. In accordance with ASC 260-10-55-88, the above-noted treasury stock acquisition
resulted in an immediate reduction of 1,026,694 shares from the outstanding shares used to calculate the weighted-average
common shares outstanding for both basic and diluted earnings per share. The forward contract was outstanding as of
December 31, 2021. As the Company is entitled to receive additional shares of its common stock in connection

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with the outstanding forward contract, the receipt of additional shares of common stock would be antidilutive. Therefore,
no adjustments were made in the computation of earnings per share for the period the forward was outstanding.

As of December 31, 2021, we repurchased 2,150,717 shares at a weighted-average price of $19.93 per share for a total of
$42,861 under the Repurchase Program and the cost of repurchased shares were recorded as treasury stock in the
condensed consolidated Balance Sheet. As of December 31, 2021, $57,139 remained available for share repurchases under
the Repurchase Program.

15. STOCK-BASED COMPENSATION

Performance Share Units, Restricted Stock Units and Stock Options

Performance Share Units

The Company periodically grants performance share units (“PSUs”) to certain members of the Company's senior
management team. PSUs vest subject to the satisfaction of annual and cumulative performance and/or market conditions
established by the Compensation Committee.

In January 2019, the Company granted PSUs with performance conditions related to 2019, 2020, 2021 and three-
year cumulative revenue goals for Xtampza ER. The PSUs were to vest following a three-year performance period, subject
to the satisfaction of the performance criteria and the executive’s continued employment through the performance period.
PSUs may vest in a range between 0% and 200%, based on the satisfaction of performance criteria, and no shares will be
issued if the minimum applicable performance metric is not achieved. The Company recognizes compensation expense
ratably over the required service period based on its estimate of the number of shares that will vest based upon the
probability of achieving the performance metrics. During the year ended December 31, 2021, the Company adjusted
cumulative compensation expense based on the number of shares that vested.

Beginning in February 2020 and subsequently in 2021, the Company granted PSUs with performance criteria related to the
relative ranking of the total stockholder return (“TSR”) of the Company’s common stock for each individual year within a
three-year performance period as well as the cumulative three-year performance period return relative to the TSR of certain
peer companies within the S&P Pharmaceutical Select Industry Index. TSR will be measured based on the 30-day average
stock price on the first day of each period compared to the 30-day average stock price on the last day of each period. The
PSUs subject to the annual performance criteria will vest annually, subject to the satisfaction of the performance criteria
and the executive’s continued employment through the performance period. The cumulative PSUs will vest following
the three-year performance period, subject to the satisfaction of the performance criteria and the executive’s continued
employment through the performance period. PSUs may vest in a range between 0% and 200%, based on the satisfaction of
performance, and no shares will be issued if the minimum applicable performance metric is not achieved. As these PSUs
vest based on the achievement of market conditions, the grant date fair values were determined using a Monte-Carlo
valuation model. The Monte-Carlo valuation model considered a variety of potential future share prices for the Company as
well as its peer companies in the selected market index.

In December 2020, the Company’s board of directors approved a modification of PSUs that were originally granted to the
Company’s senior management team in January 2019. The modification replaced the original performance criteria for the
2020, 2021 and cumulative performance periods from being based on Xtampza 2020, 2021 and three-year cumulative
revenue goals to being based on TSR for 2020, 2021 and the corresponding two-year cumulative period. The PSUs
achieved based on 2019 Xtampza revenues goals were not changed as part of the modification. The Company accounted
for this modification under ASC 718, and, per guidance, determined the modification created incremental value as the fair
value of these awards was increased upon modification. The increase in fair value resulted in an accelerated recognition of
stock-based compensation expense on the modification date of $906. The total expense for these PSUs in years ended
December 31, 2021, 2020, and 2019 was $289, $950 and $136, respectively.

