Osmotica Pharmaceuticals plc
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549FORM 10-K☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from toCommission file number 001‑38709 Osmotica Pharmaceuticals plc(Exact name of registrant as specified in its charter) IrelandNot Applicable(State or other jurisdiction of(I.R.S. Employerincorporation or organization)Identification No.) 400 Crossing BoulevardBridgewater, NJ 08807(Address of principal executive offices)(Zip Code) (908) 809‑1300(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Exchange Act: Title of Each Class Name of Each Exchange on Which RegisteredOrdinary shares, $0.01 nominal value per share Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Exchange 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 15(d) of the Exchange 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 duringthe 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 thepast 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 RegulationS-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 if disclosure of delinquent filers pursuant to Rule 405 of Regulation S-K is not contained herein, and will not be contained, to the best ofRegistrant’s knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerginggrowth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of theExchange Act. ☒Large accelerated filer ☐Accelerated filer ☐Non‑accelerated filer ☒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 orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of the voting shares held by non-affiliates of the Registrant on October 22, 2018, based upon the closing price of $9.20 of theRegistrant’s ordinary shares as reported on the Nasdaq Global Select Market, was approximately $75.1 million. The Registrant has elected to use October 22, 2018,which was the closing date of the Registrant’s initial public offering, as the calculation date, because the Registrant was a privately-held company on June 30, 2018 (thelast business day of the Registrant’s second fiscal quarter). Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Class Outstanding at March 27, 2019Ordinary shares, $0.01 nominal value per share 52,518,924 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s definitive Proxy Statement for the 2019 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commissionpursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference in PartIII items 10-14 of this Annual Report on Form 10-K. Table of ContentsTABLE OF CONTENTS Page PART I Item 1. Business4 Item 1A. Risk Factors24 Item 1B. Unresolved Staff Comments74 Item 2. Properties74 Item 3. Legal Proceedings74 Item 4. Mine Safety Disclosures75 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities76 Item 6. Selected Financial Data76 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations77 Item 7A. Quantitative and Qualitative Disclosures About Market Risk98 Item 8. Financial Statements and Supplementary Data99 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS99 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure138 Item 9A. Controls and Procedures138 Item 9B. Other Information139 PART III Item 10. Directors, Executive Officers and Corporate Governance139 Item 11. Executive Compensation140 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters140 Item 13. Certain Relationships and Related Transactions, and Director Independence140 Item 14. Principal Accountant Fees and Services140 PART IV Item 15. Exhibits and Financial Statement Schedules140 Item 16. Form 10-K Summary141 SIGNATURES 1462 Table of Contents PART ICAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historicalfacts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations andfinancial position, business strategy and plans and our objectives for future operations, are forward-looking statements. Thewords “believe,” “may,” “will,” “should,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressionsare intended to identify forward-looking statements. We have based these forward-looking statements largely on our currentexpectations and projections about future events and financial trends that we believe may affect our financial condition,results of operations, business strategy, short- and long-term business operations and objectives and financial needs.Examples of forward-looking statements include, among others, statements we make regarding: our intentions, beliefs orcurrent expectations concerning, among other things, future operations; future financial performance, trends and events,particularly relating to sales of current products and the development, approval and introduction of new products; U.S. Foodand Drug Administration, or the FDA and other regulatory applications, approvals and actions; the continuation of historicaltrends; our ability to operate our business under our new capital and operating structure; and the sufficiency of our cashbalances and cash generated from operating and financing activities for future liquidity and capital resource needs.We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should notplace significant reliance on our forward-looking statements. Actual results or events could differ materially from the plans,intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actualresults and events to differ materially from those indicated in the forward-looking statements include the following:·if we are unable to successfully develop or commercialize new products, or do so on a timely or cost effective basis,our operating results will suffer;·due to our dependence on a limited number of products, our business could be materially adversely affected if one ormore of our key products do not perform as well as expected;·failures of or delays in clinical trials could result in increased costs to us and could jeopardize or delay our ability toobtain regulatory approval and commence product sales for new products;·we are, and will continue to be in the future, a party to legal proceedings that could result in adverse outcomes;·as of December 31, 2018, we had total outstanding indebtedness of approximately $268.6 million (net of deferredfinancing costs), and we had unused commitments of $50.0 million under our senior secured credit facilities. Oursubstantial debt could adversely affect our liquidity and our ability to raise additional capital to fund operations andcould limit our ability to pursue our growth strategy or react to changes in the economy or our industry;·we face intense competition from both brand and generic companies, which could significantly limit our growth andmaterially adversely affect our financial results;·a business interruption at our manufacturing facility, our warehouses or at facilities operated by third parties that werely on could have a material adverse effect on our business;·our profitability depends on our major customers, and if our relationships with them do not continue as expected,our business, prospects and results of operations could materially suffer;·if we are unable to develop or maintain our sales capabilities, we may not be able to effectively market or sell ourproducts;3 Table of Contents·our competitors and other third parties may allege that we are infringing their intellectual property, forcing us toexpend substantial resources in resulting litigation, and any unfavorable outcome of such litigation could have amaterial adverse effect on our business;·our profitability depends on coverage and reimbursement by governmental authorities and other third-party payorsand healthcare reform and other future legislation creates uncertainty and may lead to reductions in coverage orreimbursement levels;·we are subject to extensive governmental regulation and we face significant uncertainties and potentially significantcosts associated with our efforts to comply with applicable regulations;·our products or product candidates may cause adverse side effects that could delay or prevent their regulatoryapproval, or result in significant negative consequences following regulatory approval;·manufacturing or quality control problems may damage our reputation, require costly remedial activities orotherwise negatively impact our business; and·other factors that are described in “Risk Factors,” beginning on page 23 of this Annual Report on Form 10-K.The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date hereof. Youshould not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results,levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved oroccur. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statementsfor any reason after the date hereof to conform these statements to actual results or to changes in our expectations.You should read this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity,performance and events and circumstances may be materially different from what we expect. ITEM 1. BUSINESSOverviewWe are a fully integrated biopharmaceutical company focused on the development and commercialization of specialtyproducts that target markets with underserved patient populations. We generate total revenues across our existing portfolio ofpromoted specialty neurology and women’s health products, as well as our non‑promoted products, which are primarilycomplex formulations of generic drugs. In July 2017, we received regulatory approval from the FDA, for M‑72(methylphenidate hydrochloride extended‑release tablets, 72 mg) for the treatment of attention deficit hyperactivity disorder,or ADHD, in patients aged 13 to 65 and launched M-72 in the second quarter of 2018. In February 2018, we received FDAapproval of Osmolex ER™ (amantadine extended‑release tablets) for the treatment of Parkinson’s disease and drug‑inducedextrapyramidal reactions, which are involuntary muscle movements caused by certain medications, in adults and completedcommercial launch of Osmolex ER in January 2019. In addition, we have a late‑stage development pipeline highlighted bytwo new drug application, or NDA, candidates in Phase III clinical trials: Ontinua™ ER (arbaclofen extended‑release tablets)for muscle spasticity in multiple sclerosis patients and RVL‑1201 (oxymetazoline hydrochloride ophthalmic solution, 0.1%)for the treatment of blepharoptosis, or droopy eyelid. Many of our products use our proprietary osmotic‑release drug deliverysystem, Osmodex®, which we believe offers advantages over alternative extended‑release, or ER, technologies.Our core competencies span drug development, manufacturing and commercialization. Our specialized neurology andwomen’s health sales teams support the ongoing commercialization of our existing promoted product portfolio as well as thelaunch of new products. As of December 31, 2018, we actively promoted five products: M‑72, Lorzone® (chlorzoxazonescored tablets) and ConZip® (tramadol hydrochloride extended‑release capsules) in specialty neurology; and OBComplete®, our family of prescription prenatal dietary supplements, and Divigel® (estradiol gel, 0.1%) in4 Table of Contentswomen’s health. We launched M‑72 in the second quarter of 2018, and completed the launch of Osmolex ER, in January,2019. As of December 31, 2018, we sold a portfolio consisting of approximately 37 non‑promoted products. The cash flowfrom these non‑promoted products has contributed to our investments in research and development and businessdevelopment activities. Many of our existing products benefit from several potential barriers to entry, including intellectualproperty protection, formulation and manufacturing complexities, data exclusivity, as well as U.S. Drug EnforcementAdministration, or DEA, regulation and quotas for active pharmaceutical ingredients, or API. Certain of our key products,particularly those that incorporate our proprietary Osmodex drug delivery system, are or are expected to be manufactured inour Marietta, Georgia facility.We are focused on progressing our pipeline, which is highlighted by two Phase III candidates under clinical development —arbaclofen ER and RVL‑1201. We developed arbaclofen ER using our proprietary Osmodex drug delivery system andbelieve this formulation will provide an efficacious and safe treatment for spasticity in multiple sclerosis patients. ArbaclofenER has been designated by the FDA as an Orphan Drug in this indication. We recently received topline data from our secondPhase III clinical trial of arbaclofen in multiple sclerosis patients with spasticity. The study was a multicenter, randomized,double-blind placebo controlled study in which treatment groups received either placebo, 40 mg arbaclofen per day or 80 mgarbaclofen per day. The co-primary endpoints were change from baseline in Total Numeric-transformed Ashworth Scale, orTNmAS, and Clinician Global Impression of Change, or CGIC, on day 84. Arbaclofen did not demonstrate superiority toplacebo as measured by the CGIC; however, a statistically significant improvement in spasticity relative to placebo wasdemonstrated by the TNmAS for both doses of arbaclofen (p=0.0482 and 0.0118) for 40 mg and 80 mg per day,respectively. Upon preliminary review, it appears that CGIC failed to recognize the improvement demonstrated by theTNmAS. However, the CGIC values indicated both treatment groups improved from baseline. Further, it appears that there isa dose-response relationship between the two strengths with the 80 mg exhibiting a stronger signal of efficacy as assessed bythe TNmAS scale. Though arbaclofen 80 mg per day had a higher discontinuation rate in the study, the safety andtolerability profile was in line with previously reported results, most notably a somnolence incidence of 9.5% and 14.5% forthe 40-mg and 80-mg treatment arms, respectively, compared to 9.6% for the placebo treatment arm. Somnolence is one ofthe most frequently reported dose-limiting adverse events associated with baclofen treatment today. Based on the efficacyand safety exhibited for arbaclofen, the Company remains encouraged and plans to proceed with its clinical and regulatorystrategy to file an NDA. At this time, however, it is unclear whether or not the Company will be required to conduct anadditional clinical trial which may delay our submission past 2019. Additionally, we continue to explore opportunities forarbaclofen in other indications, such as opioid withdrawal symptoms.We acquired the rights to RVL‑1201 in 2017 and are conducting a second Phase III clinical trial of RVL‑1201 for droopyeyelid. If approved, RVL‑1201 would be the first non‑surgical treatment option approved by the FDA for droopy eyelid. Wehave completed enrollment in the Phase III clinical trials for RVL-1201 and we anticipate submitting an NDA for RVL-1201in the second half of 2019. We plan to invest selectively in expanding our product portfolio by leveraging both ourproprietary Osmodex drug delivery system to develop differentiated products as well as our management team’s operatingexperience to pursue external business development opportunities.Our StrengthsWe believe our principal competitive strengths include:Diversified Portfolio of Pharmaceutical Products. As of December 31, 2018, we sold an attractive and diversified portfolioof five promoted products and approximately 37 non-promoted products. Through our specialized sales teams we promote aportfolio of specialty neurology and women's health products that we believe are differentiated from competing products andprovide meaningful benefits to patients due to their formulation or pharmacokinetic profiles. In addition, we believe that ourpromoted products are protected by a combination of patent protection, data exclusivity and our proprietary formulation andmanufacturing know-how. Our key non-promoted products are comprised of complex formulations of generic drugs thatincorporate our proprietary Osmodex drug delivery system.Efficient Research and Development Organization Generating a Targeted Pipeline. We have a history of developingcommercially successful pharmaceutical products. As of December 31, 2018, we employed 104 professionals with extensiveregulatory and drug development experience in our research and development organization. As of December5 Table of Contents31, 2018 we had 36 U.S. patents, 79 patents outside the United States and 28 pending patent applications, the last of whichexpires in 2037. Our pipeline is highlighted by two NDA candidates in Phase III clinical trials: Ontinua ER, which we areevaluating for the alleviation of signs and symptoms of spasticity resulting from multiple sclerosis, particularly for the reliefof flexor spasms and concomitant pain, clonus and muscular rigidity; and RVL-1201, which we are studying for the treatmentof blepharoptosis.Demonstrated Commercialization Capabilities. We have built a robust infrastructure for the commercialization of ourpharmaceutical products. As of December 31, 2018 our sales force was comprised of two dedicated teams that totaled 193professionals targeting approximately 18,000 physicians across the specialty neurology and women's health therapeuticareas. Our non-promoted products are supported by a team with extensive experience commercializing generic products inattractive markets.Experience Driving Patient Access in Order to Facilitate Penetration of Key Markets. We support patients' access to ourmedications through careful research and a deep understanding of the changing reimbursement landscape. We havedeveloped capabilities across the market access continuum underscored by successful payor contracting strategies andsupplemental patient assistance programs. Patient access is central to the commercialization strategy for our recent and near-term product launches. We expect that our pricing of these products will facilitate strong managed-care coverage andreimbursement, which we believe will improve patient access to our products.Product Portfolio and Pipeline That Benefit from Multiple Potential Barriers to Entry. Many of our existing productsbenefit from several potential barriers to entry, including intellectual property protection, formulation and manufacturingcomplexities, data exclusivity, as well as DEA regulation and quotas for API. Our proprietary Osmodex drug delivery systemuses osmotic pressure to provide a controlled drug release and is adaptable to many different combinations of immediate-release, extended-release and controlled- or delayed-release formulations that contain one or more drugs. We seek to identifyand develop drug candidates that are well-suited to our proprietary Osmodex drug delivery system, which we believe candeliver a differentiated and favorable pharmacokinetic profile and may provide meaningful benefits to patients. We believethat third parties attempting to compete with our products that use our proprietary Osmodex drug delivery system may facedifficulties in developing a comparable product. Likewise, we believe that formulation complexities and manufacturingchallenges may limit the number of viable competitors in the markets for our key generic products.Cash Flow from Existing Product Portfolio Enhances Research and Development Investment and Opportunistic BusinessDevelopment Activities. Our current commercial success and historical cash flow generation allow us to invest in our pipelineto support the next stage of our growth. Additionally, we opportunistically pursue strategic acquisitions and businessdevelopment initiatives to augment our internal development pipeline.Experienced and Accomplished Management Team with a Proven Track Record. Our management team brings a wealth ofexperience navigating changes in the pharmaceutical industry and delivering financial success. Led by our Chief ExecutiveOfficer, Brian Markison, our management team possesses expertise in many areas of the pharmaceutical industry, includingdrug development, manufacturing, commercial operations and finance.Our StrategyOur goal is to become a leading biopharmaceutical company by developing and commercializing drugs with significantmarket opportunities, meaningful potential barriers to entry and long product life cycles. Our strategy to achieve this goal isfocused on the following:Target Specialty Therapeutic Markets. We intend to continue developing innovative products targeting specialty marketswith underserved patient populations that we believe we can commercialize efficiently. We may expand into additionalspecialty markets where we believe there are attractive opportunities to use our expertise and proprietary Osmodex drugdelivery system to develop and commercialize differentiated products.Grow Our Existing Product Sales. We plan to leverage our existing sales force to grow our promoted product portfolioincluding M-72 and Osmolex ER. We anticipate opportunistically expanding our sales force to support future growth6 Table of Contentsand focus on products, such as M-72 and Osmolex ER, where we believe there is an attractive market. We intend to supportour non-promoted products through our national account team that manages relationships with major drug-buying consortia,pharmaceutical wholesalers and retailers in the United States.Successfully Develop Our Late-Stage Product Candidates. We are focused on advancing the development of our late-stageclinical programs to further diversify our revenue base and sustain our future growth. If successfully developed, we believeOntinua ER represents an attractive product candidate with an addressable multiple sclerosis spasticity market of up to $3.5billion in the United States. If successfully developed and approved, we believe that RVL-1201 would become the firstpharmacological treatment for blepharoptosis in the United States and would represent an important therapy in thecontinuum of care for patients with mild or moderate blepharoptosis. Our research and development efforts also includeactivities related to seeking additional indications for Ontinua ER.Expand Our Pipeline by Leveraging Our Proprietary Technology to Develop Differentiated Products. We plan to expandour pipeline of product candidates through the application of our technology, research infrastructure and developmentexpertise. Our research and development efforts are focused on identifying commercially viable products that are well suitedto benefit from our proprietary Osmodex drug delivery system. Our technology is designed to produce an extended-releaseformulation with a differentiated pharmacokinetic profile that we believe can, in certain circumstances, meaningfullyimprove upon the efficacy or side effect profiles of currently approved therapies. We plan to continue to apply our drugdevelopment criteria to make capital efficient investments in promising product candidates.Opportunistically Acquire or In-License Rights to Clinically Differentiated Products, Pipeline Candidates or Technologies.We seek to selectively acquire or in-license approved products and late-stage product candidates that complement ourexisting product portfolio, pipeline, technology or commercial infrastructure. Our management team has a history ofsuccessfully executing and integrating product and company acquisitions, which we believe positions us to capitalize onthese opportunities.Research and DevelopmentOur research and development team leverages its expertise across a variety of scientific disciplines to formulate productcandidates and advance programs through the drug development and approval process and post marketing studies. Scientificstaff in Buenos Aires, Argentina, Wilmington, North Carolina, Bridgewater, New Jersey, Marietta, Georgia and Budapest,Hungary use their expertise in our proprietary Osmodex drug delivery system, chemistry and material science to focus onidentifying drug compounds for re‑formulation to either achieve new therapeutic attributes (e.g., extended release) orindications in the case of branded products, or to achieve bioequivalence in the case of generic products. Additionally, weperform early‑stage manufacturing and technology transfer engineering and evaluate any unique intellectual property arisingfrom these activities. If we elect to progress a development candidate forward, scale‑up process engineering is performed atour manufacturing plant in Marietta, Georgia. We have capabilities in regulatory affairs, pharmaceutical science, analyticalchemistry, preclinical studies, clinical trial design and operations, quality assurance and compliance, medical affairs andpharmacovigilance. We deploy these competencies to advance a product candidate through the drug development process,and develop data and intellectual property to improve our products, support commercialization and extend product lifecycles.As of December 31, 2018, we had 104 employees in our research and development department worldwide. Our staff ofresearch scientists has expertise in the drug development process, from pre‑formulation studies and formulation development,to scale‑up and manufacturing. The clinical development and medical affairs team assumes product stewardship frompre‑clinical testing and first‑in‑human studies, Phase I, Phase II and Phase III clinical trials through to post‑marketing studies,risk management and pharmacovigilance activities. Our research and development team has extensive experiencedeveloping and coordinating clinical trial programs and communicating with the FDA throughout the process to ensureproper trial design and an efficient clinical and drug development process. Our team has a successful track record ofdeveloping products and receiving FDA approval for NDAs and abbreviated new drug applications, or ANDAs.7 Table of ContentsIntellectual PropertyWe have built and continue to develop our intellectual property portfolio for our products and product candidates. We relyon our substantial know‑how, technological innovation, patents, trademarks, trade secrets, other intellectual property andin‑licensing opportunities to maintain and develop our competitive position. We pursue patent protection in the UnitedStates and selected international markets. As of December 31, 2018, we had 36 U.S. patents, 79 patents outside the UnitedStates and 28 pending patent applications, the last of which expires in 2037.Our TechnologyOsmodex: Our Proprietary Drug Delivery SystemOur technology allows us to manufacture tablets with one or more active drugs, and in combinations of immediate-release,controlled-release, delayed-release and extended-release, or ER. We believe that our proprietary Osmodex drug deliverysystem is well-suited to address certain limitations of existing therapies that have less than optimal efficacy or unfavorableside effect profiles as a result of formulation, pharmacokinetic profiles or other complexities. However, whether ourproprietary Osmodex drug delivery system will suitably be paired with a given API is not certain or predictable. Eachsuccessful pairing that we have achieved in the past was the result of rigorous research, development and innovation. Withthat approach, our research and development team has led the successful clinical development of approved NDAsincorporating our proprietary Osmodex drug delivery system, including Allegra D® (pseudoephedrine and H1 antagonist),venlafaxine extended-release tablets (VERT), Khedezla® (desvenlafaxine extended-release tablets) and Osmolex ER.We believe that brands using osmotic extended-release technology can benefit from longer life cycles as compared to brandsdelivered in conventional extended-release dosage forms due to the complexities of mimicking extended-release profiles ofproducts using osmotic technologies. Moreover, we believe there are only a limited number of competitors with experienceusing osmotic technology. Given these dynamics, we estimate, based on market research, that osmotic extended-releasebrands have generally retained higher market share following loss of exclusivity as compared to other ER brands. We furtherestimate that generic versions of osmotic extended-release brands have tended to exhibit greater price stability as comparedto generic versions of other extended-release branded formulations, as pricing declines over time.Our PortfolioAs of December 31, 2018, we sold a diverse portfolio consisting of five promoted products and approximately 37 non-promoted products, several of which incorporate our proprietary Osmodex drug delivery system. We also have a developmentpipeline that is highlighted by two NDA candidates in Phase III clinical trials, one of which we believe has the potential forindication expansion over time. Our non-promoted product portfolio includes methylphenidate ER and VERT as well assmaller volume ANDAs and prescription dietary supplements. As of December 31, 2018 our non-promoted pipeline included16 products in various stages of development.8 Table of ContentsMany of our existing products benefit from several potential barriers to entry, including intellectual property protection,formulation and manufacturing complexities, data exclusivity, as well as DEA regulation and quotas for API. The followingtable shows our promoted and non-promoted product portfolio at December 31, 2018.Promoted Products Indication OsmodexTechnology U.S. RegulatoryStatusSpecialty Neurology M-72 ADHD in patients aged 13 to 65 Yes ApprovedOsmolex ER Parkinson's and drug-inducedextrapyramidal reactions in adults Yes ApprovedLorzone Muscle spasms No ApprovedConZip Pain No ApprovedOntinua ER Multiple sclerosis spasticity Yes Phase III Opioid withdrawal symptoms Yes Phase II ReadyWomen's Health Divigel Menopause No ApprovedOB Complete Various dietary needs during prenatal,pregnancy and postnatal periods No Dietary SupplementOphthalmology RVL-1201 Blepharoptosis (droopy eyelid) No Phase III Non-Promoted Products Indication OsmodexTechnology U.S. RegulatoryStatusMethylphenidate ER ADHD Yes ApprovedVenlafaxine ER tablets (VERT) Major Depressive Disorder and SocialAnxiety Disorder Yes ApprovedHydromorphone ER Pain Yes ApprovedNifedipine ER* Hypertension Yes ApprovedSodium Benzoate / SodiumPhenylacetate Hyperammonemia No ApprovedOxybutynin ER* Overactive bladder Yes ApprovedPrescription Prenatal Vitamins Nutritional requirements duringpregnancy No Dietary SupplementOsmodex ANDAs Various Yes In Development (3)Other ANDAs Various No Filed (9)In Development (4)Approved (1)*Out-licensed ANDAs with a commercial partner.CompetitionThe pharmaceutical industry is intensely competitive and subject to rapid and significant technological change. We willcontinue to face competition from various global pharmaceutical, biotechnology, specialty pharmaceutical and generic drugcompanies that engage in drug development activities. Many of our competitors have similar products that focus on the samediseases and conditions that our current and future pipeline products address. Many of our competitors have greater financialflexibility to deploy capital in certain areas as well as more commercial and other resources, marketing and manufacturingorganizations, and larger research and development staff. As a result, these companies may be able to pursue strategies orapprovals that we are not able to finance or otherwise pursue and may receive FDA, European Medicines Agency or otherapplicable regulatory approvals more efficiently or rapidly than us. Also, our competitors may have more experience inmarketing and selling their products post‑approval, and gaining market acceptance more quickly. Smaller or early‑stagecompanies may also prove to be significant competitors, particularly through collaborative arrangements with large,established companies. Our products could become less competitive if our competitors are able to license or acquiretechnology that is more effective or less costly and thereby offer an improved or a cheaper alternative to our products. Weexpect any products that we develop and commercialize will compete on the9 Table of Contentsbasis of, among other things, efficacy, safety, convenience of administration and delivery, price and the availability ofreimbursement from government and other third‑party payors. We also expect to face competition in our efforts to identifyappropriate collaborators or partners to help commercialize our product portfolio in our target commercial markets.Government Regulation and Approval ProcessGovernment authorities in the United States at the federal, state and local level, including the FDA, the Federal TradeCommission, or FTC, and the DEA, extensively regulate, among other things, the research, development, testing,manufacture, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, distribution,marketing and export and import of products such as those we market. For both currently marketed and future products,failure to comply with applicable regulatory requirements can, among other things, result in suspension of regulatoryapproval and possible civil and criminal sanctions. Regulations, enforcement positions, statutes and legal interpretationsapplicable to the pharmaceutical industry are constantly evolving and are not always clear. Significant changes inregulations, enforcement positions, statutes and legal interpretations could have a material adverse effect on our financialcondition and results of operations.Additionally, future healthcare legislation or other legislative proposals at the federal and state levels could bring aboutmajor changes in the affected health care systems, including statutory restrictions on the means that can be employed bybrand and generic pharmaceutical companies to settle Paragraph IV patent litigations. We cannot predict the outcome of suchinitiatives, but such initiatives, if passed, could result in significant costs to us in terms of costs of compliance and penaltiesassociated with failure to comply.Pharmaceutical Regulation in the United StatesIn the United States, the FDA regulates drugs under the U.S. Federal Food, Drug, and Cosmetic Act, or FDCA, and itsimplementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriatefederal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.Failure to comply with the applicable U.S. requirements at any time during the product development process, approvalprocess or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include theFDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, Warning Letters, product recalls,product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts,restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a materialadverse effect on us.FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approveddrug or a generic version of a previously approved drug, can be marketed in the United States. The process required by theFDA before a new drug may be marketed in the United States generally involves:·completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’scurrent good laboratory practice, or GLP, regulations;·submission to the FDA of an investigational new drug application, or IND, for human clinical testing, which mustbecome effective before human clinical trials may begin in the United States;·approval by an institutional review board, or IRB, before each trial may be initiated;·performance of adequate and well‑controlled human clinical trials in accordance with current good clinical practice,or GCP, to establish the safety and efficacy of the proposed drug product for each intended use;·satisfactory completion of an FDA pre‑approval inspection of the facility or facilities at which the product ismanufactured to assess compliance with the FDA’s Current Good Manufacturing Practice, or cGMP,10 Table of Contentsregulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength,quality and purity;·submission to the FDA of an NDA;·satisfactory completion of a potential review by an FDA advisory committee, if applicable; and·FDA review and approval of the NDA.When developing a branded product and bringing it to market, the first step in proceeding to clinical studies is preclinicaltesting. Preclinical tests are intended to provide a laboratory or animal study evaluation of the product to determine itschemistry, formulation and stability. Toxicology studies are also performed to assess the potential safety of the product. Theconduct of the preclinical tests must comply with federal regulations and requirements, including GLPs. The results of thesestudies are submitted to the FDA as part of an IND application along with other information, including information aboutproduct chemistry, manufacturing and controls and a proposed clinical trial protocol. Long‑term preclinical tests, such asanimal tests of reproductive toxicity and carcinogenicity, may continue after the IND application is submitted.The IND application automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30‑daytime period, raises concerns or questions relating to one or more proposed clinical trials, including concerns that humanresearch subjects are or would be exposed to an unreasonable and significant risk of illness or injury, and places the clinicaltrial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before theclinical trial can begin. A separate submission to an existing IND application must also be made for each successive clinicaltrial conducted during product development. Further, an independent IRB must review and approve the plan for any clinicaltrial and informed consent information for subjects before the trial commences and it must monitor the study until completed.The FDA, the IRB or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a findingthat the subjects or patients are being exposed to an unacceptable health risk or for failure to comply with the IRB’srequirements, or may impose other conditions. GCP requirements include the requirement that all research subjects providetheir informed consent in writing for their participation in any clinical trial, unless a narrow regulatory exemption applies.For purposes of an NDA submission and approval, human clinical trials are typically conducted in the following sequentialphases, which may overlap or be combined:·Phase I: In Phase I, through the initial introduction of the drug into healthy human volunteers or patients, the drug istested to assess absorption, metabolism, elimination, pharmacokinetics and safety.·Phase II: Phase II usually involves trials in a limited patient population to determine the effectiveness of the drug fora particular indication, dosage tolerance and optimum dosage and to identify common adverse effects and safetyrisks.·Phase III: Phase III clinical trials are undertaken to obtain the additional information about clinical efficacy andsafety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA toevaluate the overall benefit‑risk relationship of the drug and to provide adequate information for the labeling of thedrug. In most cases, the FDA requires two adequate and well controlled Phase III clinical trials to demonstrate theefficacy of the drug. A single Phase III clinical trial with other confirmatory evidence may be sufficient in rareinstances, for example, where the study is a large multicenter trial demonstrating internal consistency and astatistically persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention ofa disease with a potentially serious outcome and confirmation of the result in a second trial would be practically orethically impossible.After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA isrequired before marketing of the product may begin in the United States. The NDA must include, among other11 Table of Contentsthings, the results of all preclinical, clinical and other testing and a compilation of data relating to the product’spharmacology, chemistry, manufacture and controls. Under federal law, the submission of most NDAs is subject to asubstantial application user fee, and the manufacturer or sponsor under an approved NDA is also subject to annual programfees. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing basedon the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA may requestadditional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additionalinformation and is subject to payment of additional user fees. The resubmitted application is also subject to review before theFDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in‑depth substantive review. Underthe Prescription Drug User Fee Act, as amended, the FDA has agreed to certain performance goals in the review of NDAsthrough a two‑tiered classification system, Standard Review and Priority Review. Priority Review designation is given todrugs that are intended to treat a serious condition and, if approved, would provide a significant improvement in safety oreffectiveness over existing therapies. The FDA endeavors to review most applications subject to Standard Review within tento twelve months whereas the FDA’s goal is to review most Priority Review applications within six to eight months,depending on whether the drug is a new molecular entity.The FDA may refer applications for novel drug products or drug products which present difficult questions of safety orefficacy to an advisory committee for review, evaluation and recommendation as to whether the application should beapproved and under what conditions. Before approving an NDA, the FDA will typically inspect one or more clinical sites toassure compliance with GCP requirements. Additionally, the FDA will inspect the facility or the facilities at which the drug ismanufactured. The FDA will not approve the NDA unless it determines that the manufacturing process and facilities are incompliance with cGMP requirements and are adequate to assure consistent production of the product within requiredspecifications and the NDA contains data that provide substantial evidence that the drug is safe and effective for the labeledindication.After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter, which authorizescommercial marketing of the drug with specific prescribing information for specific indications, or a complete response letterto indicate that the review cycle for an application is complete and that the application is not ready for approval. A completeresponse letter generally outlines the deficiencies in the submission and may require substantial additional testing, orinformation, in order for the FDA to reconsider the application. Even with submission of this additional information, the FDAmay ultimately decide that an application does not satisfy the regulatory criteria for approval. If, or when, the deficiencieshave been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter.As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure thatthe benefits of the drug outweigh the potential risks. If the FDA determines a REMS is necessary during review of theapplication, the drug sponsor must agree to the REMS plan at the time of approval. A REMS may be required to includevarious elements, such as a medication guide or patient package insert, a communication plan to educate healthcareproviders of the drug’s risks, limitations on who may prescribe or dispense the drug, or other elements to assure safe use, suchas special training or certification for prescribing or dispensing, dispensing only under certain circumstances, specialmonitoring and the use of patient registries. In addition, the REMS must include a timetable to periodically assess thestrategy. The requirement for a REMS can materially affect the potential market and profitability of a drug.Moreover, product approval may require substantial post‑approval testing and surveillance to monitor the drug’s safety orefficacy, and the FDA has the authority to prevent or limit further marketing of a product based on the results of thesepost‑marketing programs. Once granted, product approvals may be withdrawn if compliance with regulatory standards is notmaintained or certain problems are identified following initial marketing. Drugs may be marketed only for the approvedindications and in accordance with the provisions of the approved labeling, and, even if the FDA approves a product, it maylimit the approved indications for use for the product or impose other conditions, including labeling or distributionrestrictions or other risk‑management mechanisms.Further changes to some of the conditions established in an approved application, including changes in indications,labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA12 Table of Contentssupplement before the change can be implemented, which may require us to develop additional data or conduct additionalpreclinical studies and clinical trials. An NDA supplement for a new indication typically requires clinical data similar to thatin the original application, and the FDA uses the similar procedures in reviewing NDA supplements as it does in reviewingNDAs.Disclosure of Clinical Trial InformationSponsors of certain clinical trials of FDA‑regulated products, including drugs, are required to register and disclose certainclinical trial information on www.ClinicalTrials.gov. Information related to the product, subject population, phase ofinvestigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of theregistration. Sponsors are also obligated to discuss certain results of their clinical trials after completion. Disclosure of theresults of these trials can be delayed until the new product or new indication being studied has been approved. Competitorsmay use this publicly available information to gain knowledge regarding the progress of development programs.Post‑Approval RequirementsOnce an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, amongother things, requirements relating to drug listing and registration, recordkeeping, periodic reporting, product sampling anddistribution, adverse event reporting and advertising, marketing and promotion, including standards and regulations fordirect‑to‑consumer advertising, off‑label promotion, industry‑sponsored scientific and educational activities andpromotional activities involving the Internet. Drugs may be marketed only for the approved indications and in a mannerconsistent with the provisions of the approved labeling. While physicians may prescribe for off‑label uses, manufacturersmay only promote for the approved indications and in accordance with the provisions of the approved labeling. The FDAand other agencies actively enforce the laws and regulations prohibiting the promotion of off‑label uses, and a company thatis found to have improperly promoted off‑label uses may be subject to significant liability. There also are extensive DEAregulations applicable to controlled substances.Adverse event reporting and submission of periodic reports is also required following FDA approval of an ANDA or NDA.Additionally, the FDA may require post‑marketing testing, known as Phase IV testing, REMS, and surveillance to monitorthe effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or useof the product. In addition, quality‑control, drug manufacture, packaging and labeling procedures must continue to complywith cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register theirestablishments and list their marketed products with the FDA and certain state agencies. Registration with the FDA subjectsentities to periodic unannounced inspections by the FDA, during which the agency inspects manufacturing facilities toassess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas ofproduction and quality‑control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvalsor request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initialmarketing or if previously unrecognized problems are subsequently discovered. The FDA may also impose a REMSrequirement on a drug already on the market if the FDA determines, based on new safety information, that a REMS isnecessary to ensure that the drug’s benefits outweigh its risks. In addition, regulatory authorities may take other enforcementaction, including, among other things, Warning Letters, the seizure of products, injunctions, consent decrees placingsignificant restrictions on or suspending manufacturing operations, refusal to approve pending applications or supplementsto approved applications, civil penalties and criminal prosecution.The Hatch‑Waxman Amendments505(b)(2) NDAsThe FDA is also authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2)permits the filing of an NDA where at least some of the information required for approval comes from studies not conductedby or for the applicant and for which the applicant has not obtained a right of reference from the data owner. The applicantmay rely upon the FDA’s findings of safety and efficacy for an approved product that acts as the13 Table of Contents“listed drug.” The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support thechange from the listed drug. The FDA may then approve the new product candidate for all, or some, of the conditions of usefor which the branded reference drug has been approved, or for a new condition of use sought by the 505(b)(2) applicant.Abbreviated New Drug ApplicationsThe Hatch‑Waxman amendments to the FDCA established a statutory procedure for submission and FDA review andapproval of ANDAs, for generic versions of listed drugs. An ANDA is a comprehensive submission that contains, among otherthings, data and information pertaining to the API, drug product formulation, specifications and stability of the generic drug,as well as analytical methods, manufacturing process validation data and quality control procedures. Premarket applicationsfor generic drugs are termed abbreviated because they generally do not include clinical data to demonstrate safety andeffectiveness. However, a generic manufacturer is typically required to conduct bioequivalence studies of its test productagainst the listed drug. The bioequivalence studies for orally administered, systemically available drug products assess therate and extent to which the API is absorbed into the bloodstream from the drug product and becomes available at the site ofaction. Bioequivalence is established when there is an absence of a significant difference in the rate and extent for absorptionof the generic product and the reference listed drug. For some drugs, other means of demonstrating bioequivalence may berequired by the FDA, especially where rate or extent of absorption are difficult or impossible to measure. The FDA willapprove the generic product as suitable for an ANDA application if it finds that the generic product does not raise newquestions of safety and effectiveness as compared to the reference listed drug. A product is not eligible for ANDA approval ifthe FDA determines that it is not bioequivalent to the reference listed drug if it is intended for a different use or if it is notsubject to, and requires, an approved Suitability Petition.Orange Book ListingIn seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDAcertain patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in theapplication for the drug is then published in the Orange Book. Any applicant who files an ANDA seeking approval of ageneric equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the OrangeBook must certify to the FDA (i) that there is no patent listed with the FDA as covering the relevant branded product, (ii) thatany patent listed as covering the branded product has expired, (iii) that the patent listed as covering the branded product willexpire prior to the marketing of the generic product, in which case the ANDA will not be finally approved by the FDA untilthe expiration of such patent or (iv) that any patent listed as covering the branded drug is invalid or will not be infringed bythe manufacture, sale or use of the generic product for which the ANDA is submitted. A notice of the Paragraph IVcertification must be provided to each owner of the patent that is the subject of the certification and to the holder of theapproved NDA to which the ANDA or 505(b)(2) application refers. The applicant may also elect to submit a “section viii”statement certifying that its proposed label does not contain (or carves out) any language regarding the patentedmethod‑of‑use rather than certify to a listed method‑of‑use patent.If the reference NDA holder and patent owners assert a patent challenge directed to one of the Orange Book listed patentswithin 45 days of the receipt of the Paragraph IV certification notice, the FDA is prohibited from approving the applicationuntil the earlier of 30 months from the receipt of the Paragraph IV certification, expiration of the patent, settlement of thelawsuit or a decision in the infringement case that is favorable to the applicant. The ANDA or 505(b)(2) application also willnot be approved until any applicable non‑patent exclusivity listed in the Orange Book for the branded reference drug hasexpired as described in further detail below.Non‑Patent ExclusivityIn addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non‑patentexclusivity, during which the FDA cannot approve an ANDA or 505(b)(2) application that relies on the listed drug.For example, for listed drugs that were considered new chemical entities at the time of approval, an ANDA or 505(b)(2)application referencing that drug may not be filed with the FDA until the expiration of five years after approval of that14 Table of Contentsdrug, unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit itsapplication four years following the original product approval.A drug, including one approved under Section 505(b)(2), may obtain a three‑year period of exclusivity for a particularcondition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if oneor more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of theapplication and was conducted/sponsored by the applicant. In addition, drugs approved for diseases for which the patientpopulation is sufficiently small, or orphan indications, are entitled to a seven year data exclusivity period.Orphan DrugsOntinua ER has received Orphan Drug Designation for the treatment of muscle spasticity in multiple sclerosis patients.Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease orcondition, which means a disease or condition that affects fewer than 200,000 individuals in the United States, or affectsmore than 200,000 individuals in the United States, but for which there is no reasonable expectation that the cost ofdeveloping and making the drug available in the United States will be recovered from domestic sales of the product. Orphandrug designation must be requested before submitting an NDA, and both the drug and the disease or condition must meetcertain criteria specified in the Orphan Drug Act and FDA’s implementing regulations at 21 C.F.R. Part 316. After the FDAgrants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by theFDA.Orphan drug designation entitles the applicant to incentives such as grant funding towards clinical study costs, taxadvantages, and waivers of FDA user fees. In addition, if a product that has orphan drug designation subsequently receivesthe first FDA approval for the disease for which it has such designation, the product is also entitled to seven years of orphandrug exclusivity. During the seven-year marketing exclusivity period, the FDA may not approve any other applications tomarket the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to theproduct with orphan drug exclusivity. Orphan drug designation does not convey any advantage in, or shorten the durationof, the regulatory review and approval process and a subsequent grant of orphan drug exclusivity does not prevent the FDAfrom approving a different drug for the same disease or condition, or the same drug for a different disease or condition.DEA RegulationSeveral of our products, including ConZip, methylphenidate ER (including M‑72) and hydromorphone ER are regulated as“controlled substances” as defined in the Controlled Substances Act of 1970, as amended, which establishes registration,security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA. The DEA isconcerned with, among other things, the control of handlers of controlled substances and with the equipment and rawmaterials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. A pharmaceutical product may be listed asSchedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule Vsubstances the lowest relative risk of abuse among such substances. Methylphenidate (including methylphenidate ER andM‑72) and hydromorphone (including hydromorphone ER) are listed as Schedule II drugs and tramadol hydrochloride(including ConZip) is listed as a Schedule IV drug by the DEA under the Controlled Substances Act. The manufacture,shipment, storage, sale and use of Schedule II drugs are subject to a high degree of regulation. For example, Schedule II drugprescriptions generally must be signed by a physician and may not be refilled without a new prescription. Substances inSchedule IV are considered to have a lower potential for abuse relative to substances in Schedule II. A prescription forcontrolled substances in Schedule IV may be issued by a practitioner through oral communication, in writing or by facsimileto the pharmacist and may be refilled if so authorized on the prescription or by call‑in. In the future, our other potentialproducts may also be listed by the DEA as controlled substances.15 Table of ContentsAnnual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlledsubstance. The registration is specific to the particular location, activity and controlled substance schedule. For example,separate registrations are needed for import and manufacturing, and each registration will specify which schedules ofcontrolled substances are authorized.The DEA typically inspects a facility to review its security measures prior to issuing a registration. Security requirementsvary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule IIsubstances. Required security measures include background checks on employees and physical control of inventory throughmeasures such as cages, surveillance cameras and inventory reconciliations. Records must be maintained for the handling ofall controlled substances and periodic reports must be made to the DEA, including, for example, distribution reports forSchedule II controlled substances, Schedule III substances that are narcotics and other designated substances. Reports mustalso be made for thefts or losses of any controlled substance and authorization must be obtained to destroy any controlledsubstance. In addition, special authorization and notification requirements apply to imports and exports.In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule II.Distributions of any Schedule II controlled substance must also be accompanied by special order forms, with copies providedto the DEA. The DEA establishes annually an aggregate quota for how much of a Schedule II substance may be produced intotal in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinalneeds. This limited aggregate amount of any particular Schedule II substance that the DEA allows to be produced in theUnited States each year is allocated among individual companies, who must submit applications annually to the DEA forindividual production and procurement quotas. We and our contract manufacturers must receive an annual quota from theDEA in order to produce or procure any Schedule II substance for use in manufacturing. The DEA may adjust aggregateproduction quotas and individual production and procurement quotas from time to time during the year, although the DEAhas substantial discretion in whether or not to make such adjustments. Our and our contract manufacturers’ quota of an activeingredient may not be sufficient to meet commercial demand or complete clinical trials. Any delay or refusal by the DEA inestablishing our and our contract manufacturers’ quota for controlled substances could delay or stop our clinical trials orproduct launches, which could have a material adverse effect on our business, financial position and results of operations.To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlledsubstances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, canresult in enforcement action that could have a material adverse effect on our business, results of operations and financialcondition. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke thoseregistrations. In certain circumstances, violations could result in criminal proceedings.Individual states also regulate controlled substances, and we and our contract manufacturers will be subject to stateregulation on distribution of these products.Regulation of Dietary SupplementsThe formulation, manufacturing, packaging, labeling, advertising, distribution and sale of dietary supplements, such as ourOB Complete family of prescription prenatal dietary supplements, are subject to regulation by multiple federal agencies,including the FDA, the FTC and the Consumer Product Safety Commission.The Dietary Supplement Health and Education Act of 1994, or DSHEA, amended the FDCA to establish a new frameworkgoverning the composition, safety, labeling, manufacturing and marketing of dietary supplements. Generally, under theFDCA, dietary ingredients that were marketed in the United States prior to October 15, 1994 may be used in dietarysupplements without first notifying the FDA. “New” dietary ingredients (i.e., dietary ingredients that were not marketed inthe United States before October 15, 1994) must be the subject of a new dietary ingredient notification submitted to the FDAunless the ingredient has been “present in the food supply as an article used for food” without being “chemically altered.” Anew dietary ingredient notification must provide the FDA evidence of a history of use or other evidence of safetyestablishing that use of the dietary ingredient will reasonably be expected to be safe. A new dietary ingredient notificationmust be submitted to the FDA at least 75 days before the initial marketing of the new16 Table of Contentsdietary ingredient. The FDA may determine that a new dietary ingredient notification does not provide an adequate basis toconclude that a dietary ingredient is reasonably expected to be safe. Such a determination could prevent the marketing ofsuch dietary ingredient or a dietary supplement including such dietary ingredient.All facilities that manufacture, process, package, or store food for human consumption, including dietary supplements, mustregister with the FDA as a food facility under the Public Health Security and Bioterrorism Preparedness and Response Act of2002. Facility registrations must be updated biennially. The FDA schedules periodic inspections at registered facilities todetermine whether the inspected facilities are in compliance with applicable FDA regulations. The FDA’s cGMP regulationsfor dietary supplements apply to manufacturers and holders of finished dietary supplement products, including dietarysupplements manufactured outside the United States that are imported for sale into the United States. Among other things,the FDA’s cGMP regulations: (i) require identity testing on all incoming dietary ingredients; (ii) call for a scientifically validsystem for ensuring finished products meet all specifications; (iii) include requirements related to process controls, includingstatistical sampling of finished batches for testing and requirements for written procedures; and (iv) require extensiverecordkeeping. The failure of a manufacturing facility to comply with the cGMP regulations renders products manufacturedin such facility “adulterated” under the FDCA, and subjects such products and the manufacturer to a variety of potential FDAenforcement actions.Dietary supplements are also regulated by various state and local governmental agencies. The FTC regulates the advertisingof dietary supplements and the National Advertising Division, or NAD, of the Council of Better Business Bureaus overseesan industry sponsored, self‑regulatory system that permits competitors to resolve disputes over advertising claims. The NADhas no enforcement authority of its own, but may refer matters to the FTC or the FDA for further action.Federal agencies, including the FDA and the FTC, have a variety of procedures and enforcement remedies available to them,including initiating investigations, issuing Warning Letters and cease and desist orders, requiring corrective labeling oradvertising, requiring consumer redress, seeking injunctive relief or product seizures, imposing civil penalties orcommencing criminal prosecution.Under the Dietary Supplement and Nonprescription Drug Consumer Protection Act, the FDA requires, among other things,that companies that manufacture or distribute dietary supplements report serious adverse events associated with theirproducts to the FDA and fulfill certain recordkeeping requirements for adverse events. Based on serious adverse event (orother) information, the FDA may take actions against dietary supplements or dietary ingredients that in its determinationpresent a significant or unreasonable risk of illness or injury. In addition, the FDA could issue consumer warnings withrespect to the products or ingredients in such products.The FDA Food Safety Modernization Act, or FSMA, enacted on January 4, 2011, amended the FDCA to enhance the FDA’sauthority over various aspects of food regulation, including dietary supplements. Under the FSMA, the FDA is authorized toissue a mandatory recall when the FDA determines that there is a reasonable probability that a food, including a dietarysupplement, is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse healthconsequences or death to humans or animals. Also under the FSMA, the FDA has (i) expanded access to records; (ii) theauthority to suspend food facility registrations and require high‑risk imported food to be accompanied by a certification; (iii)stronger authority to administratively detain food; (iv) the authority to refuse admission of an imported food if it is from aforeign establishment to which a U.S. inspector is refused entry for an inspection; and (v) the authority to require thatimporters verify that the foods they import meet domestic standards.The FSMA requirements may result in the detention and refusal of admission of imported products, the injunction ofmanufacturing of any dietary ingredients or dietary supplements until the FDA determines that such ingredients or productsare in compliance, and the potential imposition of fees for re‑inspection of noncompliant facilities.The FDCA, as amended by the DSHEA, permits statements of nutritional support often referred to as “structure/functionclaims” to be included in labeling for dietary supplements without FDA premarket approval. FDA regulations require thatdietary supplement manufacturers notify the FDA of those statements within 30 days of marketing. Among other things, thestatements may describe the role of a dietary ingredient intended to affect the structure or function of the body or characterizethe documented mechanism of action by which a dietary ingredient maintains such structure or function,17 Table of Contentsbut may not expressly or implicitly represent that a dietary supplement will diagnose, cure, mitigate, treat, or prevent adisease. A company that uses a statement of nutritional support in labeling must possess information substantiating that thestatement is truthful and not misleading. If the FDA determines that a particular statement of nutritional support is anunacceptable drug claim or an unauthorized version of a health claim, or if the FDA determines that a particular claim is notadequately supported by available information or is otherwise false or misleading, the claim could not be used and anyproduct bearing the claim could be subject to regulatory action.The FTC and the FDA have pursued a coordinated effort to investigate the scientific substantiation for dietary supplementclaims. Their efforts to date have resulted in a significant number of investigations and enforcement actions. Dietarysupplement claims could also be the subject of inquiries from the NAD and states’ Attorneys General.The FDA has broad authority to enforce the FDCA provisions applicable to dietary supplements, including powers to issue apublic warning or notice of violation letter to a company, publicize information about illegal products, request a voluntaryrecall, order a mandatory recall, administratively detain domestic products, detain products offered for import, request theU.S. Department of Justice, or DOJ, to initiate a seizure action, initiate an injunction action or a criminal prosecution in theU.S. courts and administratively revoke manufacturing facility registrations, thereby effectively enjoining manufacturing ofdietary ingredients and dietary supplements without judicial process.States also regulate foods and drugs under laws that generally parallel federal statutes. These products are also subject to stateconsumer health and safety regulations, such as the California Safe Drinking Water and Toxic Enforcement Act of 1986, orProposition 65. Violation of Proposition 65 may result in substantial monetary penalties.Pricing and ReimbursementSuccessful commercialization of our products depends, in part, on the availability of governmental and third‑party payorreimbursement for the cost of our products. Government authorities and third‑party payors increasingly are challenging theprice of medical products and services. On the government side, there is a heightened focus, at both the federal and statelevels, on cost containment under Medicaid, Medicare and other government benefit programs. For example, we areobligated under the Medicaid drug program to pay rebates on certain utilization of our products, under state Medicaidprograms. Many state Medicaid programs have also created preferred drug lists and include drugs on those lists only whenthe manufacturers agree to pay a supplemental rebate. If our current products or future drug candidates are not included onthese preferred drug lists, physicians may not be inclined to prescribe them to their Medicaid patients, thereby diminishingthe potential market for our products.The focus on cost containment has also led to an increase in federal and state legislativeinitiatives related to drug prices, which could significantly influence the purchase of pharmaceutical products, resulting inlower prices and changes in product demand. If enacted, these changes could lead to reduced payments to pharmaceuticalmanufacturers.In addition, third‑party payors have been imposing additional requirements and restrictions on coverage and limitingreimbursement levels for pharmaceutical products. Third‑party payors may require manufacturers to provide them withpredetermined discounts from list prices and limit coverage to specific pharmaceutical products on an approved list, orformulary, which might not include all of the FDA‑approved pharmaceutical products for particular indications. Third‑partypayors may challenge the price and examine the medical necessity and cost‑effectiveness of pharmaceutical products inaddition to their safety and efficacy. Manufacturers may need to conduct expensive pharmaco‑economic studies in order todemonstrate the medical necessity and cost‑effectiveness of pharmaceutical products in addition to the costs required toobtain the FDA approvals. Adequate third‑party reimbursement may not be available to enable manufacturers to maintainprice levels sufficient to realize an appropriate return on their investment in drug development.Healthcare ReformIn the United States, there have been a number of federal and state proposals during the last several years regarding thepricing of pharmaceutical products, government control and other changes to the healthcare system of the United States. It isuncertain what other legislative proposals may be adopted or what actions federal, state, or private payors may take18 Table of Contentsin response to any healthcare reform proposals or legislation. We cannot predict the effect such reforms may have on ourbusiness, and no assurance can be given that any such reforms will not have a material adverse effect.By way of example, in March 2010, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Careand Education Reconciliation Act of 2010, or collectively, the ACA, was signed into law, which, among other things,includes changes to the coverage and payment for drug products under government health care programs. The law includesmeasures that (i) significantly increase Medicaid rebates through both the expansion of the program and significant increasesin rebates, (ii) substantially expand the Public Health System (340B) program to allow other entities to purchase prescriptiondrugs at substantial discounts, (iii) extend the Medicaid rebate rate to a significant portion of Managed Medicaid enrollees,(iv) require manufacturers to provide discounts on Medicaid Part D spending in the coverage gap for branded and authorizedgeneric prescription drugs (which discount subsequent legislation increased beginning in 2019), and (v) levy a significantexcise tax on the industry to fund the healthcare reform.Under the Trump administration, there have been ongoing efforts to modify or repeal all or certain provisions of the ACA. Forexample, tax reform legislation was enacted at the end of 2017 that eliminates the tax penalty for individuals who do notmaintain sufficient health insurance coverage beginning in 2019 (the so-called “individual mandate”). In a May 2018report, the Congressional Budget Office estimated that, compared to 2018, the number of uninsured will increase by threemillion in 2019 and six million in 2028, in part due to the elimination of the individual mandate. The ACA has also beensubject to judicial challenge. In December 2018, a federal district court, in a challenge brought by a number of stateattorneys general, found the ACA unconstitutional in its entirety because, once Congress repealed the individual mandateprovision, there was no longer a basis to rely on Congressional taxing authority to support enactment of the law. Pendingappeals, which could take some time, the ACA is still operational in all respects.There have also been other reform initiatives under the Trump Administration, including initiatives focused on drugpricing. For example, in May of 2018, President Trump and the Secretary of the Department of Health and Human Servicesreleased a “blueprint” to lower prescription drug prices and out-of-pocket costs. Certain proposals in the blueprint, andrelated drug pricing measures proposed since the blueprint, could cause significant operational and reimbursement changesfor the pharmaceutical industry. As another example, in October 2018, the Centers for Medicare & Medicaid Services, orCMS, solicited public comments on potential changes to payment for certain Medicare Part B drugs, including reducing theMedicare payment amount for selected Medicare Part B drugs to more closely align with international drug prices. Asanother example, in November of 2018, CMS issued an advance notice of proposed rulemaking that proposed revisions toMedicare Part D to support health plans’ negotiation of lower drug prices with manufacturers and reduce health planmembers’ out-of-pocket costs. The Office of Inspector General, or OIG, within the Department of Health and Human Services,or HHS, issued a proposed rule in February of 2018 that would revise the federal Anti-Kickback Statute to limit protection fordiscounts offered by pharmaceutical manufacturers to pharmacy benefit managers, or PBMs, Medicare Part D plans, andMedicaid managed care plans that are not reflected in the price charged to the patient at the pharmacy counter and to provideprotection only for certain types of service fees paid by pharmaceutical manufacturers to PBMs.More generally, there has been considerable recent public and government scrutiny in the United States of pharmaceuticalpricing and proposals to address the perceived high cost of pharmaceuticals. There have also been several recent statelegislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs orlimiting drug prices or price increases. Adoption of new legislation at the federal or state level could affect demand for, orpricing of, our product candidates if approved for sale.We cannot predict the ultimate content, timing or effect of any changes to the ACA or other federal and state reformefforts. There is no assurance that federal or state health care reform will not adversely affect our future business and financialresults. 19 Table of ContentsHealthcare RegulationsPharmaceutical companies are subject to various federal and state laws that are intended to combat health care fraud andabuse and that govern certain of our business practices, especially our interactions with third‑party payors, healthcareproviders, patients, customers and potential customers through sales and marketing or research and development activities.These include anti‑kickback laws, false claims laws, sunshine laws, privacy laws and FDA regulation of advertising andpromotion of pharmaceutical products.Anti‑kickback laws, including the federal Anti‑Kickback Statute, make it a criminal offense knowingly and willfully to offer,pay, solicit, or receive any remuneration to induce or reward referral of an individual for, or the purchase, order orrecommendation of, any good or service reimbursable by, a federal health care program (including our products). The federalAnti‑Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one handand prescribers, purchasers and formulary managers on the other. Although there are several statutory exceptions andregulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawnnarrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may besubject to scrutiny if they do not qualify for an exception or safe harbor. In addition, a person or entity does not need to haveactual knowledge of the statute or specific intent to violate it to have committed a violation. Moreover, the government mayassert that a claim including items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes afalse or fraudulent claim for purposes of the False Claims Act. Violations of the federal Anti‑Kickback Statute can result inexclusion from Medicare, Medicaid or other governmental programs as well as civil and criminal fines and penalties of up to$100,000 per violation and three times the amount of the unlawful remuneration. A new federal anti-kickback statuteenacted in 2018 prohibits certain payments related to referrals of patients to certain providers (recovery homes, clinicaltreatment facilities and laboratories) and applies to services reimbursed by private health plans as well as government healthcare programs. Criminal sanctions (up to $200,000 fine and 10 years imprisonment) can be imposed for violations.The federal civil and criminal false claims laws, including the civil False Claims Act, prohibit knowingly presenting, orcausing to be presented, claims for payment to the federal government (including Medicare and Medicaid) that are false orfraudulent (and, under the Federal False Claims Act, a claim is deemed false or fraudulent if it is made pursuant to an illegalkickback). Manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false orfraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a productoff‑label. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a privateindividual in the name of the government. Violations of the False Claims Act can result in significant monetary penalties,including fines ranging from $11,181 to $22,363 for each false claim, and treble damages. The federal government is usingthe False Claims Act, and the accompanying threat of significant liability, in its investigation and prosecution ofpharmaceutical companies throughout the country, for example, in connection with the promotion of products forunapproved uses and other improper sales and marketing practices. The government has obtained multi‑million andmulti‑billion dollar settlements under the False Claims Act in addition to individual criminal convictions under applicablecriminal statutes. In addition, companies have been forced to implement extensive corrective action plans, and have oftenbecome subject to consent decrees or corporate integrity agreements, severely restricting the manner in which they conducttheir business. Given the significant size of actual and potential settlements, it is expected that the government will continueto devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraudand abuse laws.The Federal Civil Monetary Penalties Law prohibits, among other things, the offering or transferring of remuneration to aMedicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of aparticular provider, supplier or practioner providing Medicare or Medicaid payable items or services. Noncompliance canresult in civil money penalties of up to $20,000 for each wrongful act, assessment of three times the amount claimed for eachitem or service and exclusion from the federal healthcare programs.Federal criminal statutes prohibit, among other actions, knowingly and willfully executing or attempting to execute ascheme to defraud any healthcare benefit program, including private third‑party payors, knowingly and willfully embezzlingor stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, andknowingly and willfully falsifying, concealing or covering up a material fact or making any materially false,20 Table of Contentsfictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Aswith the federal Anti‑Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes, such that aperson or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to havecommitted a violation.Analogous state and foreign laws and regulations, including state anti‑kickback and false claims laws, may apply to productsand services reimbursed by non‑governmental third‑party payors, including commercial payors. Additionally, there are statelaws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelinesand the relevant compliance guidance promulgated by the federal government or that otherwise restrict payments that maybe made by pharmaceutical companies to healthcare providers. There are also state and foreign laws that require drugmanufacturers to report marketing expenditures or pricing information.Sunshine laws, including the federal Open Payments law enacted as part of the ACA, require pharmaceutical manufacturers todisclose payments and other transfers of value to physicians and certain other health care providers or professionals. Underthe federal Open Payments law pharmaceutical manufacturers are required to submit reports annually to the government.Failure to submit the required information may result in civil monetary penalties of up to an aggregate of $169,170 per year(or up to an aggregate of $127,799 per year for “knowing failures”) for all payments, transfers of value or ownership orinvestment interests not reported in an annual submission, and may result in liability under other federal laws or regulations.Certain states and foreign governments require the tracking and reporting of gifts, compensation and other remuneration tocertain healthcare providers.Privacy laws, including HIPAA, restrict how entities may use or disclose health information. Under HIPAA, covered entitiesare defined to include healthcare providers, such as physicians, hospitals, pharmacies and laboratories, as well as healthinsurers. Although pharmaceutical manufacturers are not covered entities under HIPAA, our ability to acquire or useprotected health information from covered entities to aid in our research, development, sales and marketing activities may beaffected by HIPAA and other privacy laws. HIPAA, was amended by the Health Information Technology for Economic andClinical Health Act of 2009, or HITECH. Those changes were adopted in regulation through a final omnibus rule publishedon January 25, 2013. Among other things, HITECH and the omnibus rule made HIPAA’s privacy and security standardsdirectly applicable to “business associates,” which are defined as contractors or agents of covered entities that create, receive,maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity.HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates andpossibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions infederal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition,state laws govern the privacy and security of health information in certain circumstances, many of which differ from eachother in significant ways, thus complicating compliance efforts.The FDA regulates the sale and marketing of prescription drug products and, among other things, prohibits pharmaceuticalmanufacturers from making false or misleading statements and from promoting products for unapproved uses. There has beenan increase in government enforcement efforts at both the federal and state level. Numerous cases have been brought againstpharmaceutical manufacturers under the Federal False Claims Act, alleging, among other things, that certain sales ormarketing‑related practices violate the Anti‑Kickback Statute or the FDA’s regulations, and many of these cases haveresulted in settlement agreements under which the companies were required to change certain practices, pay substantial finesand operate under the supervision of a federally appointed monitor for a period of years. Due to the breadth of these laws andtheir implementing regulations and the absence of guidance in some cases, it is possible that our practices might bechallenged by government authorities. Violations of fraud and abuse laws may be punishable by civil and criminal sanctionsincluding fines, civil monetary penalties, as well as the possibility of exclusion of our products from payment by federalhealth care programs.Government Price ReportingWe must offer discounted pricing or rebates on purchases of pharmaceutical products under various federal and statehealthcare programs, such as the Medicaid drug rebate program, the “federal ceiling price” drug pricing program, the 340Bdrug pricing program and the Medicare Part D Program. We must also report specific prices to government21 Table of Contentsagencies under healthcare programs, such as the Medicaid drug rebate program and Medicare Part B. The calculationsnecessary to determine the prices reported are complex and we are continually evaluating the methods we use to calculateand report the amounts owed with respect to Medicaid and other government pricing programs. Our calculations are subjectto review and challenge by various government agencies and authorities, and it is possible that any such review could resulteither in material changes to the method used for calculating the amounts owed to such agency or the amounts themselves.Because the process for making these calculations, and our judgments supporting these calculations, involve subjectivedecisions, these calculations are subject to audit. In the event that a government authority challenges or finds ambiguity withregard to our report of payments, such authority may impose civil and criminal sanctions, which could have a materialadverse effect on our business. From time to time we conduct routine reviews of our government pricing calculations. Thesereviews may have an impact on government price reporting and rebate calculations used to comply with various governmentregulations regarding reporting and payment obligations.Many government and third‑party payors reimburse the purchase of certain prescription drugs based on a drug’s averagewholesale price, or AWP. In the past several years, state and federal government agencies have conducted ongoinginvestigations of manufacturers’ reporting practices with respect to AWP, which they have suggested have led to excessivepayments by state and federal government agencies for prescription drugs. We and numerous other pharmaceuticalcompanies have been named as defendants in various state and federal court actions alleging improper or fraudulent practicesrelated to the reporting of AWP.Drug Pedigree LawsState and federal governments have proposed or passed various drug pedigree laws which can require the tracking of alltransactions involving prescription drugs from the manufacturer to the pharmacy (or other dispensing) level. Companies arerequired to maintain records documenting the chain of custody of prescription drug products beginning with the purchase ofsuch products from the manufacturer. Compliance with these pedigree laws requires implementation of extensive trackingsystems as well as heightened documentation and coordination with customers and manufacturers. While we fully intend tocomply with these laws, there is uncertainty about future changes in legislation and government enforcement of these laws.Failure to comply could result in fines or penalties, as well as loss of business that could have a material adverse effect on ourfinancial results.Federal Regulation of Patent Litigation Settlements and Authorized Generic ArrangementsAs part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, companies are required to file withthe FTC and DOJ certain types of agreements entered into between brand and generic pharmaceutical companies related tothe settlement of patent litigation or manufacture, marketing and sale of generic versions of branded drugs. This requirementcould affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes withbrand pharmaceutical companies, and could result generally in an increase in private‑party litigation against pharmaceuticalcompanies or additional investigations or proceedings by the FTC or other governmental authorities.OtherThe U.S. federal government, various states and localities have laws regulating the manufacture and distribution ofpharmaceuticals, as well as regulations dealing with the substitution of generic drugs for branded drugs. Our operations arealso subject to regulation, licensing requirements and inspection by the states and localities in which our operations arelocated or in which we conduct business.Certain of our activities are also subject to FTC enforcement actions. The FTC also enforces a variety of antitrust andconsumer protection laws designed to ensure that the nation’s markets function competitively, are vigorous, efficient and freeof undue restrictions. Federal, state, local and foreign laws of general applicability, such as laws regulating workingconditions, also govern us.In addition, we are subject to numerous and increasingly stringent federal, state and local environmental laws and regulationsconcerning, among other things, the generation, handling, storage, transportation, treatment and disposal of22 Table of Contentstoxic and hazardous substances, the discharge of pollutants into the air and water and the cleanup of contamination. We arerequired to maintain and comply with environmental permits and controls for some of our operations, and these permits aresubject to modification, renewal and revocation by the issuing authorities. Our environmental capital expenditures and costsfor environmental compliance may increase in the future as a result of changes in environmental laws and regulations orincreased manufacturing activities at any of our facilities. We could incur significant costs or liabilities as a result of anyfailure to comply with environmental laws, including fines, penalties, third‑party claims and the costs of undertaking aclean‑up at a current or former site or at a site to which our wastes were transported. In addition, we have grown in part byacquisition, and our diligence may not have identified environmental impacts from historical operations at sites we haveacquired in the past or may acquire in the future.EmployeesAs of December 31, 2018, we had a total of 466 full time employees (including 47 employees in Argentina and fiveemployees in Hungary). We have no collective bargaining agreements with our employees and none are represented by laborunions. We consider our current relations with our employees to be good.Reorganization and Our StructureOn April 30, 2018, Osmotica Holdings S.C.Sp. acquired Lilydale Limited, an Irish private company with limited liability thatwas organized in Ireland on July 13, 2017, and renamed such entity Osmotica Pharmaceuticals Limited, effective May 1,2018. On July 31, 2018, Osmotica Pharmaceuticals Limited re-registered under the Irish Companies Act of 2014 as a publiclimited company and was renamed Osmotica Pharmaceuticals plc. In addition, immediately prior to our initial public offeringand prior to the commencement of trading of our ordinary shares on the Nasdaq Global Select Market, we undertook a seriesof restructuring transactions that resulted in Osmotica Pharmaceuticals plc becoming the direct parent company of OsmoticaHoldings S.C.Sp., with each holder of common units of Osmotica Holdings S.C.Sp. receiving approximately 42.84 ordinaryshares of Osmotica Pharmaceuticals plc in exchange for each such common unit. In addition, each holder of an option topurchase common units of Osmotica Holdings S.C.Sp. received an option to purchase the number of ordinary shares ofOsmotica Pharmaceuticals plc determined by multiplying the number of units underlying such option by approximately42.84 (rounded down to the nearest whole share) and dividing the exercise price per unit for such option by approximately42.84 (rounded up to the nearest whole cent). Prior to this time, Osmotica Pharmaceuticals plc did not conduct anyoperations (other than activities incidental to its formation, this reorganization and our initial public offering). Upon thecompletion of this reorganization, the historical consolidated financial statements of Osmotica Holdings S.C.Sp. became thehistorical financial statements of Osmotica Pharmaceuticals plc. Except as otherwise indicated, all information contained inthis Annual Report on Form 10-K gives effect to this reorganization.Corporate InformationOur principal executive offices are located at 400 Crossing Boulevard, Bridgewater, New Jersey 08807, and our registeredoffice in Ireland is 25‑28 North Wall Quay, Dublin 1, Ireland and our telephone number is (908) 809‑1300. Our websiteaddress is www.osmotica.com.Available InformationWe are subject to the information requirements of the Securities Exchange Act of 1934, or the Exchange Act. We file periodicreports, current reports, proxy statements, and other information with the Securities and Exchange Commission, or SEC. TheSEC maintains a website at http://www.sec.gov that contains all of our information that has been filed or furnishedelectronically with the SEC. We make available free of charge on our website a link to our Annual Report on Form 10-K,Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuantto Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable, after such material is electronically filedwith, or furnished to, the SEC.23 Table of Contents ITEM 1A. RISK FACTORSThis Annual Report on Form 10-K contains forward-looking information based on our current expectations. You shouldcarefully consider the risks and uncertainties described below together with all of the other information contained in thisAnnual Report on Form 10-K, including our consolidated financial statements and the related notes appearing at the end ofthis Annual Report on Form 10-K. We have presented the below risks as “Risks related to our business,” “Risks related toour industry,” “Risks related to our indebtedness,” “Risks related to our ordinary shares,” “Risks related to being an Irishcorporation listing ordinary shares” and “Risks related to taxation.” If any of the following risks actually occurs, ourbusiness, prospects, operating results and financial condition could suffer materially. The risks described below are not theonly risks we face. Additional risks and uncertainties not currently known to us or those we currently view to be immaterialalso may materially and adversely affect our business, prospects, operating results or financial condition.Risks related to our businessIf we are unable to successfully develop or commercialize new products, or to do so on a timely or cost‑effective basis, or toextend life cycles of existing products, our operating results will suffer.Developing and commercializing a new product is time consuming and costly and is subject to numerous factors that maydelay or prevent development and commercialization. Our future results of operations will depend to a significant extentupon our ability to successfully gain FDA approval of and commercialize new products in a timely and cost‑effectivemanner. There are numerous difficulties in developing and commercializing new products, including:·the ability to develop products in a timely and cost‑effective manner and in compliance with regulatoryrequirements;·the success of the pre‑clinical and clinical testing processes to assure that new products are safe and effective orchemically identical and bioequivalent to the branded reference listed drug;·the risk that any of our products presently under development, if and when fully developed and tested, will notperform as expected;·delays or unanticipated costs, including delays associated with the completion of clinical trials for our brandedproducts;·delays associated with FDA registration, listing and approval processes and the ability to obtain in a timely manner,and maintain, required regulatory approvals;·legal actions against our generic products brought by brand competitors, and legal challenges to our brandedproducts or branded product intellectual property;·the availability, on commercially reasonable terms, of raw materials, including API and other key ingredients;·our ability to scale‑up manufacturing methods to successfully manufacture commercial quantities of products incompliance with regulatory requirements; and·acceptance of our products by physicians, patients, payors and the healthcare community.As a result of these and other difficulties, products currently in development may or may not receive necessary regulatoryapprovals on a timely basis or at all and we may not succeed in effectively managing our development costs. Further, if weare required by the FDA or any equivalent foreign regulatory authority to complete clinical trials in addition to those wecurrently expect to conduct, or to repeat a clinical trial that has already been completed, or if there are any delays incompleting preclinical studies, filing an IND or completing clinical trials, our expenses could increase.24 Table of ContentsThis risk exists particularly with respect to the introduction of branded products because of the uncertainties, higher costsand lengthy time frames associated with research and development of such products and the inherent unproven marketacceptance of such products. For example, after reviewing with the FDA the topline data from our second Phase III clinicaltrial of arbaclofen in multiple sclerosis patients with spasticity, the FDA may require additional clinical trials beforeapproving arbaclofen for commercial use, if they approve the product at all. The FDA’s review, as well as any subsequentclinical testing, could delay the commercial launch of this product and increase our operating expenses, which could have amaterial adverse effect on our business, financial position and results of operations.In addition, more than 79% and 65% of our total revenues in 2018 and 2017 were generated by our generic products. Ourfuture profitability depends, in part, upon our ability to introduce, on a timely basis, new generic products. The timeliness ofour product introductions is dependent upon, among other things, the timing of regulatory approval of our products, whichto a large extent is outside of our control, as well as the timing of competing products. As additional suppliers introducecomparable generic pharmaceutical products, price competition intensifies, market access narrows and product sales pricesand gross profit percentage decline, often significantly and rapidly. Accordingly, our total revenues and future profitabilityare dependent, in part, upon our ability or the ability of our development partners to file ANDAs with the FDA and gainapprovals timely and effectively or to enter into contractual relationships with other parties that have obtained marketingexclusivity. No assurances can be given that we will be able to develop and introduce successful products in the futurewithin the time constraints necessary to be successful. If we or our development partners are unable to continue to timely andeffectively file ANDAs with the FDA or to partner with other parties that have obtained marketing exclusivity, our totalrevenues, gross profit percentage and operating results may decline significantly and our prospects and business may bematerially adversely affected.If any of our products, when acquired or developed and approved, cannot be successfully or timely commercialized, ouroperating results could be adversely affected. We cannot guarantee that any investment we make in developing products willbe recouped, even if we are successful in commercializing those products.We expend a significant amount of resources on research and development, including milestones on in‑licensed products,which may not lead to successful product introductions.Much of our development effort is focused on technically difficult‑to‑formulate products or products that require advancedmanufacturing technology. We expend resources on research and development primarily to enable us to manufacture andmarket FDA‑approved products in accordance with FDA regulations. Typically, research expenses related to the developmentof innovative compounds and the filing of NDAs are significantly greater than those expenses associated with ANDAs. Wespent $48.8 million and $42.7 million on research and development expenses in 2018 and 2017, respectively. We haveentered into, and may in the future enter into, agreements that require us to make significant milestone payments uponachievement of various research and development events and regulatory approvals. As we continue to develop and in‑licensenew products, we will likely incur increased research, development and licensing expenses. Because of the inherent riskassociated with research and development efforts in our industry, particularly with respect to new drugs, our research anddevelopment expenditures may not result in the successful introduction of new FDA‑approved products. Also, after we or ourdevelopment partners submit an ANDA or NDA, the FDA may request that we conduct additional bioequivalence studies foran ANDA or additional clinical trials for an NDA. As a result, we may be unable to reasonably determine the total researchand development costs required to develop a particular product. Finally, we cannot be certain that any investment made indeveloping products will be recovered, even if we are successful in commercializing the product. To the extent that weexpend significant resources on research and development efforts and are not ultimately able to introduce successful newproducts as a result of those efforts or cost‑effectively commercialize new products, our business, financial position andresults of operations may be materially adversely affected.25 Table of ContentsFailures of or delays in clinical trials are common and have many causes, and such failures or delays could result inincreased costs to us and could prevent or delay our ability to obtain regulatory approval and commence product sales fornew products. We may also find it difficult to enroll patients in our clinical trials, which could delay or preventdevelopment of our product candidates.We may experience failures of or delays in clinical trials of our product candidates. Our planned clinical trials may not beginon time, have an effective design, enroll a sufficient number of patients or be completed on schedule, if at all. Our clinicaltrials may fail or be delayed for a variety of reasons, including, among others: delays in obtaining regulatory approval tocommence a trial; delays in reaching agreement with the FDA or equivalent foreign regulatory authorities on final trialdesign; imposition of a clinical hold for safety reasons or following an inspection of our clinical trial operations or trial sitesby the FDA or other regulatory authorities; delays in reaching agreement on acceptable terms with prospective contractresearch organizations, or CROs, and clinical trial sites, or failure by such CROs to carry out the clinical trial at each site inaccordance with the terms of our agreements with them; delays in obtaining required IRB approval at each site; difficulties ordelays in having patients complete participation in a trial or return for post‑treatment follow‑up, or clinical sites electing toterminate their participation in one of our clinical trials, which would likely have a detrimental effect on subject enrollment;time required to add new clinical sites; or delays or failure by us or our contract manufacturers to produce and deliversufficient supply of clinical trial materials.In addition, identifying and qualifying patients to participate in clinical trials of our product candidates is critical to oursuccess. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing ourproduct candidates as well as completion of required follow‑up periods. We may not be able to identify, recruit and enroll asufficient number of patients, or those with required or desired characteristics or to complete our clinical trials, in a timelymanner. Patient enrollment and completion of the trials is affected by factors including: the severity of the disease underinvestigation; the design of the trial protocol; the size of the patient population; the eligibility criteria for the trial inquestion; the perceived risks and benefits of the product candidate under trial; the proximity and availability of clinical trialsites for prospective patients; the availability of competing therapies and clinical trials; efforts to facilitate timely enrollmentin clinical trials; patient referral practices of physicians; and the ability to monitor patients adequately during and aftertreatment.If we are unable to initiate or complete our planned clinical trials or any such clinical trial is delayed for any of the abovereasons or other reasons, our development costs may increase, our regulatory approval process could fail or be delayed andour ability to commercialize and commence sales of our product candidates could be materially harmed, which could have amaterial adverse effect on our business.The testing required for the regulatory approval of our products is conducted primarily by independent third parties. Anyfailure by any of these third parties to perform this testing properly and in a timely manner may have an adverse effectupon our ability to obtain regulatory approvals.Our applications for the regulatory approval of our products, including both internally developed and in‑licensed products,incorporate the results of testing and other information that is conducted or gathered primarily by independent third parties(including, for example, manufacturers of raw materials, testing laboratories, CROs or independent research facilities). Ourability to obtain and maintain regulatory approval of the products being tested is dependent, in part, upon the quality of thework performed by these third parties, the quality of the third parties’ facilities and the accuracy of the information providedby third parties. Our control over any of these factors may be limited. We rely on these parties for execution of our preclinicalstudies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuringthat each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards andour reliance on the CROs does not relieve us of all of our regulatory responsibilities. We and our CROs are required tocomply with FDA laws and regulations regarding GCP, which are also required by the Competent Authorities of the MemberStates of the European Economic Area and comparable foreign regulatory authorities in the form of International Conferenceon Harmonization, or ICH, guidelines for all of our products in clinical development. Regulatory authorities enforce GCPthrough periodic inspections of trial sponsors, principal investigators and trial sites.26 Table of ContentsIf we or any of our CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemedunreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trialsbefore approving our marketing applications. We also rely on contract laboratories and other third parties, such as CROs, toconduct or otherwise support our nonclinical laboratory studies properly and on time, which are subject to GLP requirements.We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that anyof our clinical trials comply with applicable GCP and GLP regulations. In addition, our clinical trials must be conducted withproducts produced under the FDA’s cGMP regulations. While we have agreements governing activities of our CROs, we havelimited influence over their actual performance. In addition, portions of the clinical trials for our product candidates may beconducted outside of the United States, which will make it more difficult for us to monitor CROs and perform visits of ourclinical trial sites and will force us to rely heavily on CROs to ensure the proper and timely conduct of our clinical trials andcompliance with applicable regulations, including GCP and GLP requirements.If testing of our product candidates is not performed properly, or if the FDA or any equivalent foreign regulatory authorityfinds that the clinical trials are deficient, we may be required to repeat the clinical trials or to conduct additional clinicaltrials, which would result in additional expenses and may adversely affect our ability to obtain or maintain regulatoryapprovals. As a result, our ability to launch or continue selling products could be denied, restricted or delayed.We may not obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.Although we have received orphan drug designation for Ontinua ER for treatment for muscle spasticity in multiple sclerosispatients, we may not receive the full set of benefits potentially associated with orphan drug designation. Under the OrphanDrug Act, the first product with orphan drug designation to receive FDA approval for a specific disease or condition will beentitled to a seven-year period of market exclusivity in the United States. The FDA has previously approved another form ofbaclofen for the treatment of intractable muscle spasticity in multiple sclerosis patients. If the FDA determines that ourproduct contains the same active ingredient and is indicated for the same use as the approved product, we could be precludedfrom obtaining orphan drug exclusivity for our product unless we are able to demonstrate that our product is clinicallysuperior to the approved product, which could potentially require a head-to-head study. Moreover, even if we obtain orphandrug exclusivity, the FDA could subsequently approve a competing drug for the same condition if the FDA concludes thatthe later drug is clinically superior to our product. A competitor also may receive approval of different products for the sameindication for which our orphan product has exclusivity or obtain approval for the same product but for a different indicationfor which the orphan product has exclusivity. Additionally, orphan drug exclusivity may be lost if the FDA determines thatthe request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drugto meet the needs of patients with the rare disease or condition.Our products or product candidates may cause adverse effects or have other properties that could delay or prevent theirregulatory approval or limit the scope of any approved package insert or market acceptance, or result in significantnegative consequences following marketing approval.Treatment with our products or product candidates may produce undesirable side effects or adverse reactions or events.Although many of our products or product candidates contain active ingredients that have already been approved, meaningthat the side effects arising from the use of the active ingredient or class of drug in our products or product candidates isgenerally known, our products or product candidates may still cause undesirable or unknown side effects. These could beattributed to the active ingredient or class of drug or to our unique formulation of such products or product candidates, orother potentially harmful characteristics. Such characteristics could cause us, our IRBs, clinical trial sites, the FDA or otherregulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay, denialor withdrawal of regulatory approval, which may harm our business, financial condition and prospects significantly.Further, if any of our products cause serious or unexpected side effects after receiving market approval, a number ofpotentially significant negative consequences could result. For example, regulatory authorities may withdraw their approvalof the product or impose restrictions on its distribution, the FDA may require implementation of REMS,27 Table of Contentsregulatory authorities may require the addition of labeling statements, such as warnings or contraindications, we may berequired to change the way the product is administered or conduct additional clinical studies, we could be sued and heldliable for harm caused to patients, and our reputation may suffer.Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or productcandidate and could substantially increase the costs of commercializing our products and product candidates.If our products or product candidates do not produce the effects intended or if they cause undesirable side effects, ourbusiness may suffer.If our products or product candidates do not have the effects intended or cause undesirable side effects, our business maysuffer. For example, although many of the ingredients in our current dietary supplement products are vitamins, minerals andother substances for which there is a history of human consumption, they also contain innovative ingredients orcombinations of ingredients. These products and the combinations of ingredients could have certain undesirable side effectsif not taken as directed or if taken by a consumer who has certain medical conditions, such as the potential effect of highdoses of folic acid masking pernicious anemia. In addition, our products may not have the effect intended if they are nottaken in accordance with applicable instructions, which may include certain dietary restrictions. For example, if a patientswitches from using another company’s product to one of our products, there may be an actual or perceived lack of efficacyor increase in side effects. This is not uncommon and has been observed, for example, in patients switching between productscontaining methylphenidate. In this instance, the FDA has the ability to change the designation from AB to BX, oralternatively, to discontinue the product’s approval. Furthermore, there can be no assurance that any of the products, evenwhen used as directed, will have the effects intended or will not have harmful side effects in an unforeseen way or on anunforeseen patient population. If any of our products or products we develop or commercialize in the future are shown to beharmful or generate negative publicity from perceived lack of effect or harmful effects, our business, financial condition,results of operations and prospects could be harmed significantly.If side effects are identified with our marketed products, or if manufacturing problems occur, changes in labeling of productsmay be required, which could have a material adverse effect on our sales of the affected products. We or regulatoryauthorities, including the FDA, could decide that changes to the product labeling are needed to ensure the safety andeffectiveness of the products. Label changes may be necessary for a number of reasons, including the identification of actualor potential safety or efficacy concerns by regulatory agencies or the discovery of significant problems with a similar productthat implicates an entire class of products. Any significant concerns raised about the safety or efficacy of the products couldalso result in the need to reformulate those products, to conduct additional clinical trials, to make changes to themanufacturing processes, or to seek re‑approval of the relevant manufacturing facilities. Significant concerns about the safetyand effectiveness of a product could ultimately lead to the revocation of its marketing approval. Under the Food and DrugAdministration Amendments Act of 2007, the FDA has broad authority to force drug manufacturers to take any number ofactions if previously unknown safety or drug interaction problems arise, including but not limited to, mandating labelingchanges to a product based on new safety information (safety labeling changes). Our products, including ConZip, Divigeland VERT, have been subject to safety labeling changes, which we have addressed and incorporated into relevant productlabeling. These products and others, including product candidates, may become subject to additional safety labeling changesin the future. New safety issues may require us to, among other things, provide additional warnings or restrictions on productpackage inserts, even including boxed warnings in the United States or similar warnings outside of the United States, directlyalert healthcare providers of new safety information, narrow our approved indications, alter or terminate current or plannedtrials for additional uses of products, or even remove a product from the market, any of which could have a significantadverse impact on potential sales of the products or require us to expend significant additional funds. The revision of productlabeling or the regulatory actions described above could have a material adverse effect on our sales of the affected productsand on our business and results of operations.28 Table of ContentsOur operations in non‑U.S. jurisdictions subject us to increased regulatory oversight and regulatory, economic, social andpolitical uncertainties, which could cause a material adverse effect on our business, financial position and results ofoperations.We are subject to certain risks associated with our operations in non‑U.S. jurisdictions, including Argentina and Hungary,and with having assets and operations located in non‑U.S. jurisdictions. Our operations in these jurisdictions may beadversely affected by general economic conditions and economic and fiscal policy, including changes in exchange rates andcontrols, interest rates and taxation policies and increased government regulation. Certain jurisdictions have, from time totime, experienced instances of civil unrest and hostilities, both internally and with neighboring countries. Rioting, militaryactivity, terrorist attacks, or armed hostilities could cause our operations there to be adversely affected or suspended. Wegenerally do not have insurance for losses and interruptions caused by terrorist attacks, military conflicts and wars. Inaddition, we operate in countries, including Argentina and Hungary, where there have been reported instances of governmentcorruption and there are circumstances in which anti‑bribery laws may conflict with some local customs and practices.Our international operations may subject us to heightened scrutiny under the U.S. Foreign Corrupt Practices Act, or FCPA,other federal statutes and regulations, including those established by the Office of Foreign Assets Control, the Irish CriminalJustice (Money Laundering and Terrorist Financing) Acts 2010-2018, or the Irish Money Laundering Acts, the Irish CriminalJustice (Corruption Offences) Act 2018, the U.K. Bribery Act, anti‑corruption provisions in the Hungarian Criminal Code,Argentina’s recently enacted Law 27.401 and other similar anti‑bribery laws, and could subject us to liability under suchlaws despite our best efforts to comply with such laws and regulations. The FCPA prohibits any U.S. individual or businessfrom paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official,political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist theindividual or business in obtaining or retaining business. The Irish Corruption Offences Act renders a company liable forprosecution where any of its officers, managers, employees, agents or subsidiaries are found to be involved incorruption. The only defense is for the company to show that it took all reasonable steps and exercised all due diligence toprevent such corruption from taking place. The legislation also applies to certain international activities. The Irish MoneyLaundering Acts provide for criminal sanctions for engaging in “money laundering offences,” which are offenses committedwhere a person knows or believes that (or is reckless as to whether or not) the property represents the proceeds of criminalconduct and the party is involved in concealing or disguising the true nature, source, location, disposition, movement orownership of property, or in converting, transferring, handling, acquiring possession or using the property, or removing theproperty from, or bringing the property into, Ireland. In addition, the U.K. Bribery Act prohibits both domestic andinternational bribery, as well as bribery across both private and public sectors. An organization that “fails to prevent bribery”by anyone associated with the organization can be charged under the U.K. Bribery Act unless the organization can establishthe defense of having implemented “adequate procedures” to prevent bribery. Under these laws and regulations, as well asother anti‑corruption laws, anti‑money‑laundering laws, export control laws, customs laws, sanctions laws and other lawsgoverning our operations, various government agencies may require export licenses, may seek to impose modifications toour business practices, including the cessation of business activities in sanctioned countries or with sanctioned persons orentities and modifications to compliance programs, which may increase our compliance costs, and may subject us to fines,penalties and other sanctions. A violation of these laws or regulations could adversely impact our business, results ofoperations and financial condition. As a result of our policy to comply with the FCPA, the Irish Money Laundering Acts, theIrish Criminal Justice (Corruption Offences) Act 2018, the U.K. Bribery Act and similar anti‑bribery laws, we may be at acompetitive disadvantage to competitors that are not subject to, or do not comply with, such laws and regulations.We are, and will continue to be in the future, a party to legal proceedings that could result in adverse outcomes.We are a party to legal proceedings, including matters involving personnel and employment issues, intellectual propertyclaims and other proceedings arising in the ordinary course of business. In addition, there are an increasing number ofinvestigations and proceedings in the health care industry generally that seek recovery under the statutes and regulationsidentified in “Business — Government Regulation and Approval Process.” We evaluate our exposure to these legalproceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting principles,or GAAP. Assessing and predicting the outcome of these matters involves substantial uncertainties.29 Table of ContentsUnexpected outcomes in these legal proceedings, or changes in our evaluation or predictions and accompanying changes inestablished reserves, could have a material adverse impact on our financial results. For more information on our materialpending litigation, see the risk factor under the caption “— Our competitors or other third parties may allege that we, oursuppliers or partners are infringing their intellectual property, forcing us to expend substantial resources in litigation, theoutcome of which is uncertain. Any unfavorable outcome of such litigation, including losses related to “at‑risk” productlaunches, could have a material adverse effect on our business, financial position and results of operations” and the sectionentitled “Legal Proceedings.”Due to our dependence on a limited number of products, our business could be materially adversely affected if one or moreof our key products do not perform as well as expected.We generate a significant portion of our total revenues and gross profit percentage from the sale of a limited number ofproducts. For the years ended December 31, 2018 and 2017, our top ten products by product sales accounted forapproximately 99% and approximately 90%, respectively, of our total revenues and a significant portion of our gross profit.Any material adverse developments, including increased competition, pricing pressures or supply shortages, with respect tothe sale or use of one or more of these products or our failure to successfully introduce new key products, could have amaterial adverse effect on our revenues and gross profit percentage. For example, we expect increased pricing and marketshare pressure on methylphenidate ER due to additional market entrants.Our operating results are affected by many factors and may fluctuate significantly on a quarterly basis.Our operating results may vary substantially from quarter to quarter and may be greater or less than those achieved in theimmediately preceding period or in the comparable period of the prior year. Factors that may cause quarterly results to varyinclude, but are not limited to, the following:·our ability to create demand in the marketplace for products we promote;·the number of new product introductions;·losses related to inventory write‑offs;·marketing exclusivity, if any, which may be obtained on certain new products;·the level of competition in the marketplace for certain products;·availability of raw materials and finished products from suppliers;·our ability to manufacture products at our manufacturing facilities;·the scope and outcome of governmental regulatory actions;·our dependence on a small number of products for a significant portion of total revenues or income; and·legal actions asserting intellectual property rights against our products brought by competitors and legal challengesto our intellectual property rights brought against us by our competitors; price erosion and customer consolidation;and significant payments (such as milestones) payable by us under licensing and development agreements to ourpartners before the related product has received FDA approval.The profitability of our product sales is also dependent upon the prices we are able to charge for our products, the costs topurchase products from third parties and our ability to manufacture our products in a cost‑effective manner. If our totalrevenues decline or do not grow as anticipated, we may not be able to reduce our operating expenses to offset such declines.Failure to achieve anticipated levels of total revenues could, therefore, significantly harm our business and operating results.30 Table of ContentsIf we determine that our goodwill and other intangible assets have become impaired, we may record significantimpairment charges, which would adversely affect our results of operations.Goodwill and other intangible assets represent a significant portion of our assets. Goodwill is the excess of cost over the fairmarket value of net assets acquired in business combinations. In the future, goodwill and intangible assets may increase as aresult of future acquisitions. We review our goodwill and indefinite lived intangible assets at least annually for impairment.Impairment may result from, among other things, deterioration in the performance of acquired businesses, adverse marketconditions and adverse changes in applicable laws or regulations, including changes that restrict the activities of an acquiredbusiness. Any impairment of goodwill or other intangible assets would result in a non‑cash charge against earnings, whichwould adversely affect our results of operations. For the year ended December 31, 2018, we recorded non‑cash impairmentcharges of $104.2 million related to adjustments to the forecasted operating results for certain of our acquired generic,developed technology and in‑process research and development assets compared to their originally forecasted operatingresults at the date of acquisition.In certain circumstances, we issue price adjustments and other sales allowances to our customers, including providinglower pricing to underinsured or non‑insured patients. If our estimates for these price adjustments are incorrect, anyreserves which we establish for these programs may be inadequate, and may result in adjustments to these reserves orotherwise have a material adverse effect on our financial position and results of operations.For some of our products, we enjoy a period of time during which we may be the only party, or one of a small number ofparties, marketing and selling a certain product. This might be seen more often with one of our brand products, but may alsooccur in instances where we are one of a small number of parties selling a generic product. At some point other parties, sellingeither a competitive brand or generic product, may enter the market and compete for customers and market share resulting ina significant price decline for our drug (in some instances of generic entry, price declines have exceeded 90%). When weexperience price declines following a period of marketing exclusivity or semi‑exclusivity, or at any time when a competitorenters the market or offers a lower price with respect to a product we are selling, we may decide to lower the price of ourproduct to retain market share. As a result of lowering prices, we may provide price adjustments to our customers for thedifference between our new (lower) price and the price at which we previously sold the product which is still held ininventory by our customers, which is known as a shelf stock adjustment. While we do establish reserves for shelf stockadjustments, if actual shelf stock adjustments differ from our estimates, our operating result could be negatively affected.There are also circumstances under which we may decide not to provide price adjustments to certain customers, andconsequently, as a matter of business strategy, we may risk a greater level of sale returns of products in the customer’sexisting inventory and lose future sales volume to competitors rather than reduce our pricing.We establish reserves for chargebacks, rebates and incentives, other sales allowances and product returns at the time of sale,based on estimates. Separately, these same reserves may be used to support a patient assistance program. A patient assistanceprogram is a program designed to improve patient access to products by reducing barriers to access caused by potentiallyhigh out‑of‑pocket expenses for patients. The program assists under‑insured or non‑insured patients by helping to defraytheir out‑of‑pocket costs, in some cases entirely. Our estimates on the number of participants for the patient assistanceprogram or other similar programs, currently or in the future, may affect the adequacy of our reserves. Although we believeour processes for estimating reserves are adequate, we cannot provide assurances that our reserves will ultimately prove to beadequate. Increases in sales allowances may exceed our estimates for a number of reasons, including unanticipatedcompetition or an unexpected change in one or more of our contractual relationships. We will continue to evaluate theeffects of competition and will record a price adjustment reserve if and when we deem it necessary. Any failure to establishadequate reserves with respect to sales allowances may result in a material adverse effect on our financial position and resultsof operations.Rebates include mandated discounts under the Medicaid Drug Rebate Program, Medicare Part D Prescription Drug BenefitProgram and TRICARE Retail Pharmacy Refunds Program (TRICARE). Rebates are amounts owed after the final dispensingof the product to a benefit plan participant and are based upon contractual agreements or statutory requirements with benefitproviders. We estimate the allowance for rebates based on statutory discount rates and expected utilization at the time of sale.We adjust the allowance for rebates quarterly to reflect actual experience. If we change the way rebates are applied orcalculated, it may impair our ability to accurately accrue for rebates and have a31 Table of Contentsmaterial adverse effect on our financial position and results of operations. See “Risks Related to Our Industry — Ourprofitability depends on coverage and reimbursement by governmental authorities, health maintenance organizations, orHMOs, managed care organizations, or MCOs, and other third‑party payors; healthcare reform and other future legislationcreates uncertainty and may lead to reductions in coverage or reimbursement levels.”We may incur operating losses in the future.Our net loss was $109.3 million for the year ended December 31, 2018. Our net losses may fluctuate significantly fromquarter to quarter and year to year.We devote significant amounts of financial resources to the manufacture, marketing and commercialization of our approvedproducts, and support of our research and development of our clinical and preclinical programs. We may incur significantexpenses in the future. Some of these expenses will be made in connection with our ongoing activities, as we:·launch new products into the marketplace, including Osmolex ER;·conduct clinical trials and seek regulatory approval for Ontinua ER and RVL‑1201;·continue development of our pipeline product candidates;·conduct preclinical studies for product candidates;·incur litigation expenses related to Osmolex ER;·add personnel to support our marketing, commercialization and sales of approved products, and continue clinicaland preclinical product development efforts; and·continue our research and development efforts for new product opportunities, including business development andacquisitions; and operate as a public company.To become profitable, we must succeed in developing or acquiring products, obtaining regulatory approval for them, andmanufacturing, marketing and selling those products for which we may obtain regulatory approval. Even if we achieveprofitability for any period in the future, we may not be able to sustain profitability in subsequent periods. Our failure tobecome profitable would depress our market value and could impair our ability to raise capital, expand our business,discover or develop other products or continue our operations. A decline in the value of our company could cause you tolose all or part of your investment.Our profitability depends on our major customers. If these relationships do not continue as expected, our business,financial condition, prospects and results of operations could materially suffer.As of December 31, 2018, we had approximately 22 customers, some of which are part of larger buying groups. Our threelargest customers accounted for approximately 96% of our total revenues for the year ended December 31, 2018, as follows:Cardinal Health, Inc. 55%; McKesson Corporation 34%; and AmerisourceBergen Corporation 7%. The loss of any one ormore of these or any other major customer or the substantial reduction in orders from any one or more of our major customerscould have a material adverse effect upon our business, prospects, future operating results and financial condition.We may discontinue the manufacture and distribution of certain existing products, which may adversely impact ourbusiness, results of operations and financial condition.We continually evaluate the performance of our products, and may determine that it is in our best interest to discontinue themanufacture and distribution of certain of our products for various reasons, including commercial, regulatory, strategic orother reasons. We cannot guarantee that we have correctly forecasted, or will correctly forecast in the future,32 Table of Contentsthe appropriate products to discontinue or that our decision to discontinue various products is prudent if conditions,including market conditions, change. In addition, we cannot assure you that discontinuing one or more products will reduceour operating expenses or will not cause us to incur material charges associated with such a decision. Furthermore,discontinuing one or more existing products entails various risks, including, in the event that we decide to sell thediscontinued product, the risk that we will not be able to find a purchaser for such products or that the purchase priceobtained will not be equal to at least the book value of the net assets for such products. Other risks include managing theexpectations of, and maintaining good relations with, our customers who previously purchased products that wesubsequently discontinued, which could prevent us from selling other products to them in the future. Moreover, we mayincur other significant liabilities and costs associated with discontinuing one or more of our products, which could have amaterial adverse effect on our business, results of operations and financial condition.We face intense competition from both brand and generic companies, including companies that sell branded generics orauthorized generics, which could significantly limit our growth and materially adversely affect our financial results.The pharmaceutical industry is highly competitive. The principal competitive factors in the pharmaceutical industry include:·introduction of other brand or generic drug manufacturers’ products in direct competition with our products;·introduction of authorized generic products in direct competition with our products, particularly during exclusivityperiods;·ability of generic competitors to quickly enter the market after the expiration of patents or exclusivity periods,diminishing the amount and duration of significant profits;·consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups;·the willingness of our customers, including wholesale and retail customers, to switch among products of differentpharmaceutical manufacturers;·pricing pressures by competitors and customers;·a company’s reputation as a manufacturer and distributor of quality products;·a company’s level of service (including maintaining sufficient inventory levels for timely deliveries);·product appearance and labeling; and·a company’s breadth of product offerings.We face, and will continue to face, competition from pharmaceutical, biopharmaceutical, biotechnology and dietarysupplement companies developing similar products and technologies. Many of our competitors have longer operatinghistories and greater financial, research and development, marketing and other resources than we do. Consequently, many ofour competitors may be able to develop products or processes competitive with, or superior to, our own. Furthermore, we maynot be able to differentiate our products from those of our competitors, to successfully develop or introduce new products, ona timely basis or at all, that are less costly than those of our competitors, or to offer payment and other commercial terms tocustomers as favorable as those offered by our competitors. The markets in which we compete and intend to compete areundergoing, and are expected to continue to undergo, rapid and significant change. We expect competition to intensify astechnological advances and consolidations continue. New developments by other manufacturers and distributors couldrender our products uncompetitive or obsolete.33 Table of ContentsWe also face price competition generally as other manufacturers enter the market. Any such price competition may beespecially pronounced where our competitors source their products from jurisdictions where production costs may be lowerthan our production costs (sometimes significantly), especially lower‑cost non‑U.S. jurisdictions. Any of these factors, inturn, could result in reductions in our sales prices and gross profit percentage. This price competition has led to an increase incustomer demands for downward price adjustments by pharmaceutical distributors. There can be no assurance that we will beable to compete successfully in the industry or that we will be able to develop and implement any new or additionalstrategies successfully.Some of our products, including Osmolex ER, VERT and Divigel, are reference listed drugs. Manufacturers may seekapproval of generic versions of our reference listed drugs through the submission of ANDAs. In order to obtain approval of anANDA, a generic manufacturer generally must show that its product has the same active ingredient(s), dosage form, strength,route of administration, conditions of use and labeling as the reference listed drug, and that the generic version isbioequivalent to the reference listed drug, meaning that it is chemically identical and is absorbed in the body at the same rateand to the same extent. An ANDA applicant need not conduct its own clinical trials to demonstrate the safety or effectivenessof its generic product, but instead may rely on the prior findings of safety and effectiveness for the reference listed drug. As aresult, generic products may be significantly less costly to