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A summary of the Company’s performance share units activity for the year ended December 31, 2021 and related
information is as follows:

Outstanding at December 31, 2020

Granted
Vested
Forfeited
Performance adjustment

Outstanding at December 31, 2021

Shares

Weighted-Average
Grant Date Fair Value

283,223
231,180
(66,974)
(81,720)
(12,609)
353,100

$

$

24.26
35.15
22.35
30.66
21.80
31.77

The number of PSUs awarded represents the target number of shares of common stock that may be earned; however, the
actual number of shares earned may vary based on the satisfaction of performance criteria. The weighted-average grant
date fair value of PSUs granted for the years ended December 31, 2021, 2020, and 2019 was $35.15, $28.49, and $15.90,
respectively.

For the years ended December 31, 2021, 2020, and 2019, the stock-based compensation expense for PSUs was $4,817,
$3,551, and $136, respectively.

As of December 31, 2021, the unrecognized compensation cost related to performance share units was $4,443 and is
expected to be recognized as expense over approximately 2.0 years.

Restricted Stock Units

A summary of the Company’s restricted stock units (“RSUs”) activity for the year ended December 31, 2021 and related
information is as follows:

Outstanding at December 31, 2020

Granted
Vested
Forfeited

Outstanding at December 31, 2021

Shares

Weighted-Average
Grant Date Fair Value

1,242,387
1,373,031
(444,769)
(550,626)
1,620,023

$

$

19.42
24.23
19.17
22.63
22.48

The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2021, 2020 and 2019 was
$24.23, $21.35 and $15.38. The total fair value of RSUs vested (measured on the date of vesting) for the years ended
December 31, 2021, 2020 and 2019 was $11,165, $6,992 and $2,683, respectively.

As of December 31, 2021, the unrecognized compensation cost related to restricted stock units was $24,936 and is expected
to be recognized as expense over approximately 2.7. The weighted-average grant date fair value of restricted stock units
vested during the years ended December 31, 2021, 2020, and 2019 was $8,526, $5,989, and $4,066, respectively.

Stock Options

The Company granted stock options to employees for the years ended December 31, 2021, 2020 and 2019. The Company
estimates the fair value of stock options as of the date of grant using the Black-Scholes option pricing model and restricted
stock awards and restricted stock units based on the fair value of the award.

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Table of Contents

A summary of the Company’s stock option activity for the year ended December 31, 2021 and related information is as
follows:

Outstanding at December 31, 2020

Granted
Exercised
Cancelled

Outstanding at December 31, 2021
Exercisable at December 31, 2021

Weighted-
Average
Exercise Price  
per Share

Weighted-
Average
Remaining
Contractual
     Term (in years)     

Aggregate
Intrinsic
Value

17.78  
21.03
14.78
20.65
18.33  
18.26  

7.2

$

13,011

5.8
5.3

$
$

6,070
5,262

Shares
3,860,481
90,000
(803,485)
(418,827)
2,728,169
2,220,889

$

$
$

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

Risk-free interest rate
Volatility
Expected term (years)
Expected dividend yield

2021

Year ended December 31, 
2020

2019

0.7 %  
67.2 %  
6.0
— %  

1.3 %  
66.2 %  
6.0
— %  

2.4 %  
63.3 %  
6.1
— %  

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

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

Expected Term. The expected term represents the period of time that options are expected to be outstanding. Because the
Company does not have historical exercise behavior through December 31, 2021, it determined the expected term
assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

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

The weighted-average grant date fair value of stock options granted for the years ended December 31, 2021, 2020, and
2019 was $12.60, $12.78 and $9.07 respectively. The total intrinsic value of stock options exercised for the years ended
December 31, 2021, 2019, and 2018 was $6,456, $7,516 and $1,506, respectively.

As of December 31, 2021, the unrecognized compensation cost related to outstanding options was $5,096 and is expected
to be recognized as expense over approximately 1.9 years.

Employee Stock Purchase Plan

The Company’s 2015 Employee Stock Purchase Plan allows employees as designated by the Company’s Board of
Directors to purchase shares of the Company’s common stock. The purchase price is equal to 85% of the lower of the
closing price of the Company’s common stock on (1) the first day of the purchase period or (2) the last day of the

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purchase period. During the year ended December 31, 2021, 43,719 shares of common stock were purchased for total
proceeds of $755. As of December 31, 2021, there were 1,618,246 shares of common stock authorized for issuance
pursuant to the employee stock purchase plan. The expense for the years ended December 31, 2021, 2020 and 2019 was
$224, $342 and $358 respectively.