bring to market than reference listed drugs, and companies thatproduce generic products are generally able to offer them at lower prices. Moreover, many states allow or require substitutionof a therapeutically equivalent generic drug at the pharmacy level even if a reference listed drug is prescribed. Thus,following the introduction of a generic drug, a significant percentage of the market share of a reference listed drug may belost to the generic product. Competition from generic versions of our products could negatively impact our future totalrevenues, profitability and cash flows.Competition in the generic drug industry has also increased due to the proliferation of authorized generic pharmaceuticalproducts. Authorized generics are generic pharmaceutical products that are introduced by brand companies, either directly orthrough third parties, under the brand’s NDA approval for its own branded drug. Authorized generics, which have alreadybeen approved for marketing under the brand’s NDA, are not prohibited from sale during the 180‑day marketing exclusivityperiod granted to the first‑to‑file ANDA applicant. The sale of authorized generics adversely impacts the market share of ageneric product that has been granted 180 days of marketing exclusivity. This is a significant source of competition forcompanies that have been granted 180 days of marketing exclusivity, because an authorized generic can materially decreasethe profits that such a company could receive as an otherwise exclusive marketer of a product. Branded drug productcompanies may also reduce the price of their branded drug products to compete directly with generic drug products enteringthe market, which would similarly have the effect of reducing gross profit percentage. Such actions have the effect ofreducing the potential market share and profitability of generic products and may inhibit the development and introductionof generic pharmaceutical products corresponding to certain branded drugs.As our competitors introduce their own generic equivalents of our generic pharmaceutical products, our revenues andgross profit percentage from such products generally decline, often rapidly.Revenues and gross profit percentage derived from generic pharmaceutical products often follow a pattern based onregulatory and competitive factors that we believe are unique to the generic pharmaceutical industry. As the patent for abrand name product or the statutory marketing exclusivity period (if any) expires, the first generic manufacturer to receiveregulatory approval for a generic equivalent of the product often is able to capture a substantial share of the market. However,as other generic manufacturers receive regulatory approvals for their own generic versions, that market share and the price ofthat product will typically decline depending on several factors, including the number of competitors, the price of thebranded product and the pricing strategy of the new competitors. We cannot provide assurance that we will be able tocontinue to develop such products or that the number of competitors with such products will not increase to such an extentthat we may stop marketing a product for which we previously obtained approval, which may have a material adverse impacton our total revenues and gross profit percentage.Our branded pharmaceutical expenditures may not result in commercially successful products.Commercializing branded products is more costly than generic products. We have made significant investments in thedevelopment, launch and commercialization of branded products. This has led to increased infrastructure costs. We34 Table of Contentscannot be certain that these business expenditures will result in the successful development or launch of branded products orwill improve the long‑term profitability of our business. Just as our generic products take market share from thecorresponding branded products, we will confront the same competitive pressures from other generic pharmaceuticalcompanies that may seek to introduce generic versions of our branded products. Generic products generally are sold at asignificantly lower cost than the branded version, and, where available, may be required or encouraged in preference to thebranded version under third‑party reimbursement programs, or may be required by law to be substituted for branded versionsby pharmacies. Competition from generic equivalents, accordingly, could have an adverse effect on our branded products.While we have endeavored (with our relevant development and manufacturing partners, as applicable) to protect our brandedassets by incorporating specialized manufacturing processes and by securing regulatory exclusivities and intellectualproperty protections, such exclusivities and protections are subject to expiry and to legal challenges.We continue to consider product or business acquisitions or licensing arrangements to expand our product line. The successof our branded products will be based largely on the successful commercialization of our existing products, the identificationof products for acquisition or future development and the acquisition or in‑licensing of new product opportunities. Ourcurrent and future investments in acquisition or license arrangements may not lead to expected, adequate or any returns oninvestment. We also may not be able to execute future license or acquisition agreements on reasonable or favorable terms inorder to continue to grow or sustain our branded products. In addition, we cannot be certain that our branded productexpenditures will result in commercially successful launches of these products or will improve the long‑term profitability ofour branded products. Any future commercialization efforts that do not meet expectations could result in a write‑down ofassets related to the relevant products.A business interruption at our manufacturing facility in Marietta, Georgia, our warehouses in Sayreville, New Jersey andTampa, Florida or at facilities operated by third parties that we rely on could have a material adverse effect on ourbusiness, financial condition and results of operations.We produce all of the products that we manufacture at our manufacturing facility in Marietta, Georgia, and our inventorypasses through our warehouses in Sayreville, New Jersey and Tampa, Florida. These facilities, or the facilities of third partiesthat we rely on for the development, supply, marketing or distribution of raw materials or finished products, could be subjectto earthquakes, power shortages, telecommunications failures, floods, hurricanes, typhoons, fires, extreme weatherconditions, medical epidemics and other natural or man‑made disasters or business interruptions. A significant disruption atany of these facilities, even on a short‑term basis, could impair our ability to produce and ship products to the market on atimely basis, which could have a material adverse effect on our business, financial condition and results of operations.We may experience declines in the sales volume and prices of our products as a result of the continuing trend ofconsolidation of certain customer groups, which could have a material adverse effect on our business, financial positionand results of operations.Our ability to successfully commercialize any generic or branded product depends in large part upon the acceptance of theproduct by third parties, including pharmacies, government formularies, other retailers, physicians and patients. Therefore,our success will depend in large part on market acceptance of our products. We make a significant amount of our sales to arelatively small number of drug wholesalers and retail drug chains. These customers represent an essential part of thedistribution chain of our pharmaceutical products. Drug wholesalers and retail drug chains have undergone, and arecontinuing to undergo, significant consolidation. This consolidation may result in these groups gaining additionalpurchasing leverage and consequently increasing the product pricing pressures facing our business. Additionally, theemergence of large buying groups representing independent retail pharmacies and other drug distributors, and the prevalenceand influence of MCOs and similar institutions, potentially enable those groups to demand larger price discounts on ourproducts. For example, there has been a recent trend of large wholesalers and retailer customers forming partnerships, such asthe alliance between Walgreens and AmerisourceBergen Corporation, the alliance between Rite Aid and McKesson DrugCompany and the alliance between CVS and Cardinal Health. The result of these developments may have a material adverseeffect on our business, financial condition and results of operations.35 Table of ContentsWe depend to a large extent on third‑party suppliers and distributors for the raw materials for our products, particularlythe chemical compounds comprising the API used in our products, as well as suppliers and distributors for certain finishedgoods. A prolonged interruption in the supply of such products could have a material adverse effect on our business,financial position and results of operations.We purchase raw materials, including API, and finished goods from both U.S. and non‑U.S. companies. If we experiencesupply interruptions or delays, we may have to obtain substitute materials or products, which in turn would require us toobtain amended or additional regulatory approvals, subjecting us to additional expenditures of significant time andresources. We may source raw materials or API from a single source, which increases the risk to our business if supply fromthat source is interrupted. For example, Orion Corporation is our only supplier of Divigel, Nephron PharmaceuticalsCorporation is our only supplier of RVL‑1201 and Mallinckrodt LLC is our only supplier of the API used inmethylphenidate ER (including M‑72). We also contract with third parties to distribute finished products, including LannettCompany, Inc. for oxybutynin ER and nifedipine ER.Further, third parties with whom we have agreements may allege that we have failed to perform our obligations under suchagreements and we may become involved in lawsuits or other proceedings related to such agreements. For example, we havebeen engaged in discussions with Albion Laboratories, Inc. regarding potential disputes over the fulfillment of obligationsunder agreements for the supply of raw materials. If any dispute with a third‑party supplier or distributor were determinedadversely to us, it could have a material adverse effect on our business, financial position and results of operations.In addition, changes in our raw material suppliers, including suppliers of API, could result in significant delays inproduction, higher raw material costs and loss of sales and customers, because regulatory authorities must generally approveraw material sources for pharmaceutical products, which may be time consuming. Any significant supply interruption couldhave a material adverse effect on our business, research and development programs, financial condition, prospects and resultsof operations. Because the federal drug approval application process requires specification of raw material suppliers, if rawmaterials from a specified supplier were to become unavailable, FDA approval of a new supplier may be required. A delay inthe manufacture and marketing of the drug involved while a new supplier becomes approved by the FDA and itsmanufacturing process is determined to meet FDA standards could, depending on the particular product, have a materialadverse effect on our results of operations and financial condition. Generally, we attempt to mitigate the potential effects ofany such situation by providing for, where economically and otherwise feasible, two or more suppliers of raw materials forthe drugs that we manufacture. In addition, we may attempt to enter into a contract with a raw material supplier in an effort toensure adequate supply for certain of our products.We depend on third‑party agreements for a portion of our product offerings and product candidates, including certain keyproducts, and any failure to maintain these arrangements or enter into similar arrangements with new partners could resultin a material adverse effect.We have broadened our product offering by entering into a variety of third‑party agreements covering a combination of jointdevelopment, supply, marketing and distribution of products. For example, we have entered into an agreement withMallinckrodt LLC for the development and supply of API used in methylphenidate ER (including M‑72) products that wemanufacture at our manufacturing facility in Marietta, Georgia. For the year ended December 31, 2018, 50% of our totalrevenues were generated from products manufactured under contract or under license. We cannot provide assurance that thedevelopment, manufacturing or supply efforts of our contractual partners will continue to be successful, that we will be ableto maintain or renew such agreements or that we will be able to enter into new agreements for additional products. Thesethird parties may also exercise their rights to terminate these agreements or may fail to perform their obligations as requiredunder these agreements. Alternatives for some of these agreements may not be easily available.Any alteration to or termination of our current distribution and marketing agreements, any failure to enter into new andsimilar agreements, any disputes regarding our agreements with third parties, whether or not such disputes result in litigation,any failure to fulfill obligations by a third party, or any other interruption of our product supply under the distribution andmarketing agreements, could materially adversely affect our business, financial condition, prospects and results ofoperations.36 Table of ContentsIf we are unable to develop or maintain our sales capabilities, we may not be able to effectively market or sell our products.For the years ended December 31, 2018 and 2017, we spent $42.5 million and $33.1 million, respectively, on sales andmarketing. As we gain approval and launch new products, we will invest in expanding our sales and marketing organizationinto new areas such as Parkinson’s disease, multiple sclerosis and ophthalmology. We face a number of risks in developing ormaintaining internal sales and marketing capabilities, including:·not being able to attract talented and qualified personnel to build an effective marketing or sales force capability;·the cost of establishing a marketing and sales force capability may not be justified in light of the total revenuesgenerated from our products; and·our direct sales and marketing efforts may not be successful.If we are unable to establish or maintain adequate sales and marketing capabilities or are unable to do so in a timely manner,our ability to generate revenues and profits from our products will be limited and this could have a material adverse effect onour business, financial position and results of operations.Our future success depends on our ability to attract and retain key employees and consultants.Our future success depends, to a substantial degree, upon the continued service of the key members of our management team.The loss of the services of key members of our management team, including Brian Markison, Tina deVries, Andrew Einhornand James Schaub, or their inability to perform services on our behalf could have a material adverse effect on our business,financial condition, prospects and results of operations. Our success also depends, to a large extent, upon the contributions ofour sales, marketing, scientific and quality assurance staff. We compete for qualified personnel against other brand andgeneric pharmaceutical manufacturers that may offer more favorable employment opportunities. If we are not able to attractand retain the necessary personnel to accomplish our business objectives, we could experience constraints that wouldadversely affect our ability to sell and market our products effectively and to support our research and developmentprograms. In particular, sales and marketing efforts depend on the ability to attract and retain skilled and experienced sales,marketing and quality assurance representatives. Although we believe that we have been successful in attracting andretaining skilled personnel in all areas of our business, we cannot provide assurance that we can continue to attract, train andretain such personnel. Any failure in this regard could limit our ability to generate sales and develop or acquire new products.Any acquisitions we may undertake in the future involve numerous risks, including the risks that we may be unable tointegrate the acquired products or businesses successfully and that we may assume liabilities that could adversely affect us.We may acquire products or businesses. For example, in October 2017, we acquired the rights to RVL‑1201. Acquisitionsinvolve numerous risks, including operational risks associated with the integration of acquired businesses or products. Theserisks include, but are not limited to:·difficulties in achieving identified revenue synergies, growth opportunities, operating synergies and cost savings;·difficulties in assimilating the personnel, operations and products of an acquired company, and the potential loss ofkey employees;·difficulties in consolidating information technology platforms, business applications and corporate infrastructure;37 Table of Contents·difficulties in integrating our corporate culture with local customs and cultures;·possible overlap between our products or customers and those of an acquired entity that may create conflicts inrelationships or other commitments detrimental to the integrated businesses;·difficulties in obtaining approval from governmental authorities such as the FTC;·our inability to achieve expected total revenues and gross profit percentage for any products we may acquire;·possible contingent liability that includes, among others, known or unknown environmental, patent or productliability claims;·the diversion of management’s attention from other business concerns; and·risks and challenges of entering or operating in markets in which we have limited or no prior experience, includingthe unanticipated effects of export controls, exchange rate fluctuations, foreign legal and regulatory requirements,and political and economic conditions.In addition, non‑U.S. acquisitions involve numerous additional risks, including those related to the potential absence orinadequacy of policies and procedures sufficient to assure compliance by a non‑U.S. entity with U.S. regulatory and legalrequirements. There can be no assurance that we will not be subject to liability arising from conduct which occurred prior toour acquisition of any entity.We incur significant transaction costs associated with our acquisitions, including substantial fees for investment bankers,attorneys, and accountants. Any acquisition could result in our assumption of unknown or unexpected, and potentiallymaterial, liabilities. Additionally, in any acquisition agreement, the negotiated representations, warranties and agreements ofthe selling parties may not entirely protect us, and liabilities resulting from any breaches may not be subject toindemnification by the suing parties and could exceed negotiated indemnity limitations. These factors could impair ourgrowth and ability to compete, divert resources from other potentially more profitable endeavors, or otherwise cause amaterial adverse effect on our business, financial condition and results of operations.The financial statements of the companies we have acquired or may acquire in the future are prepared by management of suchcompanies and are not independently verified by our management. In addition, any pro forma financial statements preparedby us to give effect to such acquisitions may not accurately reflect the results of operations of such companies that wouldhave been achieved had the acquisition of such entities been completed at the beginning of the applicable financialreporting periods. Finally, we cannot guarantee that we will continue to acquire businesses at valuations consistent with ourprior acquisitions or that we will complete acquisitions at all.We may make acquisitions of, or investments in, complementary businesses or products, which may be on terms that maynot turn out to be commercially advantageous, may require additional debt or equity financing, and may involve numerousrisks, including those set forth above.We regularly review the potential acquisition of technologies, products, product rights and complementary businesses andare currently evaluating, and intend to continue to evaluate, potential product and company acquisitions and other businessdevelopment opportunities. We may choose to enter into such transactions at any time. Nonetheless, we cannot provideassurance that we will be able to identify suitable acquisition or investment candidates. To the extent that we do identifycandidates that we believe to be suitable, we cannot provide assurance that we will be able to reach an agreement with theselling party or parties, that the terms we may agree to will be commercially advantageous to us, or that we will be able tosuccessfully consummate such investments or acquisitions even after definitive documents have been signed. If we make anyacquisitions or investments, we may finance such acquisitions or investments through our cash reserves, debt financing (suchas borrowings available to us under our senior secured credit facilities, including our revolving credit facility), which mayincrease our leverage, or by issuing additional equity securities, which could dilute38 Table of Contentsthe holdings of our then‑existing shareholders. If we require financing, we cannot provide assurance that we will be able toobtain any required financing when needed on acceptable terms or at all.The use of legal, regulatory and legislative strategies by brand competitors, including authorized generics and citizen’spetitions, as well as the potential impact of proposed legislation, may increase our costs associated with the introduction ormarketing of our generic products, delay or prevent such introduction or significantly reduce the profit potential of ourproducts.Brand drug companies often pursue strategies that may serve to prevent or delay competition from generic alternatives totheir branded products. These strategies include, but are not limited to:·marketing an authorized generic version of a branded product at the same time that we introduce a genericequivalent of that product, directly or through agreement with a generic competitor;·filing citizen petitions with the FDA that may limit generic competition and result in delays of our productapprovals;·using REMS‑related distribution restrictions or other means of limiting access to their branded products to preventus from obtaining product samples needed to conduct bioequivalence testing required for ANDA approval, therebydelaying or preventing us from obtaining FDA approval of a generic version of such branded products;·seeking to secure patent protection of certain “Elements to Assure Safe Use” of a REMS program, which are requiredmedical interventions or other actions healthcare professionals need to execute prior to prescribing or dispensing thedrug to the patient, in an attempt to prevent the generic company’s ability to avoid infringement of the patents inquestion or secure approval;·seeking to establish regulatory and legal obstacles that would make it more difficult to demonstrate a genericproduct’s bioequivalence or “sameness” to the related branded product;·initiating legislative and administrative efforts in various states to limit the substitution of generic versions ofbranded products for the corresponding branded products;·filing suits for patent infringement that automatically delay FDA approval of generic products;·introducing “next‑generation” products prior to the expiration of market exclusivity for their branded product,which often materially reduces the demand for the generic product for which we may be seeking FDA approval;·obtaining extensions of market exclusivity by conducting clinical trials of branded drugs in pediatric populations orby other methods;·persuading the FDA to withdraw the approval of branded drugs for which the patents are about to expire, thusallowing the brand company to develop and launch new patented products serving as substitutes for the withdrawnproducts;·seeking to obtain new patents on drugs for which patent protection is about to expire;·filing patent applications that are more complex and costly to challenge;·seeking temporary restraining orders and injunctions against selling a generic equivalent of their branded productbased on alleged misappropriation of trade secrets or breach of confidentiality obligations;39 Table of Contents·seeking temporary restraining orders and injunctions against a generic company that has received final FDAapproval for a product and is attempting to launch an at risk product prior to resolution of related patent litigation;·reducing the marketing of the branded product to healthcare providers, thereby reducing the branded drug’scommercial exposure and market size, which in turn adversely affects the market potential of the equivalent genericproduct; and·converting branded prescription drugs that are facing potential generic competition to over‑the‑counter products,thereby potentially blocking the sale of generic prescription drugs under the operation of the Durham‑Humphreyamendments to the FDCA, or significantly impeding the growth of the generic prescription market for the drugs.The FDCA provides for an additional six months of marketing exclusivity attached to another period of exclusivity, such as afive‑year period of exclusivity granted to the first applicant to obtain approval of an NDA for a new chemical entity or if asponsor conducts pediatric clinical trials in response to a written request from the FDA. Some companies have lobbiedCongress for amendments to the Hatch‑Waxman legislation that would give them additional advantages over genericcompetitors. For example, although the term of a company’s drug patent can be extended to reflect a portion of the time anNDA is under regulatory review, some companies have proposed extending the patent term by a full year for each year spentin clinical trials, rather than the one‑half year that is currently permitted. If proposals like these were to become effective, ourentry into the market and our ability to generate revenues associated with new generic products may be delayed, reduced oreliminated, which could have a material adverse effect on our business, prospects and financial position.We depend on our ability to protect our intellectual property and proprietary rights. We may not be able to keep ourintellectual property and proprietary rights confidential and protect such rights.Our success depends on our ability to protect and defend the intellectual property rights associated with our current andfuture products. If we fail to protect our intellectual property adequately, competitors may manufacture and market productssimilar to, or that may be confused with, our products, and our generic competitors may obtain regulatory approval to makeand distribute generic versions of our branded products. We cannot be certain that patents will be issued with respect to anyof our patent applications or that any existing or future patents issued to or licensed by us will provide competitiveadvantages for our products or will not be challenged, invalidated, circumvented or held unenforceable in proceedingscommenced by our competitors or other third parties. Furthermore, our patent rights may not prevent or limit our present andfuture competitors from developing, making, importing, using or commercializing products that are functionally similar toour products. Some of our products, including some of our promoted products, are not protected by patents at all.The patent position of companies in the pharmaceutical industry generally involves complex legal and factual questions,and has been and remains the subject of significant litigation in recent years. Legal standards relating to scope and validityof patent claims are evolving and may differ in various countries. Patent protection must ultimately be sought on acountry‑by‑country basis, which is an expensive and time‑consuming process with uncertain outcomes. Any patents we haveobtained, or may obtain in the future, may be challenged, invalidated or circumvented. As a result, the issuance, scope,validity, enforceability and commercial value of our patent rights are highly uncertain. We may be involved in lawsuits toprotect or enforce our patents or the patents of our licensors, which could be expensive, time consuming and unsuccessful.In addition to the above limitations, our patent protection outside the United States may be further limited. Filing,prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitivelyexpensive, and our intellectual property rights in some countries outside the United States could be less extensive than thosein the United States. We generally select to pursue patent protection in only a limited number of jurisdictions outside of theUnited States. Even where we wish to pursue protection, we may not be able to obtain patent protection for certaintechnology outside the United States. In addition, the laws of some countries do not protect intellectual property rights to thesame extent as federal and state laws in the United States, even in jurisdictions where we do pursue40 Table of Contentspatent protection. The laws of certain non‑U.S. countries do not protect proprietary rights to the same extent or in the samemanner as the U.S., and therefore we may encounter additional problems in protecting and defending our intellectualproperty in certain non‑U.S. jurisdictions. Many companies have encountered significant problems in protecting anddefending intellectual property rights in non‑U.S. jurisdictions.Proceedings to enforce patent rights, whether in the United States. or in non‑U.S. jurisdictions, could: result in substantialcosts and divert our efforts and attention from other aspects of our business; put our patents at risk of being invalidated orinterpreted narrowly; put our patent applications at risk of not issuing; and provoke third parties to assert claims against us.We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded to us, if any, may not becommercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may beinadequate to obtain a significant commercial advantage.We also rely particularly on trade secrets, unpatented know‑how and proprietary expertise and continuing innovation todevelop and maintain our competitive position. We generally enter into confidentiality agreements with licensees, suppliers,employees, consultants and other parties. This is done in part because not all of our products are protected by patents. Wecannot provide assurance that these agreements will not be breached. We also cannot be certain that we will have recourse toadequate remedies in the event of a breach. Disputes may arise concerning the ownership of intellectual property or theapplicability of confidentiality agreements. We cannot be sure that our trade secrets and proprietary technology will not beindependently developed or otherwise become known by our competitors or, if patents are not issued with respect tointernally developed products, that we will be able to maintain the confidentiality of information relating to these products.Efforts to enforce our intellectual property rights can be costly, time‑consuming and ultimately unsuccessful. Any failure toadequately prevent disclosure of our know‑how, trade secrets and other propriety information could have a material adverseimpact on our business and our prospects.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission,fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reducedor eliminated for non‑compliance with these requirements.Periodic maintenance and annuity fees on any issued patent are due to be paid to the U.S. Patent and Trademark office, or theUSPTO, and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreigngovernmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similarprovisions during the patent application process. While an inadvertent lapse may, in many cases, be cured by payment of alate fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result inabandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevantjurisdiction. Non‑compliance events that could result in abandonment or lapse of a patent or patent application includefailure to respond to official actions within prescribed time limits, non‑payment of fees and failure to properly prepare andsubmit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our products orproduct candidates, our competitors might be able to enter the market, which would harm our business, prospects andfinancial position.Our competitors or other third parties may allege that we, our suppliers or partners are infringing their intellectualproperty, forcing us to expend substantial resources in litigation, the outcome of which is uncertain. Any unfavorableoutcome of such litigation, including losses related to “at‑risk” product launches, could have a material adverse effect onour business, financial position and results of operations.Companies that produce branded products routinely bring litigation against entities selling or seeking regulatory approval tomanufacture and market generic or other copies of their branded products, or products related to their branded products ortechnologies. These companies or other patent holders, including patent holders who do not have related products, mayallege patent infringement or other violations of intellectual property rights. Patent holders may also bring patentinfringement suits against companies that are currently marketing and selling an approved product, including an approvedgeneric product. Litigation often involves significant expense and can delay or prevent introduction or sale of our generic orother products. For example, a certain period of delay may be statutorily prescribed, or a court could grant a patent holderinjunctive relief for the period of the litigation. If third party patents are held valid, enforceable and infringed by ourproducts, we may, unless we could obtain a license from the patent holder,41 Table of Contentsneed to delay selling our corresponding product, pay damages, and, if we are already selling our product, cease selling andpotentially destroy existing product stock. These risks apply to our branded products as well as our generic products. Thirdparties, including our competitors, may allege that one of our branded products violates their patent rights, which wouldexpose us to the same risks. A license may not be available from the patent holder on commercially reasonable terms, or atall. If available, we may choose to take a license under a third party’s patent rights to resolve a dispute, even in the absence ofa finding by a court that a patent is valid, enforceable and infringed.There may be situations in which we may make business and legal judgments to manufacture, market or sell products that aresubject to claims of alleged patent infringement prior to final resolution of those claims by the courts, based upon our beliefthat such patents are invalid, unenforceable, or are not infringed by our manufacturing, marketing and sale of such products.This is referred to in the pharmaceutical industry as an “at‑risk” launch. The risk involved in an at‑risk launch can besubstantial because, if a patent holder ultimately prevails against us, the remedies available to such holder may include,among other things, permanent injunctive relief preventing the sale of the product and damages measured as a reasonableroyalty or by the profits lost by the patent holder, which can be significantly higher than the profits we make from selling ourproduct. We could face substantial damages from adverse court decisions in such matters. We could also be at risk for thevalue of such inventory that we are unable to market or sell.Upon receipt of approval for Osmolex ER from the FDA, we filed a declaratory judgment action against AdamasPharmaceuticals, Inc. and Adamas LLC, which we collectively refer to as Adamas, on February 16, 2018 in the U.S. DistrictCourt for the District of Delaware seeking a declaratory judgment that Osmolex ER does not infringe, directly or indirectly,any valid and enforceable claim of any of the 11 patents enumerated in our complaint. On September 20, 2018, Adamas filedan amended answer with counterclaims alleging infringement of certain patents included in our complaint and requestingthat the court grant Adamas damages, injunctive relief and attorneys’ fees. Adamas commercializes a different amantadineproduct, an extended‑release capsule marketed and sold as Gocovri®. We intend to vigorously defend our rights tocommercialize Osmolex ER free and clear of any of these patents. However, this litigation is at an early stage. If Adamas’scounterclaims for infringement are successful, we could be subject to liability for damages, potentially including lost profitsdamages or reasonable royalties, and also injunctive relief, as discussed above, and the other risks associated with patentlitigation, which could have an adverse effect on our business, financial position and results of operations. For moreinformation on our material pending litigation, see “Legal Proceedings.”If we fail to comply with our obligations in the agreements under which we license rights from third parties, or if the licenseagreements are terminated for other reasons, we could lose license rights that are important to our business.We are a party to a number of licenses that are important to our business and expect to enter into additional licenses in thefuture. Our existing license agreements impose, and we expect that future license agreements will impose, on us variousdevelopment, regulatory and commercial diligence obligations, payment of milestones or royalties and other obligations.Additionally, existing or future license agreements may include a sublicense from a third party that is not the originallicensor of the intellectual property at issue. Under such an agreement, we must rely on our licensor to comply with theirobligations under the primary license agreements under which such third party obtained rights in the applicable intellectualproperty, where we may have no relationship with the original licensor of such rights. If our licensors fail to comply withtheir obligations under these upstream license agreements, the original third‑party licensor may have the right to terminatethe original license, which may terminate our sublicense. If this were to occur, we would no longer have rights to theapplicable intellectual property unless we are able to secure our own direct license with the owner of the relevant rights,which we may not be able to do at a reasonable cost, on reasonable terms or at all, and this may impact our ability to continueto develop or commercialize our products incorporating the relevant intellectual property. If we fail to comply with ourobligations under our license agreements, or we are subject to a bankruptcy or insolvency, the licensor may have the right toterminate the license. In the event that any of our existing or future important licenses were to be terminated by the licensor,we would likely need to cease further development and commercialization of the related program or be required to spendsignificant time and resources to modify the program to not use the rights under the terminated license. In the case ofmarketed products that depend upon a license agreement, we could be required to cease our commercialization activities,including sale of the affected product.42 Table of ContentsDisputes may arise between us and any of our licensors regarding intellectual property subject to such agreements, including:·the scope of rights granted under the agreement and other interpretation‑related issues;·whether and the extent to which our technology and processes infringe on intellectual property of the licensor that isnot subject to the agreement;·our right to sublicense patent and other rights to third parties;·our diligence obligations with respect to the use of the licensed intellectual property, and what activities satisfythose diligence obligations;·the ownership of inventions and know‑how resulting from the joint creation or use of intellectual property by ourlicensors and us, should any such joint creation occur;·our right to transfer or assign the license; and·the effects of termination.These or other disputes over intellectual property that we have licensed or acquired may prevent or impair our ability tomaintain our current arrangements on acceptable terms, or may impair the value of the arrangement to us. Any such dispute,or termination of a necessary license, could have a material adverse effect on our business, financial condition and results ofoperations.We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectualproperty, or claiming ownership of what we regard as our own intellectual property.We may be subject to claims that our employees or we have inadvertently or otherwise used intellectual property, includingtrade secrets or other proprietary information, of any such employee’s former employer. We may also in the future be subjectto claims that we have caused an employee to breach the terms of his or her non‑competition or non‑solicitation agreement.Litigation may be necessary to defend against these potential claims.In addition, while it is our policy to require our employees and contractors who may be involved in the development ofintellectual property to execute agreements assigning such intellectual property to us, such employees and contractors maybreach the agreement and claim the developed intellectual property as their own.If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuableintellectual property rights or personnel. A court could prohibit us from using technologies or features that are essential toour products if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietaryinformation of the former employers. Even if we are successful in prosecuting or defending against such claims, litigationcould result in substantial costs and could be a distraction to our management team. In addition, any litigation or threatthereof may adversely affect our ability to hire employees or contract with independent service providers. Moreover, a loss ofkey personnel or their work product could hamper or prevent our ability to commercialize our products.We may be subject to claims challenging the inventorship or ownership of our owned or in‑licensed patent rights and otherintellectual property.We generally enter into confidentiality and intellectual property assignment agreements with our employees and consultants.However, these agreements may be breached and may not effectively assign intellectual property rights to us. Litigation maybe necessary to defend against these and other claims challenging inventorship or ownership of inventions. The owners ofintellectual property in‑licensed to us could also face such claims. If we or our licensors fail in43 Table of Contentsdefending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, suchas exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverseeffect on our business. Even if we or our licensors are successful in defending against such claims, litigation could result insubstantial costs and be a distraction to our management team and other employees.Any trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.We rely on trademarks as one means to distinguish our products and product candidates from the products of our competitors.Our trademark applications may not result in registered trademarks. Third parties may oppose our trademark applications orotherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could beforced to rebrand our products, which could result in substantial cost, loss of brand recognition and could require us todevote resources to advertising and marketing new brands. Our competitors may infringe our trademarks, and we may nothave adequate resources to enforce our trademarks. Even if we are successful in defending the use of our trademarks orpreventing third parties from infringing our trademarks, resolution of such disputes may result in substantial costs.We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, includingcybersecurity and data leakage risks.Significant disruptions to our information technology systems or breaches of information security could adversely affect ourbusiness. In the ordinary course of business, we collect, store and transmit large amounts of confidential information, and it iscritical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. Thesize and complexity of our information technology systems, and those of our third‑party vendors with whom we contract,make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentionalactions by our employees, partners or vendors, from attacks by malicious third parties. Such attacks are of ever-increasinglevels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to,industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. As a globalpharmaceutical company, our systems are subject to frequent attacks. Due to the nature of some of these attacks, there is a riskthat they may remain undetected for a period of time. Service interruptions could also result from intentional or accidentalphysical damage to our systems infrastructure maintained by us or by third parties. Maintaining the secrecy of thisconfidential, proprietary, or trade secret information is important to our competitive business position. While we have takensteps to protect such information and invested in information technology, there can be no assurance that our efforts willprevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use ordisclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination,or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure,unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidentialinformation, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other reason, couldenable others to produce competing products, use our proprietary technology or information, or adversely affect our businessor financial condition. Further, any such interruption, security breach, loss or disclosure of confidential information, couldresult in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business,financial position, results of operations or cash flow.Risks related to our industryOur profitability depends on coverage and reimbursement by governmental authorities, HMOs, MCOs and otherthird‑party payors; healthcare reform and other future legislation creates uncertainty and may lead to reductions incoverage or reimbursement levels.We have obtained coverage and reimbursement at varying levels for our products from governmental payors, private healthinsurers and other third‑party payors such as MCOs. There is no assurance; however, that any drug that we market will becovered by any third‑party payor, or that, once a coverage determination has been made, the third‑party payor will offer anadequate reimbursement level for our product. Third‑party payors may limit coverage to specific products on an approvedformulary, which might not include all of the approved products for a particular indication. In44 Table of Contentsdetermining whether to approve reimbursement for our products and at what level, we expect that third‑party payors willconsider factors that include the efficacy, cost effectiveness and safety of our products, as well as the availability of othertreatments including other generic prescription drugs and over‑the‑counter alternatives. Further, in order to obtain andmaintain acceptable reimbursement levels and access for patients at copay levels that are reasonable and customary, we mayface mounting pressure to offer discounts or rebates from list prices to increase existing discounts and rebates, to offerdiscounts and rebates to a greater number of third‑party payors or to implement other unfavorable pricing modifications.Obtaining and maintaining favorable reimbursement can be a time consuming and expensive process, and there is noguarantee that we will be able to negotiate or continue to negotiate pricing terms with third‑party payors at levels that areprofitable to us, or at all. Additionally, any reimbursement granted may not be maintained, or limits on reimbursementavailable from third‑party payors may reduce the demand for, or negatively affect the price of those products, and couldsignificantly harm our business, results of operations, financial condition and cash flows.In particular, there is no assurance that drug plans participating under the Medicare Part D program will offer our products, orof the terms of any such coverage, or that covered drugs will be reimbursed at amounts that reflect current or historical levels.The Medicare Part D Prescription Drug Benefit, established a voluntary outpatient prescription drug benefit for Medicarebeneficiaries (primarily the elderly over 65 and the disabled). These beneficiaries may enroll in private drug plans. There aremultiple types of Part D plans and numerous plan sponsors, each with its own formulary and product access requirements.The plans have considerable discretion in establishing formularies and tiered co‑pay structures and in placing priorauthorization and other restrictions on the utilization of specific products. In addition, Part D plan sponsors are permitted andencouraged to negotiate rebates with manufacturers. The Medicare Part D program is administered by the CMS within HHS.Since Medicare Part D was first established in 2006, CMS has issued extensive regulations and other sub‑regulatory guidancedocuments implementing the Medicare Part D benefit, and the HHS Office of Inspector General, or OIG, has issuedregulations and other guidance in connection with the Medicare Part D program. The federal government may continue toissue guidance and regulations regarding the obligations of Part D sponsors and their subcontractors that affect programcoverage of pharmaceutical products or their reimbursement levels. In addition, participating drug plans may establish drugformularies that exclude coverage of specific drugs, and payment levels for drugs negotiated with Part D drug plans may belower than reimbursement levels available through private health plans or other payors. Moreover, beneficiary co‑insurancerequirements could influence which products are recommended by physicians and selected by patients. See “Business –Government Regulation and Approval Process – Healthcare Reform.There is no assurance that Medicaid programs will continue to offer coverage, and adequate reimbursement levels, for ourpharmaceutical products. Most state Medicaid programs have established preferred drug lists, and the process, criteria andtimeframe for obtaining placement on the preferred drug list varies from state to state. For drugs not on the preferred drug list,the prescriber may have to request and obtain prior authorization in order for the drug to be covered. Under the Medicaiddrug rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate for single sourceproducts (including authorized generics) is based on the greater of (i) a specified percentage of the product’s averagemanufacturer price or (ii) the difference between the product’s average manufacturer price and the best price offered by themanufacturer. The rebate for multiple source products is a specified percentage of the product’s average manufacturer price.In addition, many states have established supplemental rebate programs as a condition for including a drug product on apreferred drug list. The profitability of our products may depend on the extent to which they appear on the preferred druglists of a significant number of state Medicaid programs and the amount of the rebates that must be paid to such states. Inaddition, there is significant fiscal pressure on the Medicaid program, and legislative action to lower the pharmaceuticalcosts of the program are possible. Such legislative action could materially adversely affect our anticipated total revenues andresults of operations.In addition, third‑party payors are increasingly challenging pricing of pharmaceutical products, and imposing controls tomanage costs. For example, we are currently subject to an audit by the Office of Inspector General related to purportedovercharges with respect to the prices of VERT that were purchased by the U.S. Department of Veterans Affairs. Although webelieve that the prices we charged in these transactions were appropriate and intend to defend ourselves vigorously in theseproceedings, an adverse determination of this or other audits could result in the imposition of significant financial penalties,which could have a material adverse impact on our results of operations and financial condition.45 Table of ContentsThe trend toward managed healthcare in the United States, the growth of organizations such as HMOs and MCOs, andlegislative proposals to reform healthcare and government insurance programs could significantly influence the purchase ofpharmaceutical products, resulting in lower prices and a reduction in product demand. The ACA was signed into law inMarch 2010. A number of provisions of the ACA continue to have a negative impact on the price of our products sold to U.S.government entities. As examples, the legislation includes measures that (i) significantly increase Medicaid rebates throughboth the expansion of the program and significant increases in rebates; (ii) substantially expand the Public Health System(340B) program to allow other entities to purchase prescription drugs at substantial discounts; (iii) extend the Medicaidrebate to utilization under Managed Medicaid; (iv) require manufacturers to provide point of sale discounts on Medicare PartD beneficiary spending in the coverage gap for branded and authorized generic prescription drugs (which discount wasrecently increased effective in 2019); and (v) levy a significant excise tax on the industry to fund the healthcare reform. Suchcost containment measures and healthcare reform may affect our ability to sell our products and could have a materialadverse effect on our business, results of operations and financial condition.Executive, legislative and judicial action subsequent to the enactment of the ACA has sought to repeal, modify or delayimplementation of the ACA. Tax reform legislation enacted in 2017 removed the tax penalty applicable to the “individualmandate,” which requires Americans to carry a minimal level of health insurance. Starting in 2019, the tax penalty for notcarrying such insurance is zero. The Bipartisan Budget Act of 2018, among other things, amends the ACA, effective January1, 2019, to increase from 50 percent to 70 percent the point‑of‑sale discount that is owed by pharmaceutical manufacturerswho participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the“donut hole.”The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. In January2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under theACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose afiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticalsor medical devices. In October 2017, the President signed a second Executive Order allowing for the use of association healthplans and short‑term health insurance, which may provide fewer health benefits than the plans sold through the ACAexchanges. At the same time, the Administration announced the discontinuance of the payment of cost‑sharing reduction, orCSR, payments to insurance companies until Congress approves the appropriation of funds for such CSR payments. The lossof the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. InDecember 2018 a federal and district court found the ACA unconstitutional in its entirety. Pending appeals, the ACA remainsoperational.Future healthcare legislation could also have a significant impact on our business. There is uncertainty with respect to theimpact these changes, if any, may have, and any changes likely will take time to unfold. Any additional federal healthcarereform measures adopted in the future could limit the amounts that federal and state governments will pay for healthcareproducts and services, and, in turn, could significantly reduce the projected value of certain development projects and reduceour profitability. Due to the uncertainties regarding the outcome of future healthcare reform initiatives and their enactmentand implementation, we cannot predict which, if any, of the future reform proposals will be adopted or the effect suchadoption may have on us.In addition, other broader legislative changes have been adopted that could have an adverse effect upon, and could prevent,our products’ commercial success. The Budget Control Act of 2011, as amended, or the Budget Control Act includesprovisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through2027. Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized healthprograms, or any significant taxes or fees imposed as part of any broader deficit reduction effort or legislative replacement tothe Budget Control Act, or otherwise, could have an adverse impact on our anticipated product revenues.There has been heightened public pressure and government scrutiny over pharmaceutical pricing practices, which maynegatively impact our ability to generate revenues from our products, which could result in material adverse effects to ourbusiness, financial position and results of operations.There has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost ofprescription drugs. Such scrutiny has resulted in several Congressional inquiries in recent years and proposed and46 Table of Contentsenacted federal and state legislation designed to, among other things, bring more transparency to product pricing; review therelationship between pricing and manufacturer patient assistance programs, reduce the costs of drugs under Medicare, andreform government program reimbursement methodologies for drug products. At the federal level, Congress and the TrumpAdministration have each indicated an intent to continue to seek new legislative or administrative measures to control drugcosts. And federal agencies have proposed various reforms to address drug costs. See “Business – Government Regulationand Approval Process – Healthcare Reform.” At the state level, legislatures have become increasingly active in passing, orseeking to pass, legislation and regulations designed to control pharmaceutical and biological product pricing, includinglaws establishing maximum drug reimbursement rates for governmental or other payors within a state, laws limiting consumercopayment obligations, transparency and disclosure measures related to drug price increases and laws seeking to encouragedrug importation from other countries and bulk purchasing. Reductions in reimbursement levels may negatively impact theprices we receive or the frequency with which our products are prescribed or administered. Any reduction in reimbursementfrom Medicare or other government programs may result in a similar reduction in payments from private payors. Anydownward pricing pressure on the price of certain of our products arising from social or political pressure to lower the cost ofpharmaceutical products could have a material adverse impact on our business, results of operations and financial condition.There has also been increasing U.S. federal and state enforcement interest with respect to drug pricing. For instance, the DOJissued subpoenas to pharmaceutical companies, seeking information about the sales, marketing and pricing of certain genericdrugs. In addition to the effects of any investigations or claims brought against us, our business, results of operations andfinancial condition could also be adversely affected if any such inquiries, of us or of other pharmaceutical companies or theindustry more generally, were to result in legislative or regulatory proposals that limit our ability to increase the prices of ourproducts.Certain prescription product coding databases may choose to reclassify prescription dietary supplements asnon‑prescription, or over‑the‑counter, which may result in limited or no insurance coverage for these products and adecrease in utilization of such productsMany private and government insurance plans refer to product listing databases to determine whether or not a product is aprescription product, a non‑prescription, or over‑the‑counter product or a medical food product. How a product is listed inthese databases impacts whether or not a product is covered by insurance, or whether it receives limited coverage, as manyproviders may choose not to cover over‑the‑counter products. For example, on May 15, 2017, First Databank, a prescriptioncoding database, announced that starting in June 2017 it would classify all dietary supplements as non‑prescription. Severalcompanies have sued First Databank, in an effort to prevent or delay the implementation of the reclassification. On April 9,2018, First Databank announced that it is proceeding with a reclassification of non‑prenatal dietary supplements tonon‑prescription which may affect some of our products. First Databank has temporarily delayed implementing thisreclassification for prenatal dietary supplements. If First Databank or other listing databases were to re‑classify all dietarysupplements, including prenatal dietary supplements, as non‑prescription or over‑the‑counter, this could prevent insurancecoverage for our prescription prenatal dietary supplements and negatively impact our future total revenues, profitability andcash flows.We are subject to extensive governmental regulation and we face significant uncertainties and potentially significant costsassociated with our efforts to comply with applicable regulations. Any non‑compliance may result in fines or othersanctions, including debarment, product seizures, product recalls, injunctive actions and criminal prosecutions, whichcould result in material adverse effects to our business, financial position and results of operations.The pharmaceutical industry operates in a highly regulated environment subject to the actions of courts and governmentalagencies that influence the ability of a company to successfully operate its business and is subject to regulation by variousgovernmental authorities at the federal, state and local levels with respect to the development, manufacture, labeling, sale,distribution, marketing, advertising and promotion of pharmaceutical products. As a pharmaceutical manufacturer anddistributor, we are subject to extensive regulation by the federal government, principally the FDA and the Drug EnforcementAdministration, or DEA, as well as by state governments.47 Table of ContentsThe FDCA, the Controlled Substances Act, the Generic Drug Enforcement Act of 1992, or the Generic Drug Act, and otherfederal, state and local statutes and regulations govern the testing, manufacture, safety, labeling, storage, disposal, tracking,recordkeeping, approval, advertising and promotion (including to the healthcare community) of our products. If we, ourproducts, the manufacturing facilities for our products, our CROs, or other persons or entities working on our behalf fail tocomply with applicable regulatory requirements either before or after marketing approval, a regulatory agency, such as theFDA, may, depending on the stage of product development and approval, revoke, withdraw, or suspend approvals ofpreviously approved products for cause, debar companies and individuals from participating in the drug‑approval process,request or in certain circumstances mandate recalls of allegedly violative products, seize allegedly violative products, issueWarning Letters or Untitled Letters, mandate modifications to promotional materials or require the provision of correctiveinformation to healthcare practitioners, amend and update labels or package inserts, suspend or terminate any ongoingclinical trials, refuse to approve pending applications or supplements to applications filed, refuse to allow entry intogovernment contracts, obtain injunctions to close manufacturing plants allegedly not operating in conformity with FDA’scGMP requirements, stop shipments of allegedly violative products, impose fines perhaps significant in amount, requireentry into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required duedates for specific actions and penalties for noncompliance and other sanctions imposed by courts or regulatory bodies,including criminal prosecutions. If we or a regulatory agency discovers previously unknown problems with a product, suchas adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, aregulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring productrecall, notice to physicians, withdrawal of the product from the market or suspension of manufacturing. From time to time, wehave voluntarily recalled our products and may do so in the future. For example, we had three active recalls ofmethylphenidate ER to the wholesale level. These recalls were each based on a complaint that indicated that a bottle hadcontained one tablet with the incorrect dosage strength. Our investigation revealed that the incorrect tablets were likelyintroduced at the first coating step of the manufacturing process and determined that the issue poses no potential risk topatients. Final status reports for these three recalls have been sent to the FDA Recall Coordinator. In addition, in August2017, we initiated a recall to the retail level of the prescription dietary supplement product, Zatean pN DHA. We initiated therecall because the product labeling listed an incorrect food coloring as one of the excipient ingredients. In May 2018, therecall was converted to a market withdrawal, and we did not have any reports of adverse reactions associated with the use ofthe affected product; the event is considered closed.Because of the chemical ingredients of pharmaceutical products and the nature of the manufacturing process, thepharmaceutical industry is subject to extensive environmental laws and regulation and the risk of incurring liability fordamages and the costs of remedying environmental problems. These requirements include regulation of the handling,manufacture, transportation, storage, use and disposal of materials, including the discharge of hazardous materials andpollutants into the environment. In the normal course of our business, we are exposed to risks relating to possible releases ofhazardous substances into the environment, which could cause environmental or property damage or personal injuries, andwhich could result in (i) our noncompliance with such environmental and occupational health and safety laws andregulations and (ii) regulatory enforcement actions or claims for personal injury and property damage against us. If anunapproved or illegal environmental discharge or accident occurred or if we were to discover contamination caused by prioroperations, including by prior owners and operators of properties we acquire, then we could be liable for cleanup, damages orfines, which could have a material adverse effect on our business, financial position, results of operations and cash flow. Inthe future, we may be required to increase expenditures in order to remedy environmental problems or comply with changesin applicable environmental laws and regulations. We could also become a party to environmental remediationinvestigations and activities. These obligations may relate to sites that we currently or in the future may own or lease, sitesthat we formerly owned or operated, or sites where waste from our operations was disposed. Additionally, if we fail to complywith environmental regulations to use, discharge or dispose of hazardous materials appropriately or otherwise to comply withthe provisions of our operating licenses, the licenses could be revoked, and we could be subject to criminal sanctions orsubstantial civil liability or be required to suspend or modify our manufacturing operations. We currently operate in Florida,Georgia, New Jersey and North Carolina, and in overseas jurisdictions including Argentina and Hungary, and we are requiredto comply with the laws and regulations of those states or overseas jurisdictions in addition to any federal laws andregulations. We may in the future establish or acquire operations in other jurisdictions subject to equally or more stringentlaws and regulations. Stricter environmental, safety and health laws and enforcement policies could result in substantial costsand liabilities to us, and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants to morerigorous scrutiny than is currently the48 Table of Contentscase. Consequently, compliance with these laws could result in significant capital expenditures, as well as other costs andliabilities, which could materially adversely affect us.As part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, companies are now required to filewith the FTC, and the DOJ certain types of agreements entered into between brand and generic pharmaceutical companiesrelated to the settlement of patent litigation or the manufacture, marketing and sale of generic versions of branded drugs. Thisrequirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and otherdisputes with brand pharmaceutical companies and could result generally in an increase in private‑party litigation againstpharmaceutical companies or additional investigations or proceedings by the FTC or other governmental authorities. Thepotential for FTC investigations and litigation and private‑party lawsuits associated with arrangements between brand andgeneric drug manufacturers could adversely affect our business. In recent years, the FTC has expressed its intention to takeaggressive action to challenge settlements that include an alleged payment from the brand company to the generic company(so‑called “pay for delay” patent litigation settlements) and to call on legislators to pass stronger laws prohibiting suchsettlements. In 2013, the U.S. Supreme Court held that certain of such settlements could violate anti‑trust laws and must beevaluated under a “rule of reason” standard of review.We are subject to the effects of changes in statutes, regulations and interpretative guidance that may adversely affect ourbusiness and that could require us to devote increased time and resources to our compliance efforts, which may not besuccessful. Any changes in statutes, regulations or interpretative guidance could have a material adverse effect on ourbusiness, financial condition, prospects and results of operations.We also cannot predict the likelihood, nature or extent of adverse government regulation that may arise from pending orfuture legislation or administrative action, either in the United States or abroad. Namely, the Trump Administration has takenseveral executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on,or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such asimplementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It isdifficult to predict how these executive actions, including the Executive Orders, will be implemented, and the extent towhich they will affect the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints onthe FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negativelyimpacted, and if we are not able to achieve and maintain regulatory compliance, we may not be permitted to market ourproducts or product candidates, which would adversely affect our ability to generate revenues and achieve or maintainprofitability.These risks, along with others, have the potential to materially and adversely affect our business, financial position, results ofoperations and prospects. Although we have developed compliance programs to address the regulatory environment, there isno guarantee that these programs will meet regulatory agency standards now or in the future. Additionally, despite our effortsat compliance, there is no guarantee that we may not be deemed to be deficient in some manner in the future. If we aredeemed to be deficient in any significant way, our business, financial position and results of operations could be materiallyaffected.The manufacture, packaging, labeling, advertising, promotion, distribution and sale of our dietary supplements are alsosubject to regulation by numerous national and local governmental agencies, including the FDA and FTC. Failure to complywith regulatory requirements pertaining to any of our products, including prescription drugs and dietary supplements, mayresult in various types of penalties or fines. These include injunctions, product withdrawals, recalls, product seizures, finesand criminal prosecutions. Individual U.S. states also regulate dietary supplements. A state may seek to interpret claims orproducts presumptively valid under federal law as illegal under that state’s regulations. Any or all of these requirementscould have a material adverse effect on us. In addition, the FDA’s policies may change and additional governmentregulations could impose more stringent product labeling and post‑marketing testing and other requirements. For example,the FDA has stated that there is no specific upper limit on the amount of folic acid permitted in dietary supplements. If theFDA were to regulate products with higher amounts of folic acid as drugs, it may require us to stop marketing and sellingcertain dietary supplement products. There can be no assurance that the regulatory environment in which we operate will notchange or that such regulatory environment, or any specific action taken against us, will not result in a material adverse effecton us.49 Table of ContentsThe drug regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming andinherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, ourbusiness will be substantially harmed.The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable and typically takesmany years following the commencement of clinical trials and depends upon numerous factors, including the substantialdiscretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical datanecessary to gain approval may change during the course of a product candidate’s clinical development and may vary amongjurisdictions.Our product candidates could fail to receive regulatory approval for many reasons. For example:·the FDA or comparable foreign regulatory authorities may disagree that our product candidates meet the criteria forthe NDA or ANDA regulatory pathway or foreign regulatory pathways;·we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that aproduct candidate is safe and effective or chemically identical and bioequivalent to its branded reference product forits proposed indication;·the results of any clinical trials we conduct may not meet the level of statistical significance required by the FDA orcomparable foreign regulatory authorities for approval;·we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;·the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities ofthird party manufacturers with which we contract for clinical and commercial supplies; and·the approval policies or regulations of the FDA or comparable foreign regulatory authorities may changesignificantly in a manner rendering our clinical data insufficient for approval.This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtainregulatory approval to market certain of our product candidates, which would harm our business, results of operations andprospects significantly. In addition, even if we obtain approval for our product candidates, regulatory authorities mayapprove any of our product candidates for fewer or more limited indications than we request or may grant approvalcontingent on the performance of costly post‑marketing clinical trials or may approve a product candidate with a label thatdoes not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.Any of the foregoing scenarios could harm the commercial prospects for our product candidates.Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or productcandidate and could substantially increase the costs of commercializing our products and product candidates.If we are found to have improperly promoted our products, we may be subject to restrictions on the sale or marketing of ourproducts and significant fines, penalties and sanctions, and our image and reputation within the industry and marketplacecould be harmed.The FDA and other regulatory agencies, including regulatory authorities outside the United States, strictly regulate themarketing and promotional claims that are made about drug products. In particular, promotion for a product must bebalanced, truthful, non‑misleading and consistent with its labeling approved by the FDA or by regulatory agencies in othercountries. We cannot prevent physicians from prescribing our products for indications or uses that are inconsistent with theapproved package insert. If, however, we are found to have promoted such unapproved uses prior to the FDA’s approval foran additional indication, we may, among other consequences, receive Untitled or Warning Letters and become subject tosignificant liability, which would materially harm our business. Both the U.S. federal government and foreign regulatoryauthorities have levied significant civil and criminal fines against companies and individuals for50 Table of Contentsalleged improper promotion and have entered into settlement agreements with pharmaceutical companies to limitinappropriate promotional activities. If we become the target of such an investigation or prosecution based on our marketingand promotional practices, we could face similar sanctions, which would materially harm our business. In addition,management’s attention could be diverted from our business operations, significant legal expenses could be incurred and ourreputation could be damaged.Our business operations and current and future relationships with investigators, healthcare professionals, third‑partypayors, patient organizations and customers are subject to applicable healthcare regulatory laws, which could expose us topenalties.Our business operations and current and future arrangements with investigators, healthcare professionals, third‑party payors,patient organizations and customers subject us and our customers to broadly applicable fraud and abuse and other healthcarelaws and regulations. These laws constrain the business or financial arrangements and relationships through which weconduct our operations, including how we research, market, sell and distribute our products and product candidates, ifapproved. Such laws include:·the U.S. federal Anti‑Kickback Statute, which prohibits, among other things, persons or entities from knowingly andwillfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certainrebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either thereferral of an individual for, or the purchase, lease, order or arrangement for, any good, facility, item or service, forwhich payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicareand Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violateit in order to have committed a violation;·the U.S. federal anti-kickback prohibition known as Eliminating Kickbacks in Recovery Act or EKRA, enacted in2018, which prohibits certain payments related to referrals of patients to certain providers (recovery homes, clinicaltreatment facilities and laboratories) and applies to services reimbursed by private health plans as well asgovernment health care programs;·the U.S. federal civil and criminal false claims, including the civil False Claims Act, which prohibit, among otherthings, including through civil whistleblower or qui tam actions, individuals or entities from knowingly presenting,or causing to be presented, to the U.S. federal government, claims for payment or approval that are false orfraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false orfraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to paymoney to the U.S. federal government. In addition, the government may assert that a claim including items andservices resulting from a violation of the U.S. federal Anti‑Kickback Statute constitutes a false or fraudulent claimfor purposes of the False Claims Act;·the U.S. federal law HIPAA, which created additional federal criminal statutes which prohibit, among other things,knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, orknowingly and willfully falsifying, concealing or covering up a material fact or making any materially falsestatement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to theU.S. federal Anti‑Kickback Statute, a person or entity does not need to have actual knowledge of the statute orspecific intent to violate it in order to have committed a violation;·HIPAA, as amended by HITECH and its implementing regulations, which imposes certain obligations, with respectto safeguarding the privacy, security and transmission of individually identifiable health information withoutappropriate authorization by covered entities subject to the rule, such as certain health plans, healthcareclearinghouses and healthcare providers as well as the covered entities’ business associates, independent contractorsof a covered entity that perform certain services involving the use or disclosure of individually identifiable healthinformation;·the U.S. federal civil monetary penalties statute, which prohibits, among other things, the offering or giving ofremuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence51 Table of Contentsthe beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or stategovernmental program;·the U.S. FDCA, which prohibits, among other things, the adulteration or misbranding of drugs;·the U.S. “Federal Sunshine Law,” or Open Payments, and its implementing regulations, which require certainmanufacturers of drugs and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’sHealth Insurance Program, with specific exceptions, to report annually to the government information related tocertain payments and other transfers of value to physicians, teaching hospitals, and, beginning with transfers ofvalue occurring in 2021, other healthcare practitioners as well as ownership and investment interests held byphysicians and their immediate family members;·U.S. federal consumer protection and unfair competition laws, which broadly regulate marketplace activities andactivities that potentially harm consumers;·analogous U.S. state laws and regulations, including: state anti‑kickback and false claims laws, which may apply toour business practices, including but not limited to, research, distribution, sales and marketing arrangements andclaims involving healthcare items or services reimbursed by any third‑party payor, including private insurers; statelaws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary complianceguidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrictpayments that may be made to healthcare providers and other potential referral sources; state laws and regulationsthat require drug manufacturers to file reports relating to pricing sales, shipping and marketing information, whichincludes tracking gifts and other remuneration and items of value provided to healthcare professionals and entities;state and local laws that require the registration of pharmaceutical sales representatives and reporting to certainstates the shipment of opioid products into those states; and state laws governing the privacy and security of healthinformation in certain circumstances, many of which differ from each other in significant ways and often are notpreempted by HIPAA, thus complicating compliance efforts; and·similar healthcare laws and regulations in the European Union, or the EU, and other jurisdictions, includingreporting requirements detailing interactions with and payments to healthcare providers.Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare lawsand regulations involves substantial costs. It is possible that governmental authorities will conclude that our businesspractices, including our arrangements with physicians and other healthcare providers do not comply with current or futurestatutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws andregulations. If our operations are found to be in violation of any of the laws described above or any other governmental lawsand regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrativepenalties, damages, fines, exclusion from government‑funded healthcare programs, such as Medicare and Medicaid or similarprograms in other countries or jurisdictions, integrity oversight and reporting obligations to resolve allegations ofnon‑compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and thecurtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we dobusiness are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrativesanctions, including exclusions from government funded healthcare programs and imprisonment, which could affect ourability to operate our business. Further, defending against any such actions can be costly, time‑consuming and may requiresignificant personnel resources. Therefore, even if we are successful in defending against any such actions that may bebrought against us, our business may be impaired. To the extent our patient assistance programs are found to be inconsistentwith applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significantpenalties.52 Table of ContentsWe are subject to various laws protecting the confidentiality of certain patient health information, and other personalinformation, and our failure to comply could result in penalties and reputational damage.Numerous countries in which we operate, manufacture and sell our products have, or are developing, laws protecting dataprivacy and the confidentiality of certain personal data, including not only patient health information but also data onemployees, customers, contractors and other types of individuals with whom we interact. EU member states and otherjurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. Forexample, the EU General Data Protection Regulation, or the GDPR, which came into force on May 25, 2018, introduced newdata protection requirements in the European Economic Area (EEA) and substantial fines for breaches of the data protectionrules. The GDPR expanded the territorial scope of European data privacy legislation to include not only entities that areestablished in the EEA, but also entities that are not established in the EEA but that offer goods or services to individualslocated in the EEA or monitor the behavior of individuals located in the EEA. The GDPR imposes strict obligations andrestrictions on controllers and processors of personal data including, for example, expanded disclosures about how personaldata is to be used, increased requirements pertaining to health data and pseudonymised (i.e., key‑coded) data, mandatory databreach notification requirements and expanded rights for individuals over their personal data. This could affect our ability tocollect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting, or couldcause our costs to increase, and harm our business and financial condition. The GDPR also provides for the assessment offines on entities that violate the regulation of up to 20 million Euros or four percent of annual turnover and provides datasubjects a private right of action to seek compensation for damages suffered as a result of violations of the regulation.While the GDPR, as a directly effective regulation, was designed to harmonize data protection law across the EEA, it doespermit member states to legislate in many areas (particularly with regard to the processing of genetic, biometric or health dataand the processing of personal data for research purposes), meaning that inconsistencies between different member states willstill arise. EEA member states have their own regimes on medical confidentiality and national and EU‑level guidance onimplementation and compliance practices is often updated or otherwise revised, which adds to the complexity of processingpersonal data in the EEA.European data protection law generally prohibits the transfer of personal data to countries outside of the EEA that are notconsidered by the European Commission to provide an adequate level of data protection, unless there are specificframeworks or mechanisms in place, such as the EU-U.S. Privacy Shield (Privacy Shield) or the European Commissionapproved standard contractual clauses, or if very narrow legal exceptions (such as data subject consent) apply. The PrivacyShield framework (which permits transfers of personal data from the EEA to the U.S.) is under review and there is currentlylitigation challenging other EU mechanisms for adequate data transfers (e.g. the standard contractual clauses). It is uncertainwhether the Privacy Shield framework or the standard contractual clauses will be invalidated by the European courts. Ourability to receive data from the EEA could be affected by changes in law as a result of a future review of these transfermechanisms by European regulators under the GDPR, as well as the current challenges to these mechanisms in the Europeancourts.In recent years, U.S. and European regulators have expressed concern over electronic marketing and the use of third‑partycookies, web beacons and similar technology for online behavioral advertising. In the EEA, informed consent is required forthe placement of many types of cookies on a user’s device, such as cookies used for online behavioral advertising, as well asfor the sending of many types of electronic marketing communications. The current EU laws that cover the use of cookiesand similar technology and marketing online or by electronic means are under reform. A draft of the new ePrivacy Regulationis currently going through the European legislative process. Unlike the current ePrivacy Directive, the draft ePrivacyRegulation will be directly implemented into the laws of each of the EU member states, without the need for furtherenactment. When implemented, it is expected to alter rules on third‑party cookies, web beacons and similar technology foronline behavioral advertising and to impose stricter requirements on companies using these tools. The current provisions ofthe draft ePrivacy Regulation also significantly increase penalties.53 Table of ContentsOur reporting and payment obligations under the Medicaid drug rebate program and other governmental purchasing anddiscount or rebate programs are complex and may involve subjective decisions. Any determination that we have failed tocomply with those obligations could subject us to penalties and sanctions, which could have a material adverse effect.The requirements regarding price reporting and discount or rebate obligations applicable to the various government pricingand reimbursement programs, such as the Medicaid drug rebate program are complex.Our calculations and methodologies related to government pricing reporting are subject to review and challenge by theapplicable governmental agencies, and it is possible that such reviews could result in material changes. In addition, becauseour processes for these calculations and the judgments involved in making these calculations involve, and will continue toinvolve, subjective decisions and complex methodologies, these calculations are subject to the risk of errors. Anygovernmental agencies that have commenced (or that may commence) an investigation of our company could impose, basedon a claim of violation of fraud and false claims laws or otherwise, civil or criminal sanctions, including fines, penalties andpossible exclusion from federal health care programs (including Medicaid and Medicare). Some of the applicable laws mayimpose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to howto properly calculate and report payments, and even in the absence of any such ambiguity, a governmental authority maytake a position contrary to a position that we have taken and may impose civil or criminal sanctions on us. Any suchpenalties, sanctions, or exclusion from federal health care programs could have a material adverse effect on our business,financial position and results of operations. From time to time we conduct routine reviews of our government pricingcalculations. These reviews may have an impact on government price reporting and rebate calculations used to comply withvarious government regulations regarding reporting and payment obligations.Many government and third‑party payors, including Medicare, Medicaid, HMOs and others, reimburse doctors and others forthe purchase of certain prescription drugs based on a drug’s AWP. In the past several years, state and federal governmentagencies have conducted ongoing investigations of manufacturers’ reporting practices with respect to AWP, in which theagencies have suggested that reporting of inflated AWPs by manufacturers have led to excessive payments for prescriptiondrugs. We can give no assurance that we will be able to settle any future actions that may be brought against us on terms thatwe deem reasonable, or that such settlements or adverse judgments, if entered, will not exceed the amount of any reserve.Accordingly, such actions could adversely affect us and may have a material adverse effect on our business, results ofoperations, financial condition and cash flows.Increased scrutiny around the abuse of opioids, including law enforcement concerns over diversion and legislative andregulatory efforts to combat abuse, could impact some of our pharmaceutical products, and could reduce the demand andincrease the cost, burden and liability associated with the commercialization of