Stock-Based Compensation Expense

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

Research and development
Selling, general and administrative
Total stock-based compensation expense

16. INCOME TAXES   

Years ended December 31, 

2021

2020

2019

$

$

3,422     
20,833
24,255

$

3,909
18,001
21,910

$

$

2,126
14,402
16,528

For the years ended December 31, 2021 and 2020, the Company recorded a benefit from income taxes of $74,891 and
provision for income taxes of $830, respectively. For the year ended December 31, 2019, the Company did not record a
current or deferred income tax provision or (benefit) due to current and historical losses incurred by the Company. The
Company's losses before income taxes consisted solely of losses from domestic operations.

The provision for (benefit from) income taxes contained the following components:

Current provision (benefit):
Federal
State

Deferred provision (benefit):
Federal
State

Income tax provision (benefit)

Year Ended December 31,

2021

2020

2019

$

$

$

—
3,142
3,142

(61,445)
(16,588)
(78,033)
(74,891)

$

$

$

—
830
830

—
—
—
830

$

$

$

—
—
—

—
—
—
—

A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as
reflected in the consolidated financial statements is as follows:

Federal income tax expense at statutory rate
(Increase) decrease income tax (benefit) resulting from:

State income tax, net of federal benefit
Permanent differences
Stock compensation
Research and development credit
Change in valuation allowance

Effective income tax rate

As of December 31, 

2021

2020

21.0 %  

21.0 %  

2019

21.0 %

2.9
(3.9)
(18.8)
16.3
2,202.5
2,220.0 %  

5.1
1.1
(3.0)
(1.1)
(20.1)

5.6
(1.4)
(1.8)
1.8
(25.2)

3.0 %  

— %

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Table of Contents

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

Deferred tax assets:

U.S. and state net operating loss carryforwards
Research and development credits
Operating lease liabilities
Returns and discounts
Stock-based compensation
Accruals and other
Intangible assets

Gross deferred tax assets:
Valuation allowance
Total deferred tax assets:
Deferred tax liabilities:

Debt discount
Operating lease assets
Depreciation

Net deferred tax assets

As of December 31, 
2020
2021

$

$

31,400
5,470
2,321
23,072
7,838
2,210
12,699
85,010
(1,966)
83,044

—
(2,024)
(2,978)
78,042

$

$

57,457
5,004
2,508
6,281
7,133
1,892
1,297
81,572
(65,661)
15,911

(10,809)
(2,217)
(2,885)
—

The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In
determining the extent to which a valuation allowance for deferred tax assets is required, the Company evaluates all
available evidence including projections of future taxable income, carry back opportunities, reversal of certain deferred tax
liabilities, and other tax planning strategies. Prior to generating income during the year ended December 31, 2020, the
Company had a history of operating losses and a valuation allowance was maintained on the majority of the Company's
deferred tax assets through March 31, 2021.

As a result of sustained positive earnings history through cumulative earnings over the last three years, as of June 30, 2021, 
the Company began using projections of future taxable income as a source of realizing its deferred tax assets.  Accordingly, 
the Company released the portion of the valuation allowance on deferred tax assets expected to be realized through future 
earnings in the three months ended June 30, 2021. The Company recognized a deferred tax benefit of $78,042 for the year 
ended December 31, 2021. The net operating losses expected to be recovered through ordinary income in the year ended 
December 31, 2021 are included in the annual effective tax rate. The Company has maintained a valuation allowance on the 
portion of its deferred tax assets that are not more likely than not to be realized due to tax limitation or other conditions of 
$1,966 as of December 31, 2021.

As of December 31, 2021, 2020, and 2019, the Company had gross U.S. federal net operating loss carryforwards of
$119,280, $226,824, and $292,342, respectively, which may be available to offset future income tax liabilities. The Tax
Cuts and Jobs Act of 2017 (“TCJA”) will generally allow losses incurred after 2017 to be carried over indefinitely but will
generally limit the NOL deduction to the lesser of the NOL carryover or 80% of a corporation’s taxable income (subject to
Internal Revenue Code Sections 382 and 383). Also, there will be no carryback for losses incurred after 2017. Losses
incurred prior to 2018 will generally be deductible to the extent of the lesser of a corporation’s NOL carryover or 100% of
a corporation’s taxable income (subject to Internal Revenue Code Section 382 and 383) and be available for twenty years
from the period the loss was generated.

As of December 31, 2021, 2020, and 2019, the Company also had gross U.S. state net operating loss carryforwards of
$103,044, $170,280, and $222,629, respectively, which may be available to offset future income tax liabilities and expire at
various dates through 2036.

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As of December 31, 2021, 2020 and 2019, the Company had federal research and development tax credit carryforwards of
approximately $4,503, $4,623, and $4,044, respectively, available to reduce future tax liabilities which expire at various
dates through 2036. As of December 31, 2021, 2020 and 2019 the Company had state research and development tax credit
carryforwards of approximately $955, $1,150, and $1,112, respectively, available to reduce future tax liabilities which
expire at various dates through 2036.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review
and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit
carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership
interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the
Internal Revenue Code, respectively, as well as similar state provisions.

During 2020, the Company completed an updated study to assess the impact of ownership changes, if any, on the
Company’s ability to use its NOL and tax credit carryovers as defined under Section 382 of the Internal Revenue Code
(“IRC 382”). As a result of the study, the Company concluded that there were ownership changes that occurred during the
years 2006, 2012 and 2015 that could be subject to IRC 382 limitations. These IRC 382 annual limitations may limit the
Company’s ability to use pre-ownership change federal NOL carryovers and pre-ownership change federal tax credit
carryovers, which may potentially increase the Company’s future federal income tax liability.

The Company files income tax returns in the United States and in several states. The federal and state income tax returns
are generally subject to tax examinations for the tax years ended December 31, 2018 through December 31, 2021. To the
extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted
upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.

For all years through December 31, 2021, the Company generated research credits but has not conducted a study to
document the qualified activities. This study may result in an adjustment to the Company’s research and development
credit carryforwards. The Company has reduced its deferred tax asset for its estimate of credits that could be reduced, and
that is included in the tabular rollforward of uncertain tax positions.

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

Gross UTB Balance at January 1
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Gross UTB Balance at December 31

As of December 31, 
2020

2019

2021

$

$

586     
67
1
—
654

$

578
36
  —
(28)
586

$

$

$

502
76
—
—
578

Net UTB impacting the effective tax rate at December 31 excluding
valuation allowance impacts, if any

$

500

$

560

$

549

17. EMPLOYEE BENEFITS

The Company has a retirement savings plan, which is qualified under section 401(k) of the Code, for its employees. The
plan allows eligible employees to defer, at the employee’s discretion, pretax compensation up to the Internal Revenue
Service annual limits. Employees become eligible to participate starting on the first day of employment. The Company is
not required to contribute to this plan. Total expense for contributions made by the Company for the years ended
December 31, 2021, 2020 and 2019 was $1,236, $1,260, and $1,170 respectively.

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Table of Contents

18. UNAUDITED QUARTERLY OPERATING RESULTS

The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2021 and 2020:

Year ended December 31, 2021
Product revenues, net
Cost of product revenues

Cost of product revenues (excluding intangible asset amortization)
Intangible asset amortization

Total cost of products revenues
Gross profit
Operating expenses

Research and development
Selling, general and administrative
Restructuring

Total operating expenses
Income (loss) from operations

Interest expense
Interest income

Income (loss) before income taxes

(Benefit from) provision for income taxes

Net income (loss)

Earnings (loss) per share — basic
Weighted-average shares — basic

Earnings (loss) per share — diluted
Weighted-average shares — diluted

Year ended December 31, 2020
Product revenues, net
Cost of product revenues

Cost of product revenues (excluding intangible asset amortization)
Intangible asset amortization