opioids.Law enforcement and regulatory agencies may apply policies that seek to limit the availability of opioids. Such efforts mayaffect our opioid products, such as tramadol extended‑release capsules and hydromorphone ER (hydromorphonehydrochloride extended‑release tablets). For the year ended December 31, 2018, our opioid products represented 2% of ourtotal revenues. Aggressive enforcement, unfavorable publicity regarding, for example, the use or misuse of opioid drugs orthe limitations of abuse‑deterrent formulations, litigation, public inquiries or investigations related to the abuse, sales,marketing, distribution or storage of our products could harm our reputation. Such negative publicity could reduce thepotential size of the market for our drugs and decrease the total revenues we are able to generate from sales. In addition,efforts by the FDA and other regulatory bodies to combat the abuse of opioids may negatively impact the market for ourproducts. The FDA continues to evaluate extended‑release and abuse‑deterrent opioids in the post‑market setting. We expectthat the FDA will continue to scrutinize the impact of abuse‑deterrent opioids and in the future could impose furtherrestrictions to products currently on the market, which may include changing labeling, imposing additional prescribingrestrictions, or seeking a product’s removal from the market, which could have an adverse effect on our financialperformance.In addition, some states, including the Commonwealths of Massachusetts and Virginia and the States of New York, Ohio,Arizona, Maine, New Hampshire, Vermont, Rhode Island, Colorado, Wisconsin, Alabama, South Carolina, Washington andNew Jersey, have recently enacted, intend to enact, or have considered legislation or regulations54 Table of Contentsdesigned to, among other things, limit the duration and quantity of initial prescriptions of immediate‑release forms ofopiates, mandate the use by prescribers of prescription drug databases and mandate prescriber education.The attorneys general from the substantial majority of states have announced a joint investigation into the marketing andsales practices of drug companies that market opioid pain medications. Attorneys general from several states, includingKentucky, Florida, New Mexico, and New York have also individually filed cases and issued subpoenas to pharmaceuticalmanufacturers and distributors of opioid products.At the state and local level, a number of states, cities, counties, Native American tribes, third party payors, and guardians ofchildren diagnosed with neonatal abstinence syndrome have brought separate lawsuits against various pharmaceuticalcompanies marketing and selling opioid pain medications, alleging misleading or otherwise improper promotion of opioiddrugs to physicians and consumers. Over 1,400 of these lawsuits have been consolidated in multi-district litigation in theNorthern District of Ohio in In re: National Prescription Opiate Litigation, 1:17md2804, or Federal Opioid MDL. OnJanuary 29, 2019, the Federal Opioid MDL Court issued a case management schedule setting a trial date for October 21, 2019for three bellwether cases brought by counties and cities in the Northern District of Ohio. The outcome of those bellwethercases will be used to evaluate the settlement and litigation value of the remaining coordinated cases. We are not named inany of the cases pending in the multi-district litigation, but cases continue to be filed in federal courts across the country andcontinue to be consolidated into the Federal Opioid MDL. Cases against pharmaceutical companies marketing and sellingopioid pain medications, alleging misleading or otherwise improper promotion of opioids drugs, also continue to beseparately litigated in state courts across the country. On March 15, 2018, a coalition of local governments in Arkansas,comprised of 75 counties and 15 cities, jointly filed a lawsuit in the Circuit Court of Crittenden County, Arkansas againstmore than 60 defendants, including us. The summons and complaint that we received on April 30, 2018 claimed that we andthe other defendants, including prescription opioid manufacturers, distributors and retailers, and several physicians, werenegligent and violated public nuisance law as well as various Arkansas controlled substance laws as a result of allegedopioid sales and marketing practices. The lawsuit sought damages and restitution for past and prospective spending relatedto opioid use, as well as punitive and treble damages. On July 17, 2018, the court entered an order in the Arkansas litigationvoluntarily dismissing us from the lawsuit without prejudice. If similar federal or state lawsuits are filed against us in thefuture, we may be subject to excessive litigation or settlement costs, negative publicity, diversion of management time andattention, decreased sales or removal of one or more of our opioid products from the market, which could have a materialadverse effect on our business, results of operations and financial condition. The risk of inclusion in the Federal Opioid MDLmay intensify the impact of negative publicity and could lead to a proliferation of lawsuits naming us.Additionally, in March 2017, President Trump announced the creation of a commission, through the Office of National DrugControl Policy, to make recommendations to the President on how to best combat opioid addiction and abuse. In August2017, the commission issued a preliminary report calling on President Trump to officially declare the crisis of opioid abuse anational emergency. On October 26, 2017, President Trump declared the opioid crisis a “national public health emergency.”The commission’s final report was released in early November 2017. In July 2017, the Pharmaceutical Care ManagementAssociation, a trade association representing pharmacy benefit managers, wrote a letter to the commissioner of the FDA inwhich it expressed support for, among other things, the Centers for Disease Control and Prevention, or CDC, guidelines and aseven‑day limit on the supply of opioids for acute pain. In September 2017, CVS Pharmacy announced that it would only fillfirst time opioid prescriptions for acute pain for a seven day supply. State legislative initiatives may take various forms,including attempts to tax opioid products. For instance, in 2018, New York enacted a state law (The Opioid Stewardship Act)which intended to raise $600 million from opioid manufacturers and distributors by taxing morphine milligramequivalents. A federal district court subsequently determined that the law was unconstitutional because the law violated thecommerce clause.These and other similar initiatives and actions, whether taken by governmental authorities or other industrystakeholders, may result in the reduced prescribing and use of opioids, including our opioid products, which could adverselyaffect our ability to commercialize our opioid products, and in turn adversely affect our business, financial condition andresults of operations.55 Table of ContentsSome of our products, including methylphenidate ER, are stimulant products and face intense competition from existing orfuture stimulant products and also have the potential for misuse, which could reduce the demand and increase the cost,burden and liability associated with the commercialization of such products.Some of our products and product candidates are stimulants, including methylphenidate ER. The markets formethylphenidate ER and other stimulants to treat ADHD are well developed and populated with established drugs marketedby large pharmaceutical, biotechnology and generic drug companies. There have also been efforts to develop stimulantproducts that are less prone to abuse, and such products may compete with our products. Our competitors may succeed indeveloping, acquiring or licensing, on an exclusive basis or otherwise, drug products or drug delivery technologies that aremore effective, less costly or less prone to abuse than our stimulant products, or any product candidate that we may develop.In addition, because of the potential for abuse of stimulant products, regulatory agencies may develop and apply policiesthat seek to limit the abuse of such stimulant products. If our competitors develop and market stimulant products that aremore effective, safer or less expensive than our product or future product candidates, if any, or if abuse of our stimulantproducts result in increased liability or reduced demand for such products, this could impact our ability to generate revenuesfrom such stimulant products and will adversely affect our business and financial condition.In addition, for some methylphenidate ER products when a patient switches from one medication to another, there may be anactual or perceived lack of efficacy or increase in side effects. For example, this could happen if a patient starts taking ourmethylphenidate ER product instead of the branded product. These lack of efficacy reports are submitted to the FDA and mayresult in the FDA reviewing previously submitted data, or generating data on its own, to confirm whether or not our productis therapeutically equivalent to the reference listed drug. If the FDA finds that our product is not therapeutically equivalentto the reference listed drug, FDA could change the designation of the product from AB to BX rated and request that weremove the product from the market. Either result would adversely affect our business and financial condition.The DEA limits production of some of our products and limits the availability of certain of our products’ activeingredients. Procurement and production quotas set by the DEA may not be sufficient to allow us to complete clinical trialsor to meet commercial demand, and may result in clinical delays.The DEA regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered topresent the highest risk of substance abuse and Schedule V substances the lowest risk. Methylphenidate included in ourmethylphenidate ER and M‑72 products and hydromorphone included in our hydromorphone ER product are listed asSchedule II drugs and tramadol hydrochloride included in our ConZip product is listed as a Schedule IV drug by the DEAunder the Controlled Substances Act. The manufacture, shipment, storage, sale and use of Schedule II drugs are subject to ahigh degree of regulation. For example, Schedule II drug prescriptions generally must be signed by a physician and may notbe refilled without a new prescription. Substances in Schedule IV are considered to have a lower potential for abuse relativeto substances in Schedule II. A prescription for controlled substances in Schedule IV may be issued by a practitioner throughoral communication, in writing, or by facsimile to the pharmacist, and may be refilled if so authorized on the prescription orby call‑in. In the future, our other potential products may also be listed by the DEA as controlled substances.Furthermore, the DEA limits the availability of the active ingredients in certain of our current drug products and sets a quotaon the production of these products. We, or our contract manufacturing organizations, must annually apply to the DEA forprocurement and production quotas in order to obtain these substances and produce our products. As a result, ourprocurement and production quotas may not be sufficient to meet commercial demand or to complete clinical trials, whichmay result in delays in clinical trials or inability to meet commercial demand. Moreover, the DEA may adjust these quotasfrom time to time during the year. Any delay or refusal by the DEA to establish or modify our quotas for controlledsubstances could delay or stop clinical trials or product launches, or could cause trade inventory disruptions, which couldhave a material adverse effect on our business, financial position, results of operations and cash flows.56 Table of ContentsLitigation is common in our industry, can be protracted and expensive, and could delay or prevent entry of our productsinto the market, which could have a material adverse effect on our business.Litigation concerning intellectual property rights in the pharmaceutical industry can be protracted and expensive.Pharmaceutical companies with patented branded products regularly sue companies that file applications to produce genericequivalents of their patented branded products for alleged patent infringement or other violations of intellectual propertyrights, which are expensive to defend and may delay or prevent the entry of such generic products into the market. Generally,a generic drug may not be marketed until the applicable patent(s) on the brand name drug expire or are held to be invalid,unenforceable or not infringed by the generic product at issue. When we or our development partners submit an ANDA to theFDA for approval of a generic drug, we or our development partners must certify either (i) that there is no patent listed withthe FDA as covering the relevant branded product, (ii) that any patent listed as covering the branded product has expired, (iii)that the patent listed as covering the branded product will expire prior to the marketing of the generic product, in which casethe ANDA will not be finally approved by the FDA until the expiration of such patent or (iv) that any patent listed ascovering the branded drug is invalid or will not be infringed by the manufacture, sale or use of the generic product for whichthe ANDA is submitted, which we refer to as a “Paragraph IV” certification. Whenever we file an ANDA with a Paragraph IVcertification, there is a high likelihood that a brand pharmaceutical company will sue us for alleged patent infringement orother violations of intellectual property rights. Also, competing pharmaceutical companies may file lawsuits against usalleging patent infringement or other violations of intellectual property rights or may file declaratory judgment actionsagainst us alleging non‑infringement, invalidity, or unenforceability of our own patents. Because substantially all of ourcurrent business involves the development and marketing of products that are subject to potential claims of patentinfringement by third parties or, with respect to our own branded products, are subject to third‑party challenges, the threat oflitigation, the outcome of which is inherently uncertain, is always present. Such litigation is often costly and time consumingand could result in a substantial delay in, or prevent, the introduction or marketing of our products, which could have amaterial adverse effect on our business, financial condition, prospects and results of operations.We are susceptible to product liability claims that may not be covered by insurance, which, if successful, could require us topay substantial sums.Like all pharmaceutical companies, we face the risk of loss resulting from, and the adverse publicity associated with, productliability lawsuits, whether or not such claims are valid. We likely cannot avoid such claims. Unanticipated side effects orunfavorable publicity concerning any of our products would likely have an adverse effect on our ability to achieveacceptance by prescribing physicians, managed care providers, pharmacies and other retailers, customers, patients andclinical trial participants. Even unsuccessful product liability claims could require us to spend money on litigation, divertmanagement’s time, damage our reputation and impair the marketability of our products. In addition, although we believethat we have adequate product liability insurance coverage, we cannot be certain that our insurance will, in fact, be sufficientto cover such claims or that we will be able to obtain or maintain adequate insurance coverage in the future at acceptableprices. A successful product liability claim that is excluded from coverage or exceeds our policy limits could require us topay substantial sums. In addition, insurance coverage for product liability may become prohibitively expensive in the futureor, with respect to certain high‑risk products, may not be available at all. For example, some product liability insurancecarriers exclude from coverage claims related to abuse or misuse of our opioid products, such as hydromorphone ER. As aresult we may not be able to maintain adequate product liability insurance coverage to mitigate the risk of large claims, or wemay be required to maintain a larger self‑insured retention than we would otherwise choose.Manufacturing or quality control problems may damage our reputation for quality production, require costly remedialactivities and negatively impact our business, results of operations and financial condition.As a pharmaceutical company, we are subject to substantial regulation by various governmental authorities. For instance, wemust comply with requirements of the FDA and other healthcare regulators with respect to the manufacture of pharmaceuticalproducts. We must register our facilities, whether located in the United States or elsewhere, with the FDA as well as regulatorsoutside the United States. Also, our products, including our investigational products, must be made in a manner consistentwith applicable cGMP regulations, or similar standards in each territory in which we manufacture. The failure of one of ourfacilities, or a facility of one of our third‑party suppliers, to comply with57 Table of Contentsapplicable laws and regulations may lead to breach of representations made to our customers or to regulatory or governmentaction against us related to products made in that facility.In addition, the FDA and other agencies periodically inspect our manufacturing facilities. Following an inspection, anagency may issue a notice listing conditions that are believed to violate cGMP or other regulations, or a Warning Letter forviolations of “regulatory significance” that may result in enforcement action if not promptly and adequately corrected. Wehave in the past received Warning Letters from the FDA regarding certain operations. For example, in May 2017, the FDAissued a Warning Letter to us for violation of post‑marketing adverse drug experience reporting requirements, specifically for(i) failing to develop written procedures for the surveillance, receipt, evaluation, and reporting of post‑marketing adversedrug experiences, and (ii) failing to submit periodic adverse drug experience reports annually. This Warning Letter was basedon an October‑November 2016 FDA inspection. We have been providing periodic updates to FDA outlining our correctivesteps taken in response to this Warning Letter. In July 2018, the FDA conducted an inspection of our pharmacovigilancefunction as follow up to the May 10, 2017 Warning Letter. On October 25, 2018, the FDA sent us a letter confirming thatthey completed an evaluation of our corrective actions and that we have addressed the violations contained in the WarningLetter but we cannot be assured that the FDA will continue to be satisfied with our quality control and manufacturingsystems and standards with respect to this or other matters. Failure to comply strictly with these regulations and requirementsmay damage our reputation and lead to financial penalties, compliance expenditures, the recall or seizure of products, total orpartial suspension of production or distribution, withdrawal or suspension of the applicable regulator’s review of oursubmissions, enforcement actions, injunctions and criminal prosecution. Further, other federal agencies, our customers andpartners in our development, manufacturing, collaboration and other partnership agreements with respect to our products andservices may take any such FDA observations or Warning Letters into account when considering the award of contracts or thecontinuation or extension of such partnership agreements. The delay and cost of remedial actions, or obtaining approval tomanufacture at a different facility, could negatively impact our business. Any failure by us to comply with applicable lawsand regulations or any actions by the FDA and other agencies as described above could have a material adverse effect on ourbusiness, financial position and results of operations.The illegal distribution and sale by third parties of counterfeit versions of our products or of stolen products could have anegative impact on our reputation and a material adverse effect on our business, results of operations and financialcondition.Third parties could illegally distribute and sell counterfeit versions of our products, which do not meet the rigorousmanufacturing and testing standards that our products undergo. Counterfeit products are frequently unsafe or ineffective, andcan be life‑threatening. Counterfeit medicines may contain harmful substances, the wrong dose of the API or no API at all.However, to distributors and users, counterfeit products may be visually indistinguishable from the authentic version.Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patientconfidence in the authentic product. It is possible that adverse events caused by unsafe counterfeit products will mistakenlybe attributed to the authentic product. In addition, thefts of inventory at warehouses, plants or while in‑transit, which are notproperly stored and which are sold through unauthorized channels could adversely impact patient safety, our reputation andour business.Public loss of confidence in the integrity of our pharmaceutical products as a result of counterfeiting or theft could have amaterial adverse effect on our reputation, business, results of operations and financial condition.Our employees and independent contractors, including consultants, vendors and any third parties we may engage inconnection with development and commercialization may engage in misconduct or other improper activities, includingnoncompliance with regulatory standards and requirements, which could harm our business.Misconduct by our employees and independent contractors, including consultants, vendors and any third parties we mayengage in connection with development and commercialization, could include intentional, reckless or negligent conduct orunauthorized activities that violate: (i) the laws and regulations of the FDA and other similar regulatory authorities,including those laws that require the reporting of true, complete and accurate information to such authorities;58 Table of Contents(ii) manufacturing standards; (iii) data privacy, security, fraud and abuse and other healthcare laws and regulations; or(iv) laws that require the reporting of true, complete and accurate financial information and data. Specifically, sales,marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended toprevent fraud, misconduct, kickbacks, self‑dealing and other abusive practices. These laws and regulations may restrict orprohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs andother business arrangements. Activities subject to these laws could also involve the improper use or misrepresentation ofinformation obtained in the course of clinical trials, creation of fraudulent data in preclinical studies or clinical trials orillegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation.It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we taketo detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protectingus from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws orregulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct,even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves orasserting our rights, those actions could have a significant impact on our business and results of operations.Risks related to our indebtedness Our operating subsidiaries’ substantial indebtedness could adversely affect our ability to raise additional capital to fundour operations, limit our ability to react to changes in the economy or our industry and prevent us from meetingobligations on our indebtedness. We currently have a substantial amount of indebtedness. As of December 31, 2018, our total indebtedness was $268.6million (net of deferred financing costs), with unused commitments of $50.0 million under the senior secured credit facilities.We may also incur significant additional indebtedness in the future. Subject to the limits contained in our senior secured credit facilities, we may be able to incur substantial additional debt fromtime to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so,the risks related to this high level of debt could intensify. Specifically, the high level of debt could have importantconsequences, including, but not limited to: ·making it more difficult for us to satisfy our obligations with respect to our debt;·requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes,thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions andother general corporate purposes;·limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitionsor other general corporate requirements;·increasing our vulnerability to general adverse economic and industry conditions;·exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the seniorsecured credit facilities, which are at variable rates of interest;·limiting our flexibility in planning for and reacting to changes in the industry in which we compete;·placing us at a disadvantage compared to other, less leveraged competitors; and·increasing our cost of borrowing.59 Table of ContentsThe terms of the credit agreement governing our senior secured credit facilities, or the Credit Agreement, restrict ourcurrent and future operations, particularly our ability to respond to changes or to take certain actions.The Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictionson our operating subsidiaries and may limit our ability to engage in acts that may be in our long‑term best interest, includingrestrictions on our ability to:·incur additional indebtedness;·pay dividends or make other distributions or repurchase or redeem our share capital;·prepay, redeem or repurchase certain debt;·make loans and investments;·sell assets or enter into sale and lease‑back transactions;·incur liens;·enter into transactions with affiliates;·alter the businesses we conduct;·enter into agreements restricting our subsidiaries’ ability to pay dividends;·consolidate, merge or sell all or substantially all of our assets;·amend or modify the organizational documents of our operating subsidiaries;·amend or modify certain indebtedness of our operating subsidiaries;·change our fiscal year; and·enter into certain derivative transactions.In addition, the restrictive covenants in the Credit Agreement require us to comply with certain financial covenants. As of theend of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2018, our operating subsidiaries must(i) maintain a Total Leverage Ratio (as defined in the Credit Agreement) no greater than 4.75:1.00, which shall be reduced to4.50:1.00 for the fiscal quarter ending March 31, 2020 and each subsequent fiscal quarter and (ii) maintain a ConsolidatedFixed Charge Coverage Ratio not less than 1.25:1.00. Our ability to meet these financial ratios can be affected by eventsbeyond our control.A breach of the covenants under the Credit Agreement could result in an event of default under the Credit Agreement. Suchan event of default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debtto which a cross‑acceleration or cross‑default provision applies which could have a material adverse effect on our business,operations and financial results. In addition, an event of default under the Credit Agreement would permit the lenders underthe senior secured credit facilities to terminate all commitments to extend further credit under that facility. Furthermore, if wewere unable to repay the amounts due and payable under the senior secured credit facilities, those lenders could proceedagainst the collateral granted to them to secure that indebtedness which could force us into bankruptcy or liquidation. In theevent our lenders accelerate the repayment of the borrowings, we and our subsidiaries may not have sufficient assets to repaythat indebtedness. Any acceleration of amounts due under the Credit Agreement60 Table of Contentsor the exercise by the applicable lenders of their rights under the related security documents would likely have a materialadverse effect on us. As a result of these restrictions, we may be:·limited in how we conduct our business;·unable to raise additional debt or equity financing to operate during general economic or business downturns; or·unable to compete effectively or to take advantage of new business opportunities. These restrictions may affect ourability to grow in accordance with our strategy.We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions tosatisfy our obligations under our indebtedness, which may not be successful.Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition andoperating performance, which are subject to prevailing economic and competitive conditions and to certain financial,business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flowsfrom operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantialliquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of materialassets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able toeffect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternativeactions may not allow us to meet our scheduled debt service obligations. The Credit Agreement restricts our ability todispose of assets and use the proceeds from those dispositions and also restricts our ability to raise debt or equity capital tobe used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtainproceeds in an amount sufficient to meet any debt service obligations when due.Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness oncommercially reasonable terms or at all, would materially and adversely affect our financial position and results of operationsand our ability to satisfy our obligations, including our indebtedness.If we cannot make scheduled payments on our debt, we will be in default and, as a result:·our debt holders could declare all outstanding principal and interest to be due and payable;·the lenders under the senior secured credit facilities could terminate their commitments to loan us money andforeclose against the assets securing the borrowings; and·we could be forced into bankruptcy or liquidation.We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance ourindebtedness as it becomes due depends on many factors, some of which are beyond our control.Our ability to make scheduled payments on, or to refinance our respective obligations under, our indebtedness and to fundplanned capital expenditures and other corporate expenses will depend on the ability of our subsidiaries to makedistributions, dividends or advances to us, which in turn will depend on our subsidiaries’ future operating performance andon economic, financial, competitive, legislative, regulatory and other factors and any legal and regulatory restrictions on thepayment of distributions and dividends to which they may be subject. Many of these factors are beyond our control. Wecannot be certain that our business will generate sufficient cash flow from operations or that future borrowings will beavailable to us in an amount sufficient to enable us to satisfy our respective obligations under our indebtedness or to fundour other needs. In order for us to satisfy our obligations under our indebtedness and fund planned capital expenditures, wemust continue to execute our business strategy. If we are unable to do so, we may need61 Table of Contentsto reduce or delay our planned capital expenditures or refinance all or a portion of our indebtedness on or before maturity.Significant delays in our planned capital expenditures may materially and adversely affect our future revenue prospects. Inaddition, we cannot assure our creditors that we will be able to refinance any of our indebtedness on commercially reasonableterms or at all.We are a holding company with nominal net worth and will depend on dividends and distributions from our subsidiaries,which are restricted from paying dividends and distributions to us pursuant to the terms of our existing indebtedness andmay be restricted pursuant to the terms of future indebtedness, which as a result may restrict us from paying dividends toyou.We are a holding company with nominal net worth. We do not have any material assets or conduct any business operationsother than our investments in our subsidiaries. Our business operations are conducted primarily out of our indirect operatingsubsidiaries, Vertical Pharmaceuticals, LLC, Trigen Laboratories, LLC and Osmotica Pharmaceutical US LLC. As a result,notwithstanding any restrictions on payment of dividends under our existing indebtedness and under Irish law, our ability topay dividends, if any, will be dependent upon cash dividends and distributions or other transfers from our subsidiaries.Payments to us by our subsidiaries will be contingent upon their respective earnings and subject to any limitations on theability of such entities to make payments or other distributions to us. The Credit Agreement restricts our subsidiaries frompaying dividends and making distributions to its direct or indirect equity holders unless there are available exceptionsthereunder. If we are not able to meet such available exceptions that would allow our subsidiaries to pay a dividend or makea distribution to us, and which would then allow us to pay a dividend to you, then we will need to obtain a waiver from thelenders under the senior secured credit facilities.Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. Thiscould further exacerbate the risks to our financial condition described above.We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the CreditAgreement contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number ofqualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could besubstantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. If newdebt is added to our current debt levels, the related risks that we and the guarantors now face could intensify.Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increasesignificantly.Borrowings under the senior secured credit facilities are at variable rates of interest and expose us to interest rate risk.Historically, we have elected that Borrowings under the senior secured credit facilities bear interest based upon the LondonInter‑Bank Offered Rate, or LIBOR. The senior secured credit facilities include a LIBOR floor of 1.00%. The interest periodcan be set at one, two, three or six months (or, to the extent available to all relevant lenders, twelve months or a shorterperiod) as selected by us in accordance with the terms of the senior secured credit facilities. An increase of 1.00% in LIBORwould result in a $2.7 million increase in our annual interest expense associated with the senior secured credit facilities.Risks related to our ordinary sharesWe are eligible to be treated as an “emerging growth company,” as defined in the JOBS Act, and we cannot be certain ifthe reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares lessattractive to investors.We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growthcompany, we may take advantage of exemptions from various reporting requirements that are applicable to other publiccompanies that are not emerging growth companies, including, but not limited to, (i) not being required to comply with theauditor attestation requirements of Section 404 of the Sarbanes‑Oxley Act, (ii) reduced disclosure obligations regardingexecutive compensation in our periodic reports and proxy statements and (iii) exemptions from the requirements of holding anon‑binding advisory vote on executive compensation. In addition, as an emerging growth62 Table of Contentscompany, we are only required to provide three years of audited financial statements and three years of selected financialdata in this Annual Report on Form 10-K.We could be an emerging growth company for up to five years, although circumstances could cause us to lose that statusearlier, including if the market value of our ordinary shares held by non‑affiliates exceeds $700.0 million as of any June 30before that time or if we have total annual gross revenues of $1.07 billion or more during any fiscal year before that time, inwhich cases, we would no longer be an emerging growth company as of the following December 31 or, if we issue more than$1.0 billion in non‑convertible debt during any three‑year period before that time, we would cease to be an emerging growthcompany immediately. In addition, we qualify as a “smaller reporting company,” which allows us to take advantage of manyof the same exemptions from disclosure requirements, including not being required to comply with the auditor attestationrequirements of Section 404 of the Sarbanes‑Oxley Act and reduced disclosure obligations regarding executivecompensation in our periodic reports and proxy statements. We cannot predict if investors will find our ordinary shares lessattractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, theremay be a less active trading market for our ordinary shares and our share price may be more volatile. When these exemptionscease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliancewith them, and we cannot predict or estimate the amount or timing of such additional costs.Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until suchtime as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemptionfrom new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards asother public companies that are not emerging growth companies.Investment funds affiliated with Avista Capital Partners, or Avista, and affiliates of Altchem Limited, or Altchem, havesignificant influence over us, including control over decisions that require the approval of shareholders, which could limityour ability to influence the outcome of matters submitted to shareholders for a vote.We are currently controlled by Avista and Altchem, who we refer to as our Sponsors. As of December 31, 2018, investmentfunds affiliated with the Sponsors beneficially owned approximately 81.6% of our outstanding ordinary shares. For as long asthe Sponsors own or control at least a majority of our outstanding voting power, they will have the ability to exercisesubstantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders mayvote, including the election and removal of directors, any amendment to our Memorandum and Articles of Association, theapproval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. Even iftheir ownership falls below 50%, they will continue to be able to strongly influence or effectively control our decisions solong as they continue to hold a significant portion of our ordinary shares. In addition, each of the Sponsors has a contractualright to nominate two directors for so long as such Sponsor owns at least 20% of our outstanding ordinary shares, and onedirector for so long as such Sponsor owns less than 20% but more than 10% of our outstanding ordinary shares.Additionally, the Sponsors’ interests may not align with the interests of our other shareholders. Avista and Altchem are in thebusiness of making investments in companies and may acquire and hold interests in businesses that compete directly orindirectly with us. The Sponsors may also pursue acquisition opportunities that may be complementary to our business, and,as a result, those acquisition opportunities may not be available to us.We are a “controlled company” within the meaning of the rules of the Nasdaq Stock Market and, as a result, qualify for,and rely on, exemptions from certain corporate governance requirements; you do not have the same protections afforded toshareholders of companies that are subject to such requirements.Because the Sponsors control a majority of the voting power of our outstanding ordinary shares, we are a “controlledcompany” within the meaning of the corporate governance standards of the Nasdaq Stock Market. Under these rules, acompany of which more than 50% of the voting power for the election of directors is held by an individual, group or63 Table of Contentsanother company is a “controlled company” and may elect not to comply with certain corporate governance requirements,including the requirements that, within one year of the date of the listing of our ordinary shares:·we have a board of directors that is composed of a majority of “independent directors,” as defined under the rules ofthe Nasdaq Stock Market;·we have a compensation committee that is composed entirely of independent directors; and·we have a nominating and corporate governance committee that is composed entirely of independent directors.We intend to continue to utilize all of these exemptions. Accordingly, for so long as we are a “controlled company,” you willnot have the same protections afforded to shareholders of companies that are subject to all of the corporate governancerequirements of the Nasdaq Stock Market. Our status as a controlled company could make our ordinary shares less attractiveto some investors or otherwise harm our share price.Our directors who have relationships with Avista or Altchem may have conflicts of interest with respect to mattersinvolving our company.Two of our seven directors are affiliated with Avista and two directors are affiliated with Altchem. In addition, our ChiefExecutive Officer, Brian Markison, serves as an operating executive at Avista Capital Partners. Our directors have fiduciaryduties to us and, in addition, have duties to Avista or Altchem, as applicable. As a result, these directors may face real orapparent conflicts of interest with respect to matters affecting both us and Avista or Altchem, as applicable, whose interests,in some circumstances, may be adverse to ours.Your percentage ownership in us may be diluted in the future, which could reduce your influence over matters on whichshareholders vote.In the future, your percentage ownership in us may be diluted because of equity issuances for acquisitions, capital markettransactions or otherwise, including equity awards that we may grant to directors, officers and employees. From time to time,we may issue additional options or other share based awards to our directors, officers and employees under our benefits plans.Pursuant to our Articles of Association, our board of directors has the authority, without action or vote of our shareholdersand on a non-pre-emptive basis, to issue all or any part of our authorized but unissued ordinary shares, and one or moreclasses or series of preferred shares having such powers, preferences and relative, participating, optional and other specialrights, including preferences over our ordinary shares respecting dividends and distributions, as our board of directorsgenerally may determine. The terms of one or more classes or series of preferred shares could dilute the voting power orreduce the value of our ordinary shares. For example, our board of directors could grant the holders of preferred shares theright to elect some number of our directors in all events or on the happening of specified events or the right to veto specifiedtransactions. Similarly, the repurchase or redemption rights or liquidation preferences our board of directors could assign toholders of preferred shares could affect the residual value of our ordinary shares.Issuances of ordinary shares or voting preferred shares in the manner outlined above may reduce your influence over matterson which our shareholders vote.As a public company, we are subject to additional laws, regulations and stock exchange listing standards, which imposeadditional costs on us and may strain our resources and divert our management’s attention.Prior to our initial public offering, we operated our company on a private basis. We are now subject to the reportingrequirements of the Exchange Act, the Sarbanes‑Oxley Act, the Dodd‑Frank Wall Street Reform and Consumer Protection Actof 2010, the listing requirements of the Nasdaq Stock Market and other applicable securities laws and regulations.Compliance with these laws and regulations increases our legal and financial compliance costs and makes some activitiesmore difficult, time‑consuming or costly. Being a public company and being subject to new rules and regulations also makesit more expensive for us to obtain director and officer liability insurance, and we may be required64 Table of Contentsto accept reduced coverage or incur substantially higher costs to obtain coverage. These factors may therefore strain ourresources, divert management’s attention and affect our ability to attract and retain qualified board members.We have identified a material weakness in our internal control over financial reporting. If we fail to maintain effectiveinternal control over financial reporting and effective disclosure controls and procedures, we may not be able to accuratelyreport our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in ourcompany.We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes‑Oxley Act andtherefore are not required to make a formal assessment of the effectiveness of our internal control over financial reporting forthat purpose. We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes‑Oxley Act,which requires management to certify financial and other information in our quarterly and annual reports and provide anannual management report on the effectiveness of internal control over financial reporting. Although we are required todisclose changes that have materially affected, or are reasonably likely to materially affect, our internal control over financialreporting on a quarterly basis, we are not required to make our first annual assessment of our internal control over financialreporting pursuant to Section 404 until our second annual report required to be filed with the SEC.To comply with the requirements of being a public company, we may need to undertake various actions to develop,implement and test additional processes and other controls, including compliance training for our directors, officers andemployees, hiring of additional finance, accounting and other personnel and modifications to our existing accountingsystems, any of which could entail substantial cost or take a significant period of time to complete. Testing and maintaininginternal controls can divert our management’s attention from other matters related to the operation of our business. Inaddition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may notbe able to remediate resulting in our management being unable to assert that our internal control over financial reporting iseffective.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such thatthere is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements willnot be prevented or detected on a timely basis.In connection with the preparation of our audited consolidated financial statements as of and for the years endedDecember 31, 2017 and 2016, we identified a material weakness in our internal control over financial reporting. This materialweakness related to our failure to maintain an effective control environment around our period‑end financial closing andreporting process.Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and isimportant to help prevent financial fraud. If we are unable to maintain adequate internal controls, our business and operatingresults could be harmed. While we believe that we have remediated the material weakness identified in connection with thepreparation of our audited consolidated financial statements as of and for the years ended December 31, 2017 and 2016, if wefail to maintain the adequacy of our internal control over financial reporting or our disclosure controls and procedures, wecould be subjected to regulatory scrutiny, civil or criminal penalties or shareholder litigation, the defense of any of whichcould cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, andwe could be required to pay damages to settle such actions if any such actions were not resolved in our favor. Moreover, wemay be the subject of negative publicity focusing on a material weakness and we may be subject to negative reactions fromshareholders and others with whom we do business. Further, we may not be able to remediate a future material weakness in atimely manner and our management may be required to devote significant time and expense to remediate any such materialweakness. Failure to maintain adequate internal control over financial reporting could also result in financial statements thatdo not accurately reflect our financial condition or results of operations, which could result in the need to restate previouslyissued financial statements. There can be no assurance that we will not identify any significant deficiencies or other materialweaknesses in the future that will impair our ability to report our financial condition and results of operations accurately oron a timely basis. In addition, if we are unable to comply with the requirements of Section 404 in a timely manner or assertthat our internal control over financial reporting is effective, or if our independent registered public accounting firm isunable to express65 Table of Contentsan unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, investors maylose confidence in the accuracy and completeness of our financial reports. In the event that any of the foregoing occurs, themarket price of our ordinary shares could be negatively affected.We have identified errors in our financial statements for the years ended December 31, 2016 and December 31, 2017related to our accounting for certain aspects of the Business Combination, which required us to restate those financialstatements. If we identify errors in our financial reporting in the future, we may be required to restate previously issuedfinancial statements and any such restatement may subject us to regulatory penalties and could cause investors to loseconfidence in the accuracy and completeness of our financial statements, which could cause the price of our ordinaryshares to decline.In connection with the preparation of the prospectus for our initial public offering, we identified errors in our financialstatements for the years ended December 31, 2016 and December 31, 2017 related to our accounting for certain aspects of theBusiness Combination. The required adjustments to address these errors led to restatements of those financial statements. Ifwe are required to restate any of our financial statements in the future due to our inability to adequately remedy the issuesthat gave rise to these restatements or for any other reason, we may be subject to regulatory penalties and investors could loseconfidence in the accuracy and completeness of our financial statements, which could cause our share price to decline.Registration of the beneficial interests in our shares subjects us and the holders of such beneficial interests to certain risks.We entered into a Depository Agreement, or DTC Agreement, with the Depository Trust Company, or DTC, in connectionwith the listing and trading of our shares on the Nasdaq Global Select Market. In accordance with the DTC Agreement,following completion of the initial public offering of our shares, DTC’s nominee, Cede & Co., was registered as the legalowner of certain of our ordinary shares in the Irish shareholder register that we are required to maintain pursuant to theCompanies Act 2014 of Ireland, or the Irish Companies Act. Under the DTC Agreement, DTC credited the beneficial interestsin those ordinary shares in book entry form to its participants. Accordingly, while the ordinary shares issued in accordancewith Irish law are listed and traded on the Nasdaq Global Select Market, it is the beneficial interests in such ordinary sharesthat are settled and held in DTC. In accordance with market practice and system requirements of the Nasdaq Global SelectMarket, the ordinary shares are listed and traded on the Nasdaq Global Select Market under the category of “Common Share.”In respect of beneficial interests in ordinary shares held in DTC, such beneficial ownership would not necessarily berecognized by an Irish court. As such, investors holding beneficial interests in our ordinary shares within DTC may have nodirect rights against us and our officers and directors and may be required to obtain the cooperation of DTC in order to assertclaims against us and our officers and directors, and to look solely to DTC for the payment of any dividends, for exercise ofvoting rights attaching to the underlying ordinary shares and for all other rights arising in respect of the underlying ordinaryshares. We cannot guarantee that DTC will be able to continue to execute its obligations under the DTC Agreement,including that the beneficial owners of the ordinary shares within DTC will receive notice of general meetings in time toinstruct DTC to either effect registration of their ordinary shares or otherwise vote their ordinary shares in the manner desiredby such beneficial owners. Any such failure may, inter alia, limit the access for, delay or prevent, such beneficial shareholdersbeing able to exercise the rights attaching to the underlying ordinary shares.DTC has certain termination rights under the DTC Agreement. In the event that the DTC Agreement is terminated, we will useour reasonable best efforts to enter into a replacement agreement for purposes of permitting the uninterrupted listing of ourordinary shares on the Nasdaq Global Select Market. There can be no assurance, however, that it would be possible to enterinto such new agreements on substantially the same terms as the DTC Agreement or at all. A termination of the DTCAgreement could, therefore, have a material and adverse effect on us and the beneficial shareholders holding their ordinaryshares within DTC. The DTC Agreement limits DTC’s liability for any loss suffered by us. DTC disclaims any liability forany loss attributable to circumstances beyond DTC’s control, including, but not limited to, errors committed by others. DTCis liable for direct losses incurred as a result of events within DTC’s control. Thus, we may not be able to recover our entireloss if DTC does not perform its obligations under the DTC Agreement.66 Table of ContentsOur share price may be volatile, and the market price of our ordinary shares may drop.Our share price has been and may continue to be volatile. Since our initial public offering in October 2018, the closing priceof our ordinary shares as reported on the Nasdaq Global Select Market has ranged from a low of $6.25 on November 27, 2018to a high of $9.20 on October 22, 2018. In addition, securities markets worldwide have experienced, and are likely tocontinue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, marketor political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operatingperformance. The trading price of our shares may fluctuate in response to various factors, including:·market conditions in the broader stock market;·actual or anticipated fluctuations in our quarterly financial and operating results;·introduction of new products or services by us or our competitors;·issuance of new or changed securities analysts’ reports or recommendations;·results of operations that vary from expectations of securities analysts and investors;·results of operations that vary from those of our competitors;·guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;·strategic actions by us or our competitors;·announcement by us, our competitors or our vendors of significant contracts or acquisitions;·sales, or anticipated sales, of large blocks of our shares;·additions or departures of key personnel;·regulatory, legal or political developments;·public response to press releases or other public announcements by us or third parties, including our filings with theSEC;·litigation and governmental investigations;·changing economic conditions;·changes in accounting principles;·default under agreements governing our indebtedness;·exchange rate fluctuations; and·other events or factors, including those from natural disasters, war, acts of terrorism or responses to these events.67 Table of ContentsThese and other factors, many of which are beyond our control, may cause our market price and demand for our shares tofluctuate substantially. Fluctuations in our share price could limit or prevent investors from readily selling their shares andmay otherwise negatively affect the market price and liquidity of our shares. In addition, in the past, when the market price ofshares has been volatile, holders of those shares have sometimes instituted securities class action litigation against thecompany that issued the shares. If any of our shareholders brought a lawsuit against us, we could incur substantial costsdefending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, whichcould significantly harm our profitability and reputation.A significant portion of our total outstanding ordinary shares are restricted from immediate resale but may be sold into themarket in the near future. This could cause the market price of our ordinary shares to drop significantly, even if ourbusiness is doing well.Sales of a substantial number of shares of our ordinary shares in the public market could occur at any time. These sales, or theperception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price ofour ordinary shares. As of December 31, 2018 we had 52,518,924 ordinary shares outstanding. This includes shares that wesold in our initial public offering, which may be freely sold in the public market. Substantially all of the shares that were notsold in our initial public offering are subject to a 180‑day lock‑up period provided under agreements executed in connectionwith our initial public offering. These shares will, however, be able to be resold after the expiration of these lock‑upagreements on April 15, 2019. As restrictions on resale end, the market price of our shares could decline if the holders ofcurrently restricted shares sell them or are perceived by the market as intending to sell them. We also filed a Form S‑8 underthe Securities Act to register all of our ordinary shares that we may issue under our equity compensation plans. In addition,Avista and Altchem have certain demand registration rights that could require us in the future to file registration statementsin connection with sales of our shares by them. Such sales could be significant. Once we register these shares, they can befreely sold in the public market upon issuance.Since we have no current plans to pay regular cash dividends on our ordinary shares, you may not receive any return oninvestment unless you sell your ordinary shares for a price greater than that which you paid for it.We do not anticipate paying any regular cash dividends on our ordinary shares for the foreseeable future. Any decision todeclare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, amongother things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors thatour board of directors may deem relevant. Our ability to pay dividends is, and may be, limited by covenants of existing andany future outstanding indebtedness we or our subsidiaries incur. In addition, our ability to pay cash dividends may belimited by Irish law, as discussed under the risk factor titled “The rights of our shareholders may differ from the rightstypically offered to shareholders of a U.S. corporation and these differences may make our ordinary shares less attractive toinvestors.” Therefore, any return on investment in our ordinary shares is solely dependent upon the appreciation of the priceof our ordinary shares on the open market, which may not occur.If securities or industry analysts do not publish research or reports about our business, if they adversely change theirrecommendations regarding our shares or if our results of operations do not meet their expectations, our share price andtrading volume could decline.The trading market for our shares is influenced by the research and reports that industry or securities analysts publish aboutus or our business. We do not have any control over these analysts. If one or more of these analysts ceases coverage of ourcompany or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn couldcause our share price or trading volume to decline. Moreover, if one or more of the analysts who covers us downgrades ourordinary shares, or if our results of operations do not meet their expectations, our share price could decline.68 Table of ContentsRisks related to being an Irish corporation listing ordinary sharesProvisions contained in our Articles of Association, as well as provisions of Irish law, could impair a takeover attempt,limit attempts by our shareholders to replace or remove our current directors and management team, and limit the marketprice of our ordinary shares.Our Articles of Association, together with certain provisions of the Irish Companies Act could have the effect of delaying orpreventing changes in control or changes in our management without the consent of our board of directors.There are a number of approaches for acquiring an Irish public limited company, including a court‑approved scheme ofarrangement under the Irish Companies Act, through a tender offer by a third party, by way of a merger with a companyincorporated in the European Economic Area, or EEA, under the European Communities (Cross‑Border Mergers) Regulations2008 (as amended) and by way of a merger with a company incorporated in Ireland under the Irish Companies Act. Eachmethod requires shareholder approval or acceptance and different thresholds apply.The Irish Takeover Panel Act 1997 and the Irish Takeover Rules 2013 made thereunder, or the Irish Takeover Rules, govern atakeover or attempted takeover of our company by means of a court‑approved scheme of arrangement or a tender offer. TheIrish Takeover Rules contain detailed provisions for takeovers, including as to disclosure, process, dealing and timetable.The Irish Takeover Rules could discourage an investor from acquiring 30% or more of our outstanding ordinary shares unlesssuch investor was prepared to make a bid to acquire all outstanding ordinary shares.Our Articles of Association contain provisions that may delay or prevent a change of control, discourage bids at a premiumover the market price of our ordinary shares and adversely affect the market price of our ordinary shares and the voting andother rights of the holders of our ordinary shares. These provisions include:·permitting our board of directors to issue preference shares without shareholder approval, with such rights,preferences and privileges as they may designate;·provisions that allow our board of directors to adopt a shareholder rights plan upon such terms and conditions as itdeems expedient and in our best interests;·establishing an advance notice procedure for shareholder proposals to be brought before shareholder meetings,including proposed nominations of persons for election to our board of directors;·the ability of our board of directors to fill vacancies on our board in certain circumstances; and·imposing particular approval and other requirements in relation to certain business combinations.These provisions do not make us immune from takeovers. However, these provisions may frustrate or prevent any attempts byour shareholders to replace or remove our current management team by making it more difficult for shareholders to replacemembers of our board of directors, which is responsible for appointing the members of our management.Our board of directors may be limited by the Irish Takeover Rules in its ability to defend an unsolicited takeover attempt.We are subject to the Irish Takeover Panel Act 1997 and the Irish Takeover Rules. Under the Irish Takeover Rules, our boardof directors is not permitted to take any action that might frustrate an offer for our ordinary shares once our board of directorshas received an approach that may lead to an offer or has reason to believe that such an offer is or may be imminent, subjectto certain exceptions. Potentially frustrating actions, such as (i) the issue of shares, options, restricted share units orconvertible securities, (ii) material acquisitions or disposals, (iii) entering into contracts other than in the ordinary course ofbusiness or (iv) any action, other than seeking alternative offers, which may result in frustration of an offer, are prohibitedduring the course of an offer or at any earlier time during which our board of directors has reason to69 Table of Contentsbelieve an offer is or may be imminent. These provisions may give our board of directors less ability to control negotiationswith hostile offerors than would be the case for a corporation incorporated in a jurisdiction of the United States.The operation of the Irish Takeover Rules may affect the ability of certain parties to acquire our ordinary shares.Under the Irish Takeover Rules, if an acquisition of ordinary shares were to increase the aggregate holding of the acquirer andits concert parties to ordinary shares that represent 30% or more of the voting rights of a company, the acquirer and, in certaincircumstances, its concert parties would be required (except with the consent of the Irish Takeover Panel) to make an offer forthe outstanding ordinary shares at a price not less than the highest price paid for the ordinary shares by the acquirer or itsconcert parties during the previous 12 months. This requirement would also be triggered by an acquisition of ordinary sharesby a person holding (together with its concert parties) ordinary shares that represent between 30% and 50% of the votingrights in the company if the effect of such acquisition were to increase that person’s percentage of the voting rights by 0.05%within a 12‑month period. Under the Irish Takeover Rules, certain separate concert parties are presumed to be acting inconcert. Our board of directors and their relevant family members, related trusts and “controlled companies” are presumed tobe acting in concert with any corporate shareholder who holds 20% or more of the company. The application of thesepresumptions may result in restrictions upon the ability of any of the concert parties and members of our board of directors toacquire more of our securities, including under the terms of any executive incentive arrangements. We may consult with theIrish Takeover Panel with respect to the application of this presumption and the restrictions on the ability to acquire furthersecurities, although we are unable to provide any assurance as to whether the Irish Takeover Panel will overrule thispresumption.Our Articles of Association designate the courts of Ireland for all actions and proceedings, other than those relating to U.S.securities law, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or ourdirectors, officers or employees and require shareholders to pursue certain claims outside the United States.Our Articles of Association provide that, unless our board of directors or one of its duly authorized committees approves theselection of an alternate forum and to the fullest extent permitted by applicable law, the courts of Ireland shall be theexclusive forum for all actions or proceedings, other than those related to U.S. securities law, but including (i) any derivativeaction or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any ofour directors, officers or employees to us or our shareholders, (iii) any action asserting a claim against us arising pursuant toany provision of Irish law or our Articles of Association and (iv) any action to interpret, apply, enforce or determine thevalidity of our Articles of Association. Any person or entity purchasing or otherwise acquiring any interest in our shares shallbe deemed to have notice of and to have consented to the provisions of our Articles of Association and waived any argumentrelating to the inconvenience of the forums described above. As a result, certain shareholder actions and proceedings mayonly be brought in Ireland and our shareholders would not have access to any U.S. courts with respect to such actions. Thischoice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable fordisputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and ourdirectors, officers and employees. Alternatively, if a court were to find these provisions of our Articles of Associationinapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incuradditional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business andfinancial condition.Irish law differs from the laws in effect in the United States and U.S. shareholders may have difficulty enforcing civilliabilities against us, our directors or members of senior management.A number of our directors are non‑residents of the United States, and all or a substantial portion of their assets are locatedoutside the United States. As a result, it may not be possible to serve process on these directors, or us, in the United States orto enforce court judgments obtained in the United States against these individuals or us in Ireland based on the civil liabilityprovisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Irelandwould recognize or enforce judgments of U.S. courts obtained against us or our directors based on the civil liabilitiesprovisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. TheUnited States currently does not have a treaty with Ireland providing for the reciprocal70 Table of Contentsrecognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment ofmoney rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or statesecurities laws, would not automatically be enforceable in Ireland. A judgment obtained against us will be enforced by thecourts of Ireland if the following general requirements are met:·U.S. courts must have had jurisdiction in relation to the particular defendant according to Irish conflict of law rules(the submission to jurisdiction by the defendant would satisfy this rule); and·the judgment must be final and conclusive and the decree must be final and unalterable in the court whichpronounces it.A judgment can be final and conclusive even if it is subject to appeal or even if an appeal is pending. But where theeffect of lodging an appeal under the applicable law is to stay execution of the judgment, it is possible that in themeantime the judgment may not be actionable in Ireland. It remains to be determined whether a final judgmentgiven in default of appearance is final and conclusive. Irish courts may also refuse to enforce a judgment of the U.S.courts that meets the above requirements for one of the following reasons:·the judgment is not for a definite sum of money;·the judgment was obtained by fraud;·the enforcement of the judgment in Ireland would be contrary to natural or constitutional justice;·the judgment is contrary to Irish public policy or involves certain U.S. laws that will not be enforced in Ireland; or·jurisdiction cannot be obtained by the Irish courts over the judgment debtors in the enforcement proceedings bypersonal service in Ireland or outside Ireland under Order 11 of the Irish Superior Courts Rules.As an Irish company, we are principally governed by Irish law, which differs in some material respects from laws generallyapplicable to U.S. corporations and shareholders, including, among others, differences relating to interested director andofficer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally areowed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directorsor other officers of the company and may exercise such rights of action on behalf of the company only in limitedcircumstances. Accordingly, holders of our ordinary shares may have more difficulty protecting their interests than wouldholders of shares of a corporation incorporated in a jurisdiction of the United States.The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation and thesedifferences may make our ordinary shares less attractive to investors.We are incorporated under Irish law and, therefore, certain of the rights of holders of our shares are governed by Irish law,including the provisions of the Irish Companies Act, and by our Articles of Association. These rights differ in certain respectsfrom the rights of shareholders in typical U.S. corporations and these differences may make our ordinary shares less attractiveto investors. The principal differences include the following:·under Irish law, dividends may only be declared if we have, on an individual entity basis, profits available fordistribution, within the meaning of the Irish Companies Act. In addition, no distribution or dividend may be paid ormade by us unless our net assets are equal to, or exceed, the aggregate of our called up share capital plusnon‑distributable reserves and the distribution does not reduce our net assets below such aggregate;·under Irish law, each shareholder generally has preemptive rights to subscribe on a proportionate basis to anyissuance of shares. Preemption rights may be disapplied under Irish law for renewable five‑year periods by Irish71 Table of Contentscompanies by way of a provision in such companies’ articles of association or a special resolution of theirshareholders, which is an option we availed ourselves of prior to the completion of our initial public offering;·under Irish law, certain matters require the approval of holders of 75% of the votes cast at a general meeting of ourshareholders, including amendments to our Articles of Association, which may limit our flexibility to manage ourcapital structure;·under Irish law, a bidder seeking to acquire us would need, on a tender offer, to receive shareholder acceptance inrespect of 80% of our outstanding shares. If this 80% threshold is not achieved in the offer, under Irish law, thebidder cannot complete a “second step merger” to obtain 100% control of us. Accordingly, tender of 80% of ouroutstanding shares will likely be a condition in a tender offer to acquire us, not 50% as is more common in tenderoffers for corporations organized under U.S. law; and·under Irish law, shareholders may be required to disclose information regarding their equity interests upon ourrequest, and the failure to provide the required information could result in the loss or restriction of rights attachingto the shares, including prohibitions on the transfer of the shares, as well as restrictions on voting, dividends andother payments.Risks related to taxationChanges in our effective tax rate may reduce our net income in future periods.We cannot give any assurance as to what our effective tax rate will be because of, among other things, uncertainty regardingthe tax policies of the jurisdictions in which we operate and the varying applications of statutes, regulations and relatedinterpretations.A number of factors may increase our future effective tax rates, including: the jurisdictions in which profits are determined tobe earned and taxed (which may vary depending on our taxable presence in such jurisdictions as may be determined by taxauthorities in such jurisdictions); the resolution of issues arising from tax audits that may be undertaken by various taxauthorities; changes in the valuation of our deferred tax assets and liabilities due to changes in applicable tax legislation;increases in expenses that are not deductible for tax purposes, including transaction costs and impairments of goodwill inconnection with acquisitions; changes in available tax credits; changes in share‑based compensation; changes in tax laws orthe interpretation of such tax laws (including in respect of new U.S. tax legislation passed last year); changes to currentlyapplicable tax treaties, including those resulting in a loss of treaty benefits; changes in GAAP; and challenges to the transferpricing policies related to our structure undertaken by various tax authorities. Currently, jurisdictions within theOrganization for Economic Co‑Operation and Development, or the OECD, are reviewing OECD proposals relating to baseerosion and profit shifting. Our effective tax rate could be affected to the extent that countries adopt such OECD proposals.Recently enacted U.S. tax legislation has significantly changed the U.S. federal income taxation of corporations andmultinational consolidated groups, including by reducing the U.S. corporate income tax rate, limiting interest deduction,adopting elements of a territorial international tax system and introducing new anti‑base erosion provisions. Many of thesechanges are effective immediately, without any transition periods or grandfathering for existing transactions and may affectour actual effective tax rate. The legislation is unclear in many respects and could be subject to potential amendments andtechnical corrections, as well as interpretations and implementing regulations by the U.S. Department of Treasury and theInternal Revenue Service, any of which could lessen or increase certain adverse impacts of the legislation. Further, it isreasonable to expect that non‑U.S. taxing authorities will be reviewing current law for potential modifications in reaction tothe implementations of the new U.S. tax legislation.It is possible that in the future, whether as a result of a change in law or the practice of any relevant tax authority or as a resultof any change in the conduct of our affairs, we could become, or be regarded as having become tax resident in a jurisdictionother than Ireland. Should we cease to be an Irish tax resident, we may be subject to a charge of Irish capital gains tax as aresult of a deemed disposal of our assets. Our actual effective tax rate may vary from our expectation and72 Table of Contentsthat variance may be material. Additionally, the tax laws of Ireland and other jurisdictions in which we operate could changein the future, and such changes could cause a material adverse change in our effective tax rate.If our tax rates or tax expenses were to increase as described above, such increases could cause a material and adverse changein our worldwide effective tax rate and we may have to take action, at potentially significant expense, to seek to mitigate theeffect of such changes. In addition, any amendments to the current double taxation treaties between Ireland and otherjurisdictions could subject us to increased taxation. Any such amendments to double taxation treaties or increases in taxationbased on examinations by taxing authorities, if such increases are ultimately sustained, could result in increased charges,financial loss, including penalties, and reputational damage and materially and adversely affect our results, financialcondition and prospects.If we are a passive foreign investment company, U.S. investors in our ordinary shares could be subject to adverse U.S.federal income tax consequences.The rules governing passive foreign investment companies, or PFICs, can have adverse effects for U.S. federal income taxpurposes. We would be classified as a PFIC for any taxable year in which either: (i) at least 75% of our gross income isclassified as “passive income” for purposes of the PFIC rules, or (ii) at least 50% of the fair market value of our assets(determined on the basis of a quarterly average) is attributable to assets that produce or are held for the production of“passive income.” For this purpose, we will be treated as owning our proportionate share of the assets and earning ourproportionate share of the income of any other corporation we own, directly or indirectly, 25% or more (by value) of its stock.We do not believe that we are currently a PFIC, and we do not anticipate becoming a PFIC for the 2019 taxable year, howeversuch a determination cannot be made until following the end of such taxable year. Notwithstanding the foregoing, thedetermination of whether we are a PFIC must be made annually after the close of each taxable year, depends on the particularfacts and circumstances (such as the valuation of our assets, including goodwill and other intangible assets) and may also beaffected by the interpretation and application of the PFIC rules. The fair market value of our assets is expected to depend, inpart, upon (a) the market price of our ordinary shares and (b) the composition of our income and assets, which will be affectedby how, and how quickly, we spend any cash that is raised in any financing transaction, including our initial public offering.In light of the foregoing, no assurance can be provided that we are not a PFIC for the current taxable year or that we will notbecome a PFIC for any future taxable year.If we are a PFIC, U.S. holders of our ordinary shares would be subject to adverse U.S. federal income tax consequences, suchas ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxestreated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. Whether or notU.S. holders of our ordinary shares make timely qualified electing fund, or QEF, elections, if we provide the necessaryinformation to U.S. holders to make such elections, or mark‑to‑market elections may affect the U.S. federal income taxconsequences to U.S. holders with respect to the acquisition, ownership and disposition of our ordinary shares and anydistributions such U.S. holders may receive. Investors should consult their own tax advisors regarding all aspects of theapplication of the PFIC rules to our ordinary shares.U.S. holders of 10% or more of the voting power or value of our ordinary shares may be subject to U.S. federal incometaxation at ordinary income tax rates on undistributed earnings and profits.There is a risk that we will be classified as a “controlled foreign corporation,” or CFC, for U.S. federal income tax purposes.We will generally be classified as a CFC if more than 50% of our outstanding shares, measured by reference to voting poweror value, are owned (directly, indirectly or by attribution) by “U.S. Shareholders.” For this purpose, a “U.S. Shareholder” isany U.S. person that owns directly, indirectly or by attribution, 10% or more of the total voting power or total value of ouroutstanding shares. If we are classified as a CFC, a U.S. Shareholder may be subject to U.S. income taxation at ordinaryincome tax rates on its proportionate share of our undistributed earnings and profits attributable to “subpart F income” orundistributed earnings and profits invested in certain U.S. property and may also be subject to tax at ordinary income taxrates on any gain realized on a sale of ordinary shares, to the extent of our current and accumulated earnings and profitsattributable to such shares. U.S. Shareholders of a CFC are also required to include in gross income for a taxable year, at areduced effective tax rate, its proportionate share of certain non‑U.S. active business income of a CFC not included in aCFC’s “subpart F income,” or “global intangible low‑taxed income,” to the extent such “global intangible low‑taxedincome” is in excess of 10% of the adjusted U.S. federal income tax basis of73 Table of Contentsdepreciable tangible assets used in the CFC’s trade or business (reduced by a U.S. Shareholder’s allocable net interestexpense). Foreign taxes paid by a CFC attributable to the CFC’s “subpart F income” and “global intangible low‑taxedincome” and any corresponding foreign tax credits may affect the amount of income includible in a U.S. Shareholder’s grossincome for U.S. tax purposes. Even if we are not classified as a CFC, certain of our non‑U.S. subsidiaries could be treated asCFCs due to the application of certain new attribution rules that currently apply in determining CFC status. If certainnon‑U.S. subsidiaries are classified as CFCs, any U.S. Shareholder may be required to report annually and include in its U.S.taxable income its pro rata share of “subpart F income,” “global intangible low‑taxed income” and investments in U.S.property attributable to those non‑U.S. subsidiaries. The CFC rules are complex and U.S. Shareholders and U.S. holders of ourordinary shares are urged to consult their own tax advisors regarding the possible application of the CFC, “subpart Fincome,” and “global intangible low‑taxed income” rules (including applicable direct and indirect attribution rules) to thembased on their particular circumstances.A future transfer of your ordinary shares, other than one effected by means of the transfer of book entry interests in DTC,may be subject to Irish stamp duty.Transfers of ordinary shares effected by means of the transfer of book entry interests in the DTC should not be subject to Irishstamp duty where ordinary shares are traded through DTC, either directly or through brokers that hold such shares on behalfof customers through DTC. However, if you hold your ordinary shares as of record rather than beneficially through DTC, anytransfer of your ordinary shares could be subject to Irish stamp duty (currently at the rate of 1% of the higher of the price paidor the market value of the shares acquired). Payment of Irish stamp duty is generally a legal obligation of the transferee. Thepotential for stamp duty to arise could adversely affect the price of our ordinary shares. ITEM 1B. UNRESOLVED STAFF COMMENTSNone. ITEM 2. PROPERTIESOur principal office is located in Bridgewater, New Jersey, where we lease approximately 25,000 square feet of office spacepursuant to a lease that expires in March 2022. We also own a facility in Marietta, Georgia and lease facilities in Sayreville,New Jersey, Tampa, Florida, Wilmington, North Carolina, Buenos Aires, Argentina and Budapest, Hungary. We believe ourfacilities are adequate to meet our current needs, although we may seek to negotiate new leases or evaluate additional oralternate space for our operations. We believe appropriate alternative space would be readily available on commerciallyreasonable terms. ITEM 3. LEGAL PROCEEDINGSFrom time to time, we are a party to various legal proceedings. In addition, we have in the past been, and may in the future be,subject to investigations by governmental and regulatory authorities, which exposes us to greater risks associated withlitigation, regulatory or other proceedings, including significant fines or penalties. The outcome of litigation, regulatory orother proceedings cannot be predicted with certainty, and some lawsuits, claims, actions or proceedings may be disposed ofunfavorably to us. In addition, intellectual property disputes often have a risk of injunctive relief which, if imposed againstus, could materially and adversely affect our business, financial condition or results of operations.On February 16, 2018, upon receipt of approval for Osmolex ER from the FDA, we filed suit against Adamas in the U.S.District Court for the District of Delaware seeking a declaratory judgment that Osmolex ER does not infringe, directly orindirectly, any valid and enforceable claim of any of the 11 patents enumerated in our complaint. On September 20, 2018,Adamas filed an amended answer with counterclaims alleging infringement of certain patents included in our complaint andrequesting that the court grant Adamas damages, injunctive relief and attorneys' fees. Adamas commercializes a differentamantadine product, an extended-release capsule marketed and sold as Gocovri®. We intend to vigorously defend our rightsto commercialize Osmolex ER free and clear of any of these patents. However, this litigation is at an early stage. If Adamas’scounterclaims for infringement are successful, we could be exposed to74 Table of Contentsinjunctive relief, invalidity or damages, any of which could materially and adversely affect our business, financial conditionand results of operations.In general, we intend to continue to vigorously prosecute and defend these proceedings, as appropriate; however, from timeto time, we may settle or otherwise resolve these matters on terms and conditions that we believe are in our best interests.Resolution of any or all claims, investigations and legal proceedings, individually or in the aggregate, could have a materialadverse effect on our business, results of operations and cash flows in any given accounting period or on our overall financialcondition. ITEM 4. MINE SAFETY DISCLOSURESNot applicable.75 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIESMarket Information and HoldersOur ordinary shares began trading October 18, 2018. Our ordinary shares are listed on the NASDAQ Global Select Marketunder the symbol “OSMT.”As of March 27, 2019, there were 11 registered holders of record of our ordinary shares.Securities Authorized for Issuance under Equity Compensation PlansThe information required by this item will be incorporated by reference from our definitive proxy statement to be filedpursuant to Regulation 14A.Use of Proceeds from Initial Public Offering of Ordinary SharesOn October 17, 2018, our Registration Statement on Form S-1, as amended (File No. 333-227357), relating to our IPO, wasdeclared effective by the SEC. The offering commenced on October 17, 2018 and, on October 22, 2018, we closed theissuance and allotment of the 7,647,500 ordinary shares at a price of $7.00 per ordinary share. The number of shares issued inthe IPO reflected the exercise in full of the underwriters’ option to purchase 997,500 additional ordinary shares. Jefferies,Barclays, RBC Capital Markets and Wells Fargo Securities acted as joint lead book-running managers for the offering. Inaddition, we issued and allotted 2,014,285 ordinary shares at the public offering price in a private placement to certainexisting shareholders.We raised a total of $67.6 million in gross proceeds in the IPO and concurrent private placement, or approximately $58.1million in net proceeds, after deducting underwriting discounts of $4.6 million, net of reimbursement and estimated expensesof approximately $4.9 million. On October 31, 2018, the net proceeds from the IPO were used to repay $42.3 million of ourTerm A Loan and $7.7 million of our Term B Loan, together with accrued and unpaid interest.Recent Sales of Unregistered SecuritiesIn addition, we issued and allotted 2,014,285 ordinary shares on October 17, 2018 at the IPO price in a private placementunder Section 4(a)(2) of the Securities Act of 1933, as amended, to certain existing shareholders. The aggregate net proceedsof the private placement were approximately $14.1 million, which, as reference above, were used to repay indebtedness underour senior secured credit facility, to pay fees and expenses associated with the IPO and the private placement and for workingcapital and other general corporate purposes. ITEM 6. SELECTED FINANCIAL DATANot applicable.76 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONSThe statements in the discussion and analysis regarding industry outlook, our expectations regarding the performance ofour business and the forward-looking statements are subject to numerous risks and uncertainties, including, but not limitedto, the risks and uncertainties described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”Our actual results may differ materially from those contained in or implied by any forward-looking statements. You shouldread the following discussion together with the sections entitled “Risk Factors,” “Business” and the audited consolidatedfinancial statements, including the related notes, appearing elsewhere in this Annual Report on Form 10-K. All referencesto years, unless otherwise noted, refer to our fiscal years, which end on December 31. As used in this Annual Report on Form10-K, unless the context suggests otherwise, “we,” “us,” “our,” “the Company” or “Osmotica” refer to OsmoticaPharmaceuticals plc. This discussion and analysis is based upon the historical financial statements of OsmoticaPharmaceuticals plc included in this Annual Report on Form 10-K. Prior to the Reorganization (as defined in theaccompanying Notes to Consolidated Financial Statements), Osmotica Pharmaceuticals plc was a subsidiary of OsmoticaHoldings S.C.Sp. and had no material assets and conducted no operations other than activities incidental to its formation,the Reorganization and its initial public offering.We are a fully integrated biopharmaceutical company focused on the development and commercialization of specialtyproducts that target markets with underserved patient populations. In 2017, we generated total revenues across our existingportfolio of promoted specialty neurology and women’s health products, as well as our non‑promoted products, which areprimarily complex formulations of generic drugs. In 2018 we received regulatory approval from the U.S. Food and DrugAdministration, or the FDA, for M‑72 (methylphenidate hydrochloride extended‑release tablets, 72 mg) for the treatment ofattention deficit hyperactivity disorder, or ADHD in patients aged 13 to 65, as well as Osmolex ER (amantadineextended‑release tablets) for the treatment of Parkinson’s disease and drug‑induced extrapyramidal reactions, which areinvoluntary muscle movements caused by certain medications, in adults. We launched M‑72 in the second quarter of 2018and launched Osmolex ER in January 2019. In addition, we have a late‑stage development pipeline highlighted by two newdrug application or NDAs, candidates in Phase III clinical trials: Ontinua ER (arbaclofen extended‑release tablets) for musclespasticity in multiple sclerosis patients and RVL‑1201 (oxymetazoline hydrochloride ophthalmic solution, 0.1%) for thetreatment of blepharoptosis, or droopy eyelid. Many of our products use our proprietary osmotic‑release drug deliverysystem, Osmodex, which we believe offers advantages over alternative extended‑release, or ER, technologies.Our core competencies span drug development, manufacturing and commercialization. Our specialized neurology andwomen’s health sales teams support the ongoing commercialization of our existing promoted product portfolio as well as thelaunch of new products. As of December 31, 2018, we actively promoted five products: M‑72, Lorzone (chlorzoxazonescored tablets) and ConZip (tramadol hydrochloride extended‑release capsules) in specialty neurology; and OB Complete,our family of prescription prenatal dietary supplements, and Divigel (estradiol gel, 0.1%) in women’s