Total cost of products revenues
Gross profit
Operating expenses

Research and development
Selling, general and administrative

Total operating expenses
Income from operations
Interest expense
Interest income

Income before income taxes

Provision for income taxes

Net income

Earnings per share — basic
Weighted-average shares — basic

Earnings per share — diluted
Weighted-average shares — diluted

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter (1)

$

87,721

$

82,942

$

78,843

$

27,362

15,328
16,795
32,123
55,598

2,930
31,476
—
34,406
21,192
(5,721)
3
15,474
(188)
15,662

0.45
34,951,740

0.41
41,160,092

$

$

$

15,908
16,795
32,703
50,239

3,462
30,368
—
33,830
16,409
(5,421)
3
10,991
(61,852)
72,843

2.06
35,302,608

1.79
41,286,853

$

$

$

15,934
16,796
32,730
46,113

1,450
30,514
—
31,964
14,149
(5,115)
3
9,037
991
8,046

0.23
35,373,909

0.22
36,261,174

$

$

$

11,900
16,795
28,695
(1,333)

1,609
26,602
4,578
32,789
(34,122)
(4,757)
3
(38,876)
(13,842)
(25,034)

(0.73)
34,123,309

(0.73)
34,123,309

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

76,511

$

78,058

$

79,176

$

27,229
10,295
37,524
38,987

2,666
31,260
33,926
5,061
(4,823)
212
450
—
450

0.01
34,100,688

0.01
35,069,693

$

$

$

12,899
16,795
29,694
48,364

2,493
29,322
31,815
16,549
(8,259)
14
8,304
246
8,058

0.23
34,395,266

0.23
35,091,906

$

$

$

14,188
16,795
30,983
48,193

2,141
26,426
28,567
19,626
(8,063)
3
11,566
280
11,286

0.33
34,540,126

0.32
35,069,188

$

$

$

76,271

15,184
16,795
31,979
44,292

2,472
26,824
29,296
14,996
(7,737)
3
7,262
304
6,958

0.20
34,592,277

0.20
35,417,623

$

$

$

$

$

$

$

(1) In the fourth quarter of 2021, product revenues, net included a $38,329 product revenue adjustment related to

returns adjustments, of which $13,787 related to Xtampza revenue and $24,542 related to Nucynta Products
revenue. In addition, selling general and administrative operating expense includes $2,935 of expense related to
litigation settlements.

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Table of Contents

19. BIODELIVERY SCIENCES INTERNATIONAL, INC. ACQUISITION

On February 14, 2022, the Company and BioDelivery Sciences International, Inc. (NASDAQ: BDSI) announced the
Merger Agreement pursuant to which Collegium will acquire BDSI for $5.60 per share in cash. The transaction, which has
been unanimously approved by the boards of directors of both companies, is expected to close late in the first quarter 2022,
subject to customary closing conditions, including receipt of required regulatory approvals and the tender of a majority of
outstanding shares of BDSI’s common stock. Following the successful closing of the tender offer, the Company will
acquire any shares of BDSI that are not tendered in the tender offer through a second-step merger at the same consideration
as paid in the tender offer.

In connection with the definitive agreement to acquire BDSI, Collegium entered into a commitment letter (the “Debt
Commitment Letter” with Pharmakon Advisors, L.P. pursuant to which funds managed by Pharmakon Advisors, L.P. have
committed, subject to customary conditions, to provide to Collegium a four (4) year senior secured term loan facility in an
aggregate principal amount of $650 million (the “Term Facility”). Proceeds will be used to finance a portion of Collegium’s
acquisition of BDSI, as well as to repay the outstanding debt of Collegium and BDSI and pay certain fees and expenses
related thereto. Under the terms of the Debt Commitment Letter, the Term Facility will have $100 million in amortization
payments during the first year and the remaining $550 million balance will amortize in equal quarterly installments over
the remaining three (3) years. The loan will initially bear interest at 3-month LIBOR plus 7.50% per annum subject to a
1.20% floor, and Collegium will pay a one-time fee of 2% due at signing and 1% due at closing. The obligation of
Pharmakon Advisors, L.P. to provide the financing under the Debt Commitment Letter is subject to a number of conditions,
including the receipt by Pharmakon Advisors, L.P. of executed loan documentation, the accuracy of certain representations
and warranties in all material respects and consummation of the transactions as contemplated by the Merger Agreement.

F-42

Exhibit 4.5

DESCRIPTION OF THE REGISTRANT’S COMMON STOCK

References to “the Company,” “Collegium,” “we,” “our” and “us” herein are, unless the context otherwise indicates, only to

Collegium Pharmaceutical, Inc. and not to any of its subsidiaries.

The following description of our common stock is a summary and does not purport to be complete. It is subject to and qualified in its

entirety by reference to our Third Amended and Restated Articles of Incorporation (our “amended and restated articles of
incorporation”) and amended and restated bylaws, each of which is incorporated by reference as an exhibit to the Annual Report on
Form 10-K of which this Exhibit 4.5 is a part. We encourage you to read our amended and restated articles of incorporation, amended
and restated bylaws and the applicable provisions of the Virginia Stock Corporation Act, for additional information.

Common Stock

Authorized Capital Stock.  Our authorized capital stock consists of 105,000,000 shares, 100,000,000 of which are designated as
common stock with a par value of $0.001 per share and 5,000,000 of which are designated as preferred stock with a par value of $0.001.
Shares of our common stock have the following rights, preferences and privileges:

Voting Rights. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a
vote of the shareholders. With certain exceptions, a majority of the votes cast at a shareholder meeting at which a quorum is present must
approve all shareholder matters. Our amended and restated articles of incorporation provide that an amendment to our amended and
restated articles of incorporation, a merger, share exchange, domestication, entity conversion, sale of assets that requires shareholder
approval or our dissolution must be approved by a majority of all the votes entitled to be cast at a shareholder meeting. Our amended and
restated articles of incorporation provide that an amendment to our amended and restated bylaws by the shareholders must be approved
by at least a majority of all the votes entitled to be cast. Our amended and restated bylaws also provide that our directors are elected by a
majority of the votes cast in non-contested director elections. In contested elections, directors are elected by a plurality of the votes cast
plurality of the votes cast.

Dividends. Subject to the preferences applicable to any shares of preferred stock outstanding at any time, holders of our common
stock are entitled to receive dividends when and as declared by our board of directors from assets or funds legally available therefor. The
timing, declaration, amount and payment of future dividends will depend on our financial condition, earnings, capital requirements and
debt service obligations, as well as legal requirements, regulatory constraints, industry practice and other factors that our board of
directors deems relevant. Our board of directors will make all decisions regarding our payment of dividends from time to time in
accordance with applicable law.

Liquidation. Subject to any preferential liquidation rights of holders of preferred stock that may be outstanding, upon our
dissolution, the holders of our common stock will be entitled to share ratably in our assets legally available for distribution to our
shareholders.

No Preemptive or Similar Rights. The holders of our common stock do not have any preemptive rights or preferential rights to
subscribe for shares of our capital stock or any other securities. Our common stock is not subject to any redemption or sinking fund
provisions.

Transfer Agent and Registrar. The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

Listing. Our common stock is listed on NASDAQ under the symbol “COLL.”

Anti-Takeover Effects of Provisions of our Articles of Incorporation, our Bylaws and Virginia Law

Various provisions contained in our amended and restated articles of incorporation, our amended and restated bylaws and Virginia

law could delay, deter or discourage some transactions involving an actual or potential change in control of the Company.

Articles of Incorporation and Bylaws

Preferred stock

Our amended and restated articles of incorporation authorize our board of directors to establish one or more series of preferred stock
and to determine, with respect to any series of preferred stock, the preferences, rights and other terms of such series. Under this authority,
our board of directors could create and issue a series of preferred stock with rights, preferences or restrictions that have the effect of
discriminating against an existing or prospective holder of our capital stock as a result of such holder beneficially owning or
commencing a tender or exchange offer for a substantial amount of our common stock. One of the effects of authorized but unissued and
unreserved shares of preferred stock may be to render it more difficult for, or to discourage an attempt by, a potential acquiror to obtain
control of us by means of a merger, tender or exchange offer, proxy contest or otherwise, and thereby protect the continuity of our
management. The issuance of shares of preferred stock may have the effect of delaying, deferring or preventing a change in control of
our Company without any action by our shareholders.

Qualification and election of directors

Our amended and restated bylaws provide that to be eligible to be nominated by a shareholder for election to our board of directors,
a person must submit a written questionnaire regarding his or her background and qualifications and must agree to other representations
as set forth in our amended and restated bylaws.

Since our initial public offering, our board of directors had been divided into three classes, each serving three-year terms and until 
each director’s successor is duly elected and qualified. Under our amended and restated articles of incorporation, our board of directors 
will be declassified beginning in 2021.  Directors in office immediately after the 2020 annual meeting of shareholders will serve out their 
three-year terms, but directors elected by shareholders beginning at the 2021 annual meeting will be elected to one-year terms. Beginning 
at the 2023 annual meeting of shareholders, all directors will be subject to annual election for one-year terms.  Our amended and restated 
articles of incorporation do not provide for cumulative voting in the election of directors.

Board vacancies; removal

Our amended and restated articles of incorporation provide that any vacancy occurring on our board of directors will be filled by a
majority of directors then in office, even if less than a quorum. Our amended and restated articles of incorporation also provide that our
directors can only be removed for cause upon the vote of more than two-thirds of the votes entitled to be cast by holders of common
stock.

Special meetings of shareholders; number of directors and unanimous written consent of shareholders

Our amended and restated articles of incorporation provide that only the board of directors, the chairman of the board of directors or
the president may call a special meeting of the shareholders. Our amended and restated bylaws provide that the authorized number of our
directors be changed only by resolution of our board of directors. Our amended and restated bylaws prohibit shareholders from acting by
less-than-unanimous written consent.

Advance notification of shareholder nominations and proposals

Our amended and restated bylaws establish advance notice procedures with respect to shareholder proposals and the nomination of

persons for election as directors, other than nominations made by or at the direction of our board of directors.

Virginia Anti-Takeover Statutes

Affiliated transactions statute

Virginia law contains provisions governing certain material transactions, or affiliated transactions, between the Company and any
holder of more than 10% of any class of its outstanding voting shares, or an interested shareholder. In general, these provisions prohibit a
Virginia corporation from engaging in an affiliated transaction with an interested shareholder for a period of three years following the
date such person became an interested shareholder, unless (i) a majority of the disinterested directors and the holders of at least two-
thirds of the voting shares, other than those beneficially owned by the interested shareholder, approved the affiliated transaction, or (ii)
before the date that the person became an interested shareholder, a majority of the disinterested directors approved the transaction that
resulted in the person becoming an interested shareholder. After three years, any such transaction must be at a “fair price,” as statutorily
defined, or must be approved by the holders of at least two-thirds of the voting shares, other than those beneficially owned by the
interested shareholder. Affiliated transactions subject to this approval requirement include mergers, share exchanges, material
dispositions of corporate assets not in the ordinary course of business, the sale of shares of the corporation or any of its subsidiaries to an
interested shareholder having an aggregate fair market value of greater than 5% of the aggregate fair market value of the corporation’s
outstanding shares, any dissolution of the Company proposed by or on behalf of an interested

shareholder or any reclassification, including reverse stock splits, recapitalization or merger of the Company with its subsidiaries, if any,
that increases the percentage of voting shares beneficially owned by an interested shareholder by more than 5%.

The shareholders of a Virginia corporation may adopt an amendment to the corporation’s articles of incorporation or bylaws opting
out of the provisions of Virginia law governing affiliated transactions but such amendment shall not be effective until 18 months after its
adoption. Neither our amended and restated articles of incorporation nor our amended and restated bylaws contain a provision opting out
of the provisions of Virginia law governing affiliated transactions.

Control share acquisitions statute

Virginia law also contains provisions relating to control share acquisitions, which are transactions causing the voting strength of any

person acquiring beneficial ownership of shares of a Virginia public corporation to meet or exceed certain threshold percentages (20%,
33 1 / 3 % or 50%) of the total votes entitled to be cast for the election of directors. Shares acquired in a control share acquisition have no
voting rights unless (i) the voting rights are granted by a majority vote of all outstanding shares other than those held by the acquiring
person or any officer or employee director of the corporation or (ii) the articles of incorporation or bylaws of the corporation provide that
these Virginia law provisions do not apply to acquisitions of its shares. The acquiring person may require that a special meeting of the
shareholders be held to consider the grant of voting rights to the shares acquired in the control share acquisition.

As permitted by Virginia law, our amended and restated articles of incorporation contain a provision opting out of the Virginia anti-

takeover law regulating control share acquisitions.

Indemnification and limitation of directors’ and officers’ liability

We are a Virginia corporation. As permitted by Virginia law, our amended and restated articles of incorporation provide that no
director or officer shall be liable in any proceeding brought by or in the right of us or our shareholders for monetary damages arising out
of any transaction, occurrence or other course of conduct, except for liability resulting from willful misconduct or a knowing violation of
criminal law or of any federal or state securities laws.

Our amended and restated articles of incorporation require us to indemnify any director or officer who was or is a party to a

proceeding, including a proceeding brought by or in the right of the Company, due to his or her status as our director or officer unless he
or she engaged in willful misconduct or a knowing violation of criminal law. Our amended and restated articles of incorporation also
require us to advance expenses to such person prior to the final disposition of any such proceeding.

We have obtained policies that insure our directors and officers against certain liabilities they may incur in their capacity as directors

and officers.

We have entered into indemnification agreements with our directors and executive officers. These agreements contain provisions
that may require us, among other things, to advance expenses to and indemnify these directors and officers against certain liabilities that
may arise because of their status or service as directors or officers of us.

Subsidiaries of Collegium Pharmaceutical, Inc.

Subsidiary

Collegium Securities Corporation

Collegium NF, LLC

Jurisdiction of Incorporation

Massachusetts

Delaware

Exhibit 21.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-234329 and 333-237200 on Form S-3
and Registration Statement Nos. 333-207744, 333-218767, 333-225498, 333-233092, 333-245649, and 333-258752 on
Form S-8 of our reports dated February 24, 2022, relating to the consolidated financial statements of Collegium
Pharmaceutical, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company's internal control over
financial reporting, appearing in this Annual Report on Form 10-K of Collegium Pharmaceutical, Inc. for the year
ended December 31, 2021.

Exhibit 23.1

/s/ Deloitte & Touche LLP

Boston, Massachusetts
February 24, 2022

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph Ciaffoni, 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
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with 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
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

(b)

(c)

(d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):

(a)

(b)

All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.

/s/ JOSEPH CIAFFONI
Joseph Ciaffoni
President and Chief Executive Officer

Dated: February 24, 2022

  
   
 
Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Colleen Tupper, 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
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with 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
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

(b)

(c)

(d)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):

(a)

(b)

All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.

/s/ COLLEEN TUPPER
Colleen Tupper
Executive Vice President and Chief Financial Officer

Dated: February 24, 2022

  
   
   
   
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1

In connection with the annual report on Form 10-K of Collegium Pharmaceutical, Inc. (the “Company”) for the fiscal year
ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Joseph Ciaffoni, President and Chief Executive 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 his knowledge:

(1)

(2)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.

Date: February 24, 2022

/s/ JOSEPH CIAFFONI
Joseph Ciaffoni
President and Chief Executive Officer

  
   
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.2

In connection with the annual report on Form 10-K of Collegium Pharmaceutical, Inc. (the “Company”) for the fiscal year
ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Colleen Tupper, 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 her
knowledge:

(1)

(2)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.

/s/ COLLEEN TUPPER
Colleen Tupper
Executive Vice President and Chief Financial Officer

Date: February 24, 2022