health. We launchedM‑72 in the second quarter of 2018, and Osmolex ER, which was approved by the FDA on February 16, 2018, was fullylaunched in January 2019. As of December 31, 2018, we sold a portfolio consisting of approximately 37 non‑promotedproducts, which has generated strong cash flow. The cash flow from these non‑promoted products has contributed to ourinvestments in research and development and business development activities. Certain of our key products, particularlythose that incorporate our proprietary Osmodex drug delivery system, are or are expected to be manufactured in our Marietta,Georgia facility. Many of our existing products benefit from several potential barriers to entry, including intellectualproperty protection, formulation and manufacturing complexities, data exclusivity, as well as U.S. Drug EnforcementAdministration, or DEA, regulation and quotas for API. Our non-promoted products compete in generic markets wherebarriers to entry are lower than markets in which certain of our promoted products compete. In particular, bothmethylphenidate ER tablets and venlafaxine ER tablets, or VERT have experienced, and are expected to continue toexperience pricing erosion due to additional competition from other generic pharmaceutical companies. It is anticipated thatthis pricing erosion will result in lower net sales, revenue and profitability in 2019 and subsequent years.We are focused on progressing our pipeline, which is highlighted by two Phase III candidates under clinical development —arbaclofen ER and RVL‑1201. We developed arbaclofen ER using our proprietary Osmodex drug77 Table of Contentsdelivery system and believe this formulation will provide an efficacious and safe treatment for spasticity in multiple sclerosispatients. We recently received topline data from our second Phase III clinical trial of arbaclofen in multiple sclerosis patientswith spasticity. The initial review of the preliminary topline data indicates that both doses of arbaclofen demonstratedsuperiority to placebo in one of the two co-primary endpoints. In addition, there were numerous signals of efficacy and thesafety profile was in line with previously reported results. Based on the efficacy and safety exhibited for arbaclofen, theCompany remains encouraged and plans to proceed with its clinical and regulatory strategy to submit an NDA. At this time,however, it is unclear whether or not the Company will be required to conduct an additional clinical trial which may delayour submission past 2019. If we are required to conduct any such additional clinical trial, our development costs mayincrease, our regulatory approval process could be denied or delayed and we may not be able to commercialize andcommence sales of arbaclofen ER in the time frame currently contemplated, if at all.We acquired the rights to RVL‑1201 in 2017 and are conducting a second Phase III clinical trial of RVL‑1201 for droopyeyelid. If approved, RVL‑1201 would be the first non‑surgical treatment option approved by the FDA for droopy eyelid. Weplan to invest selectively in expanding our product portfolio by leveraging both our proprietary Osmodex drug deliverysystem to develop differentiated products as well as our management team’s operating experience to pursue external businessdevelopment opportunities.Financial Operations OverviewRecent TransactionsRevitaLid AcquisitionOn October 24, 2017, we entered into a stock purchase agreement to acquire the outstanding stock of RevitaLid, Inc., orRevitaLid. RevitaLid is the owner of RVL‑1201, an ophthalmic product that treats blepharoptosis, which had been licensedfrom one of the sellers in the transaction. Osmotica obtained all rights under the license agreement and is undertaking theclinical development and, if approved, the commercialization of RVL‑1201, which includes conducting clinical trials andfiling an NDA with the FDA. The transaction was accounted for as an asset acquisition of acquired in‑process research anddevelopment, or IPR&D, and because there was no alternative future use for the acquired asset, the purchase price, includingnet deferred tax assets and liabilities, was expensed and included in research and development expenses.Segment InformationWe currently operate in one business segment focused on the development and commercialization of pharmaceuticalproducts that target markets with underserved patient populations. We are not organized by market and are managed andoperated as one business. We also do not operate any separate lines of business or separate business entities with respect toour products. A single management team reports to our chief operating decision maker who comprehensively manages ourentire business. Accordingly, we do not accumulate discrete financial information with respect to separate service lines anddo not have separately reportable segments. See Note 2, Summary of Significant Accounting Policies to our consolidatedfinancial statements included elsewhere in this Annual Report on Form 10-K.Components of Results of OperationsRevenuesOur revenues consist of product sales, royalty revenues and licensing and contract revenue.Net product sales—Our revenues consist primarily of product sales of our promoted products, principally M-72, Lorzone,Divigel and the OB Complete family of prescription prenatal dietary supplements, and our non‑promoted products,principally methylphenidate ER and venlafaxine ER, or VERT. We ship product to a customer pursuant to a purchase order,which in certain cases is pursuant to a master agreement with that customer, and we invoice the customer upon shipment. Forthese sales we recognize revenue when control has transferred to the customer, which is typically on delivery to thecustomer. The amount of revenue we recognize is equal to the selling price, adjusted for any variable78 Table of Contentsconsideration, which includes estimated chargebacks, commercial rebates, discounts and allowances at the time revenues arerecognized.Royalty revenue—For arrangements that include sales-based royalties, including milestone payments based on the level ofsales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue atthe later of (a) when the related sales occur, or (b) when the performance obligation to which some or all the royalty has beenallocated has been satisfied (or partially satisfied).Licensing and contract revenue—The Company has arrangements with commercial partners that allow for the purchase ofproduct from the Company by the commercial partners for purpose of sub-distribution. Licensing revenue is recognized whenthe performance obligation identified in the arrangement is completed. Variable considerations, such as returns on productsales, government program rebates, price adjustments and prompt pay discounts associated with licensing revenue, aregenerally the responsibility of our commercial partners.Selling, General and Administrative ExpensesSelling, general and administrative expenses consist primarily of personnel expenses, including salaries and benefits foremployees in executive, finance, accounting, business development, legal and human resource functions. General andadministrative expenses also include corporate facility costs, including rent, utilities, legal fees related to corporate mattersand fees for accounting and other consulting services. We expect to incur additional general and administrative expenses as apublic company, including costs associated with the preparation of our SEC filings, increased legal and accounting costs,investor relations costs, incremental director and officer liability insurance costs, as well as costs related to compliance withthe Sarbanes‑Oxley Act of 2002 and the Dodd‑Frank Wall Street Reform and Consumer Protection Act.Research and DevelopmentCosts for research and development are charged as incurred and include employee‑related expenses (including salaries andbenefits, travel and expenses incurred under agreements with contract research organizations, or CROs, contractmanufacturing organizations and service providers that assist in conducting clinical and preclinical studies), costs associatedwith preclinical activities and development activities and costs associated with regulatory operations.Costs for certain development activities, such as clinical studies, are recognized based on an evaluation of the progress tocompletion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us byour vendors on their actual costs incurred. Payments for these activities are based on the terms of the individualarrangements, which may differ from the patterns of costs incurred, and are reflected in our consolidated financial statementsas prepaid expenses or accrued expenses as applicable.79 Table of ContentsResults of OperationsComparison of Years Ended December 31, 2018 and 2017Financial Operations OverviewThe following table presents revenues and expenses for the years ended December 31, 2018 and 2017 (dollars in thousands): Year Ended December 31, 2018 2017 % Change Net product sales $261,398 $237,671 10%Royalty revenue 1,959 6,449 (70)%Licensing and contract revenue 344 1,629 (79)%Total Revenue 263,701 245,749 7%Cost of goods sold (inclusive of amortization of intangibles) 135,014 125,188 8%Gross profit 128,687 120,561 7%Gross profit percentage 49% 49% Selling, general and administrative expenses 74,244 56,955 30%Research and development expenses 48,761 42,688 14%Impairment of intangibles and fixed assets 17,903 72,986 (75)%Impairments of goodwill 86,318 — %Total operating expenses 227,225 172,629 32%Interest expense and amortization of debt discount 20,791 29,052 (28)%Other non-operating (income) expenses, net (665) 4,522 (115)%Total other non-operating expenses, net 20,126 33,574 (40)%Loss before income taxes (118,664) (85,643) (39)%Income tax benefit 9,268 44,501 (79)%Net loss $(109,396) $(41,142) 166% RevenueThe following table presents total revenues for the years ended December 31, 2018 and 2017 (dollars in thousands): Year Ended December 31, 2018 2017 % Change Venlafaxine ER (VERT) $66,039 $96,054 (31)%Methylphenidate ER 129,469 43,711 196%Lorzone 17,172 22,276 (23)%Divigel 23,314 18,542 26%OB Complete 10,510 10,446 1%Other 14,894 46,642 (68)%Net product sales 261,398 237,671 10%Royalty revenue 1,959 6,449 (70)%Licensing and contract revenue 344 1,629 (79)%Total revenues $263,701 $245,749 7% Total revenues increased by $18.0 million to $263.7 million for the year ended December 31, 2018, as compared to $245.7million for the year ended December 31, 2017.Net Product Sales. Net product sales increased by $23.7 million to $261.4 million for the year ended December 31, 2018, ascompared to $237.7 million for the year ended December 31, 2017, primarily due to methylphenidate ER, which wasapproved and launched in the third quarter of 2017, and M-72, which was launched in the second quarter of 2018. While weexperienced significant growth in methylphenidate ER during 2018, this trend is expected to reverse in80 Table of Contents2019. Two new competitors received FDA approval for AB-rated methylphenidate ER products in the first and fourthquarters of 2018, and we anticipate additional competitors in 2019. Accordingly, we anticipate average selling prices willdecline which will negatively affect our net sales of methylphenidate ER in 2019 and in future years. Product sales from VERT decreased by 31% for the year ended December 31, 2018, reflecting additional competition and agreater proportion of sales from our lower priced authorized generic product, which accounted for substantially all VERTunit volume during the year. Prior to 2018, one other company sold competing dosage strengths of VERT. During the thirdquarter of 2018, another company launched competing dosage strengths of VERT. We expect that these competing productsas well as additional generic product launches in the future, if any, will continue to negatively affect our sales of VERT for2019 and future years.Product sales from Lorzone declined 23% for the year ended December 31, 2018, reflecting the shift of promotional efforts toM-72 which was launched in the second quarter of 2018, partially offset by price increases instituted during 2018. Productsales from Divigel increased by 26%, driven primarily by targeted promotional activities and strong patient access. Productsales from the OB Complete family of prescription prenatal dietary supplements increased by 1% as sales levels reboundedafter initially falling following the discontinuation of our OB Complete Gold prenatal vitamin line during 2017. Other non-promoted product sales decreased by 68%, largely due to the termination in the second quarter of 2017 of a marketing anddistribution relationship with the ANDA holder of a portfolio of products, including aripiprazole together with a favorableresolution in late 2017 of disputed gross sales deductions taken by a wholesale customer.Royalty Revenue. Royalty revenue decreased by $4.5 million for the year ended December 31, 2018, compared to the prioryear period, primarily due to lower product sales by third parties.Licensing and Contract Revenue. Licensing and contract revenue decreased by $1.3 million in 2018 primarily due to thediscontinuation in April 2017 of promotional activities for Monistat, a women’s health product, on behalf of a third party,and a decline in sales on other contract revenue products.Cost of Goods Sold and Gross Profit PercentageThe following table presents a breakdown of total cost of goods sold for the years ended December 31, 2018 and 2017(dollars in thousands): Year Ended December 31, 2018 2017 % Change Amortization of intangible assets $76,896 $43,381 77%Depreciation expense 2,626 1,978 33%Royalty expense 11,949 31,386 (62)%Other cost of goods sold 43,543 48,443 (10)%Total cost of goods sold $135,014 $125,188 8% Cost of goods sold increased $9.8 million in the year ended December 31, 2018 to $135.0 million as compared to $125.2million in the year ended December 31, 2017. The increase was primarily driven by a $33.5 million increase in amortizationof intangible assets, largely attributable to a full year of amortization for methylphenidate ER following its approval andlaunch in the third quarter of 2017. The increase in depreciation expense is largely attributable to a full year of depreciationrelated to an expansion project for our manufacturing facility in Marietta, Georgia which was completed during the secondquarter of 2017. Royalty expense decreased by $19.4 million primarily reflecting the termination in the second quarter of2017 of the distribution and marketing arrangement with the ANDA holder for a portfolio of products, including aripiprazole,for which we paid a significant royalty rate on our net sales. The $4.9 million decrease in other cost of goods sold is mostlydue to lower API costs for methylphenidate ER during 2018.Gross profit percentage remained at 49% for the year ended December 31, 2018 compared to the year ended December 31,2017. Excluding amortization and depreciation, our gross profit percentage increased to 79% for the year ended81 Table of ContentsDecember 31, 2018 as compared with 68% for the year ended December 31, 2017, primarily as a result of the termination inthe second quarter of 2017 of the distribution and marketing relationship with the ANDA holder for a portfolio of products,including aripiprazole, for which we paid a significant royalty rate on net sales.Selling, General and Administrative ExpensesSelling, general and administrative expenses increased $17.2 million in the year ended December 31, 2018 to $74.1 millionas compared to $57.0 million in the year ended December 31, 2017. The increase in our selling, general and administrativeexpenses reflects additions to salesforce headcount and marketing costs associated with the launches of M-72 and OsmolexER, together with costs we incurred related to our initial public offering and severance expenses due to restructuring of oursales force.Research and Development ExpensesResearch and development expenses increased by $6.1 million in the year ended December 31, 2018 to $48.8 million ascompared to $42.7 million in the year ended December 31, 2017. The increase was largely attributable to clinical trial costsof arbaclofen ER and RVL-1201, each of which are in Phase III clinical trials, together with additional headcount. Partiallyoffsetting this increase, research and development expenses for the year ended December 31, 2017 included approximately$16.4 million related to the acquisition of RevitaLid, Inc., owner of the rights to RVL-1201. The purchase of RevitaLid wasaccounted for as an acquisition of in-process R&D with no alternative future use and expensed at the time of acquisition.The following table summarizes our research and development expenses incurred for the periods indicated (dollars inthousands): Year Ended December 31, 2018 2017 % Change Osmolex ER $1,732 $3,235 (46)%Arbaclofen ER 19,679 5,976 229%RVL 1201 7,225 16,372 (56)%Other 20,125 17,105 18%Total $48,761 $42,688 14% Impairment of Intangible Assets and GoodwillImpairment of intangible assets and goodwill was $104.2 million during the year ended December 31, 2018. During 2018 werecognized impairments of finite-lived developed technology assets of $10.3 million consisting of the write down to fairvalue of nifedipine and Khadezla of $6.2 million and $4.1 million, respectively. Nifedipine was impaired due to a greatercompetitive environment which reduced the anticipated royalty revenue from our license partner, and in late 2018, we madethe decision to discontinue commercialization of Khedezla and recognized an impairment charge of $4.1 million. InDecember 2018, we made the decision to cease development of Generic Product A, an indefinite-lived In-Process R&D assetwhich resulted in an impairment charge of $7.6 million. In December 2018, circumstances and events related to pricing oncertain of our generic assets, together with our decision to discontinue development and commercialization of Khedezla andGeneric Product A, made it more likely than not that goodwill had become impaired. As a result, we performed an assessmentof goodwill as of December 31, 2018. Based on the results of this assessment, we recognized an impairment charge of $86.3million for the year ended December 31, 2018. 82 Table of ContentsThe following table details the impairment charges for such periods (in thousands): Year Ended December 31, 2018 Impairment Asset/Asset Group Charge Reason For ImpairmentDeveloped Technology Nifedipine $6,173 Lower royalty revenue due tocompetitionKhedezla 4,130(1)Discontinued commercialization 10,303 In-Process R&D Generic Product “A” 7,600(1)Suspension of developmentactivities Goodwill 86,318 Discontinued products and priceerosion on generic assetsTotal Impairment Charges for year ended December 31, 2018 $104,221 Year Ended December 31, 2017 Impairment Asset/Asset Group Charge Reason For ImpairmentProduct Rights Hydromorphone ER $6,567(1)Sales underperforming expectationsdue to competitionOther Product Rights 561(1)Discontinued products/lower salesexpectations 7,128 Developed Technology Oxybutinin License Royalty 8,767 Revenue underperformingexpectations due to a new genericmarket entrant In-Process R&D Ontinua ER 23,100 Delay in commencement of Phase IIItrialOsmolex ER 8,900 Delay in approval date and productlaunchGeneric Product “A” 18,600 Delay in finalizing formulationdevelopmentOther Generic Products in Development 6,025(1)Discontinued products/lower salesexpectations post launch 56,625 Total Impairment Charges for year ended December 31, 2017 $72,520 (1) - Assets were fully impaired as of December 31, 2018 and December31, 2017, as applicable. 83 Table of ContentsImpairment of Fixed AssetsFixed asset impairments for the years ended December 31, 2018 and 2017 were $0.1 million and $0.5 million, respectively,due to the abandonment of assets at a warehouse we ceased leasing, the termination of a capital project that had not reachedcompletion, and the fair market value for equipment being lower than its carrying value.Interest Expense and Amortization of Debt DiscountInterest expense and amortization of debt discount decreased by $8.3 million in the year ended December 31, 2018 to $20.8million as compared to $29.1 million in the year ended December 31, 2017. The decrease in borrowing costs reflects lowercosts associated with a refinancing concluded in December 2017 which refinanced our LIBOR-based term loan, seniorsubordinated note, and junior subordinated PIK note borrowings.Other Non‑operating (Income) Expenses, netOther non-operating (income) expense was $0.7 million and $(4.5) million for the years ended December 31, 2018 and 2017,respectively. On December 21, 2017, we amended our senior secured credit facilities to increase the principal amount by$59.0 million. Proceeds from these incremental borrowings were used to fully repay our senior subordinated notes and PIKnotes. On October 31, 2018, we prepaid $50.0 million of term loans under our senior secured credit facility. Other non-operating income (expense) included $0.9 million and $4.9 million of debt extinguishment costs for years ended December31, 2018 and 2017, respectively, offset by interest and other miscellaneous income.Income Tax Benefit Year Ended December 31, 2018 2017 (dollars in thousands) Income tax benefit $9,268 $44,501 Effective tax rate 7.8% 51.9% Income tax benefit decreased by $35.2 million in the year ended December 31, 2018 to $9.3 million as compared to $44.5million in the year ended December 31, 2017.The income tax benefit for the year ended December 31, 2018 and 2017 reflect significant differences in the usualrelationship of income tax benefit before income taxes. The primary cause of this, as well as the change in the effectiveincome tax rate period over period, relates to the following items: the decrease in the U.S. statutory income tax rate to 21%from 34% for the year ended December 31, 2018 compared to the same period in 2017; a disproportionate change in theincome tax rate for the year ended December 31, 2018 as a result of credits from research and development when compared tothe loss before income taxes; and the fact that in both periods there were ordinary losses in certain foreign tax jurisdictions inwhich we operate where no tax benefit is expected to be recognized, which subsequently requires that these jurisdictions notbe included in the calculation of the interim annual effective income tax rate. In addition, during the year ended December31, 2018 there was a discrete item of expense included in the income tax provision related to a decrease in the Argentinianstatutory rate as a result of a law change.Liquidity and Capital ResourcesOur principal sources of liquidity are cash generated from operations and amounts available to be drawn under ourRevolving Credit Facility, or Revolver. Our primary uses of cash are to fund operating expenses, product development costs,capital expenditures, debt service payments, as well as strategic business and product acquisitions.As of December 31, 2018, we had cash and cash equivalents of $70.8 million and borrowing availability under the Revolverof $50.0 million. We also had $271.4 million aggregate principal amount borrowed under our term loans and $1.8 millionunder our note payable for insurance financing. During the year ended December 31, 2018 we generated84 Table of Contents$37.6 million of cash from operations, and during the year ended December 31, 2017, we generated cash flows fromoperations of $57.8 million. We expect to generate positive cash flow from operations in the future through sales of ourexisting products, launches of approved products currently in our development pipeline and sales derived from in-licenses oracquisitions of other products; however, we expect our levels of cash flow generated to be lower due to price erosion onmethylphenidate ER and VERT.As of December 31, 2018, the interest rate was 6.09% and 6.59% for our Term A Loan and Term B Loan, respectively. As ofDecember 31, 2017, the interest rate was 5.25% and 5.75% for our Term A Loan and Term B Loan, respectively.At December 31, 2018, there were no outstanding borrowings or outstanding letters of credit under the Revolver. Availabilityunder the Revolver as of December 31, 2018 was $50.0 million.On October 22, 2018, we completed our IPO, in which we issued and allotted 7,647,500 ordinary shares at a public offeringprice of $7.00 per share. The number of shares issued in the IPO reflected the exercise in full of the underwriters’ option topurchase 997,500 additional ordinary shares. In addition, we issued and allotted 2,014,285 ordinary shares at the publicoffering price in a private placement to certain existing shareholders. The aggregate net proceeds of the IPO and the privateplacement were approximately $58.1 million after deducting underwriting discounts and commissions and offeringexpenses. Shortly after the IPO, we prepaid $50 million of our Term A loan and Term B loan.During the year ended December 31, 2018, we benefited from the commercial launch of methylphenidate ER and M-72 inSeptember 2017 and April 2018, respectively. Methylphenidate ER competes in generic markets for which futurecompetition will erode profitability over time. In late 2018, we became aware of several companies launching competingversions of methylphenidate ER. As a result, we anticipate price erosion which will negatively affect profitability ofmethylphenidate in 2019 and future years. During 2017 and 2018, we made significant investments in research anddevelopment, primarily for Ontinua ER and RVL-1201, both of which are in Phase III clinical trials.We believe that our existing cash balances, cash we expect to generate from operations from our existing product portfolio,our near‑term product launches and our product pipeline, as well as funds available under the Revolver, will be sufficient tofund our operations and to meet our existing obligations for at least the next 12 months.The adequacy of our cash resources depends on many assumptions, including primarily our assumptions with respect toproduct sales and expenses, as well as other factors, such as successful development and launching of new products andstrategic product or business acquisitions. Our assumptions may prove to be wrong or other factors may adversely affect ourbusiness, and as a result we could exhaust or significantly decrease our available cash resources, and we may not be able togenerate sufficient cash to service our debt obligations which could, among other things, force us to raise additional funds orforce us to reduce our expenses, either of which could have a material adverse effect on our business.To continue to grow our business over the longer term, we plan to commit substantial resources to internal productdevelopment, clinical trials of product candidates, expansion of our commercial, manufacturing and other operations andproduct acquisitions and in‑licensing. We have evaluated and expect to continue to evaluate a wide array of strategictransactions as part of our plan to acquire or in‑license and develop additional products and product candidates to augmentour internal development pipeline. Strategic transaction opportunities that we pursue could materially affect our liquidityand capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we maypursue development, acquisition or in‑licensing of approved or development products in new or existing therapeutic areas orcontinue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access toadditional capital to license or acquire additional products, product candidates or companies to expand our operations, or forgeneral corporate purposes. Strategic transactions may require us to raise additional capital through one or more public orprivate debt or equity financings or could be structured as a collaboration or partnering arrangement. Any equity financingwould be dilutive to our shareholders, and the consent of the lenders under our senior secured credit facilities could berequired for certain financings.85 Table of ContentsCash FlowsThe following table provides information regarding our cash flows for the periods indicated (in thousands): Year Ended December 31, 2018 2017 ChangeNet cash provided by operating activities $37,558 57,837 $(20,279)Net cash used in investing activities (4,134) (19,395) 15,261Net cash provided by (used in) financing activities 3,604 (23,314) 26,918Effect on cash of changes in exchange rate (938) 57 (995)Net increase in cash and cash equivalents $36,090 $15,185 $20,905 Net cash provided by operating activitiesCash flows from operating activities are primarily driven by earnings from operations (excluding the impact of non-cashitems), the timing of cash receipts and disbursements related to accounts receivable and accounts payable and the timing ofinventory transactions and changes in other working capital amounts. Net cash provided by operating activities was $37.6million and $57.8 million for the years ended December 31, 2018 and 2017, respectively.The decrease in cash provided by operating activities in the year ended December 31, 2018, as compared to year endedDecember 31, 2017, was due to changes in working capital, primarily as a result of greater level of accounts receivable andinventories and, a lower level of accounts payable, partially offset by prepaid assets and higher accrued expenses. Net cash outflow related to operating assets and liabilities was $25.0 million for the year ended December 31, 2018 ascompared with the net cash inflow of $9.5 million for the year ended December 31, 2017. The change was largely driven bygreater levels of accounts receivable and inventories related to methylphenidate ER, which was launched late in the thirdquarter of 2017, and lower levels of accounts payable, offset by lower levels of prepaid assets and higher accrued expensesduring the period.During the year ended December 31, 2018, accounts receivable was a $17.0 million use of funds, due to greater levels ofaccounts receivable from product sales, and lower reserves for chargebacks, commercial rebates and doubtful accounts.Inventories were also a use of funds of $7.4 million primarily due to increased methylphenidate ER inventories to meetcustomer demand. Prepaid expenses and other current assets were a $4.7 million source of funds while accounts payable,represented a $11.3 million use of funds.Net cash used in investing activitiesOur uses of cash in investing activities during the years ended December 31, 2018 and 2017 reflected purchases of property,plant and equipment and were $4.1 million and $6.9 million, respectively. In 2017 we invested $12.5 million in theacquisition of RevitaLid, Inc., owner of rights to RVL-1201. Purchases of property, plant and equipment in the year endedDecember 31, 2017 included the costs of completion of the expansion construction project for our Marietta, Georgiamanufacturing facility, and the purchase of other property, plant and equipment.Net cash provided by (used in) financing activitiesNet cash provided by financing activities of $3.6 million during the year ended December 31, 2018 primarily related to the$58.1 million of net proceeds from our IPO and a $2.7 million net increase in insurance financing loans, partially offset by$56.1 million of repayments of our term loans under our senior secured credit facility.Net cash used in financing activities of $23.3 million during the year ended December 31, 2017 primarily related to debtrepayments and payment of contingent consideration related to the 2014 in-license of a portfolio of women’s healthproducts, including Divigel and distributions to partners.86 Table of ContentsContractual ObligationsThe following table lists our contractual obligations as of December 31, 2018. Payments due by period (in thousands) Less than 1 More than 5 Total year 1 - 3 years 3 - 5 years yearsLong-term debt obligations 271,360 — 271,360 — —Interest expense 70,028 17,632 52,396 — —Capital lease obligations 257 119 138 — —Operating lease obligations 5,803 1,998 3,314 491 —Purchase obligations 4,000 4,000 — — —Royalty obligations 8,646 1,375 3,188 3,000 1,083Insurance premium financing obligations 1,774 1,774 — — —Total 361,868 26,898 330,396 3,491 1,083(1)Represents the remaining principal amount under our senior secured credit facilities, which is due on December 21,2022.(2)These amounts represent future cash interest payments related to our existing debt obligations based on variable interestrates specified in the senior secured credit facilities. Payments related to variable debt are based on applicable rates atDecember 31, 2018 plus the specified margin in the senior secured credit facilities for each period presented. As ofDecember 31, 2018, the interest rate was 6.09% for Term A Loan and 6.59% for Term B Loan.(3)Includes minimum cash payments related to certain fixed assets, primarily office equipment.(4)Includes minimum cash payments related to our leased offices and warehouse facilities under non-cancelable leases inNew Jersey, Florida, North Carolina, as well as in Argentina and Hungary.(5)Includes obligations to purchase API with minimum required annual amounts.(6)Includes obligations to make minimum annual royalty payments.(7)Includes obligations to make minimum insurance premium financing paymentsOur liability for unrecognized tax benefits has been excluded from the above contractual obligations table as the nature andtiming of future payments, if any, cannot be reasonably estimated. As of December 31, 2018, our liability for unrecognizedtax benefits was $1.5 million (excluding interest and penalties). We do not anticipate that the amount of our liability forunrecognized tax benefits will significantly change in the next 12 months.Critical Accounting EstimatesThe significant accounting policies and basis of presentation are described in Note 2, Summary of Significant AccountingPolicies to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Summary of Significant Accounting Policies. The preparation of our consolidated financial statements in accordance withGAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, andexpenses and the related disclosures in the notes thereto. Some of these estimates can be subjective and complex. Althoughwe believe that our estimates and assumptions are reasonable, there may be other reasonable estimates or assumptions thatdiffer significantly from ours. Further, our estimates and assumptions are based upon information available at the time theywere made. Actual results could differ from those estimates.In order to understand our consolidated financial statements, it is important to understand our critical accounting estimates.We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make87 (1)(2)(3)(4)(5)(6)(7)Table of Contentsassumptions about matters that were highly uncertain at the time the accounting estimate was made and (ii) changes in theestimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could haveused in the current period, would have a material impact on our financial condition, results of operations or cash flows. Webelieve the following accounting policies and estimates to be critical:Revenue RecognitionUpon adoption of Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (ASCTopic 606) on January 1, 2018, we recognize revenue as described below. The implementation of the new revenuerecognition standard did not have a material impact on our consolidated financial statements. The information presented forthe periods prior to January 1, 2018 has not been restated and is reported under ASC Topic 605.Product Sales—Revenue is recognized at the point in time when our performance obligations with our customers have beensatisfied. At contract inception, we determine if the contract is within the scope of ASC Topic 606 and then evaluates thecontract using the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations;(3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognizerevenue at the point in time when the Company satisfies a performance obligation.Revenue is recorded at the transaction price, which is the amount of consideration we expect to receive in exchange fortransferring products to a customer. We considered the unit of account for each purchase order that contains more than oneproduct. Because all products in a given purchase order are generally delivered at the same time and the method of revenuerecognition is the same for each, there is no need to separate an individual order into separate performance obligations. In theevent that we fulfilled an order only partially because a requested item is on backorder, the portion of the purchase ordercovering the item is generally cancelled, and the customer has the option to submit a new one for the backordered item. Wedetermine the transaction price based on fixed consideration in our contractual agreements, which includes estimates ofvariable consideration, and the transaction price is allocated entirely to the performance obligation to providepharmaceutical products. In determining the transaction price, a significant financing component does not exist since thetiming from when we deliver product to when the customers pay for the product is less than one year and the customers donot pay for product in advance of the transfer of the product.We record product sales net of any variable consideration, which includes estimated chargebacks, commercial rebates,discounts and allowances and doubtful accounts. We utilize the expected value method to estimate all elements of variableconsideration included in the transaction. The variable consideration is recorded as a reduction of revenue at the timerevenues are recognized. We will only recognize revenue to the extent that it is probable that a significant revenue reversalwill not occur in a future period. These estimates may differ from actual consideration amount received and we will re‑assessthese estimates each reporting period to reflect known changes in factors.Royalty Revenue—For arrangements that include sales‑based royalties, including milestone payments based on the level ofsales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of(a) when the related sales occur, or (b) when the performance obligation to which some or all the royalty has been allocatedhas been satisfied (or substantially satisfied).Licensing and Contract Revenue— We have arrangements with commercial partners that allow for the purchase of productfrom us by the commercial partner for purposes of sub‑distribution. We recognize revenue from an arrangement when controlof such product is transferred to the commercial partner, which is typically upon delivery. In these situations the performanceobligation is satisfied when product is delivered to our commercial partner. Licensing revenue is recognized in the period inwhich the product subject to the sublicensing arrangement is sold. Sales deductions, such as returns on product sales,government program rebates, price adjustments, and prompt pay discounts in regard to licensing revenue is generally theresponsibility of our commercial partners and not recorded by us.Freight—We record amounts billed to customers for shipping and handling as revenue, and record shipping and handlingexpenses related to product sales as cost of goods sold. We account for shipping and handling activities related to contractswith customers as costs to fulfill the promise to transfer the associated products. When shipping and88 Table of Contentshandling costs are incurred after a customer obtains control of the products, we also have elected to account for these as coststo fulfill the promise and not as a separate performance obligation.Sales DeductionsProduct sales are recorded net of estimated chargebacks, commercial and governmental rebates, discounts, allowances, copaydiscounts, advertising and promotions and estimated product returns, or collectively, “sales deductions.”Provision for estimated chargebacks, certain commercial rebates, discounts and allowances and doubtful accounts settled insales credits at the time of sales are analyzed and adjusted, if necessary, monthly and recorded against gross trade accountsreceivable. Estimated product returns, certain commercial and governmental rebates and customer coupons settled in cash areanalyzed and adjusted, if necessary, monthly and recorded as a component of accrued expenses.Calculating certain of these items involves estimates and judgments based on sales or invoice data, contractual terms,historical utilization rates, new information regarding changes in applicable regulations and guidelines that would impactthe amount of the actual rebates, our expectations regarding future utilization rates and estimated customer inventory levels.Amounts accrued for sales deductions are adjusted when trends or significant events indicate that adjustment is appropriateand to reflect actual experience. The most significant items deducted from gross product sales where we exercise judgmentare chargebacks, commercial and governmental rebates, product returns, discounts and allowances and advertising andpromotions.Where available, we have relied on information received from our wholesaler customers about the quantities of inventoryheld, including the information received pursuant to days of sales outstanding, which we have not independently verified.For other customers, we have estimated inventory held based on buying patterns. In addition, we have evaluated marketconditions for products primarily through the analysis of wholesaler and other third party sell‑through, as well asinternally‑generated information, to assess factors that could impact expected product demand at December 31, 2018 andDecember 31, 2017. We believe that the estimated level of inventory held by our customers is within a reasonable range ascompared to both: (i) historical amounts and (ii) expected demand for the products that represent majority of the volume atDecember 31, 2018 and December 31, 2017.If the assumptions we use to calculate our allowances for sales deductions do not appropriately reflect future activity, ourfinancial position, results of operations and cash flows could be materially impacted.The following table presents the activity and ending balances for our product sales provisions for the years endedDecember 31, 2018 and 2017 (in thousands): Commercial Government Product Discounts and Chargebacks Rebates Rebates Returns Allowances TotalBalance at January 1, 2017 $24,311 $30,553 $6,486 $30,341 $3,632 $95,323Provision 202,367 134,526 26,007 26,300 15,387 404,587Charges processed (194,336) (125,845) (18,342) (13,341) (15,534) (367,398)Balance at December 31, 2017 32,342 39,234 14,151 43,300 3,485 132,512Provision 365,043 257,917 18,582 20,492 20,245 682,279Charges processed (358,524) (247,920) (22,752) (15,328) (20,220) (664,744)Balance December 31, 2018 $38,861 $49,231 $9,981 $48,464 $3,510 $150,047 Total items deducted from gross product sales were $682.3 million (excluding $4.9 million in provisions for advertising andpromotion), or 71.9% as a percentage of gross product sales, during the year ended December 31, 2018. Total items deductedfrom gross product sales were $404.6 million, or 62.6% as a percentage of gross product sales, in 2017.Chargebacks—We enter into contractual agreements with certain third parties such as retailers, hospitals andgroup‑purchasing organizations, or GPOs, to sell certain products at predetermined prices. Most of the parties have elected tohave these contracts administered through wholesalers that buy the product from us and subsequently sell it to these thirdparties. When a wholesaler sells products to one of these third parties that are subject to a contractual price89 Table of Contentsagreement, the difference between the price paid to us by the wholesaler and the price under the specific contract is chargedback to us by the wholesaler. Utilizing this information, we estimate a chargeback percentage for each product and record anallowance for chargebacks as a reduction to gross sales when we record our sale of the products. We reduce the chargebackallowance when a chargeback request from a wholesaler is processed. Our provision for chargebacks is fully reserved for atthe time when sales revenues are recognized.We obtain product inventory reports from major wholesalers to aid in analyzing the reasonableness of the chargebackallowance and to monitor whether wholesaler inventory levels do not significantly exceed customer demand. We assess thereasonableness of our chargeback allowance by applying a product chargeback percentage that is based on a combination ofhistorical activity and current price and mix expectations to the quantities of inventory on hand at the wholesalers accordingto wholesaler inventory reports. In addition, we estimate the percentage of gross sales that were generated through direct andindirect sales channels and the percentage of contract compared to non‑contract revenue in the period, as these each affectthe estimated reserve calculation. In accordance with our accounting policy, we estimate the percentage amount ofwholesaler inventory that will ultimately be sold to third parties that are subject to contractual price agreements based on atrend of such sales through wholesalers. We use this percentage estimate until historical trends indicate that a revision shouldbe made. On an ongoing basis, we evaluate our actual chargeback rate experience, and new trends are factored into ourestimates each quarter as market conditions change.Events that could materially alter chargebacks include: changes in product pricing as a result of competitive marketdynamics or negotiations with customers, changes in demand for specific products due to external factors such as competitorsupply position or consumer preferences, customer shifts in buying patterns from direct to indirect through wholesalers,which could either individually or in aggregate increase or decrease the chargebacks depending on the direction and trend ofthe change(s).Chargebacks were $365.0 million and $202.4 million, or 38.5% and 31.3% as a percentage of gross product sales, for theyears ended December 31, 2018 and 2017, respectively. Chargebacks as a percentage of gross product sales increased in2018 as compared with 2017, primarily due to a change in product mix and pricing. We expect that chargebacks willcontinue to significantly impact our reported net product sales.Commercial Rebates—We maintain an allowance for commercial rebates that we have in place with certain customers.Commercial rebates vary by product and by volume purchased by each eligible customer. We track sales by product numberfor each eligible customer and then apply the applicable commercial rebate percentage, using both historical trends andactual experience to estimate our commercial rebates. We reduce gross sales and increase the commercial rebates allowanceby the estimated rebate amount when we sell our products to eligible customers. We reduce the commercial rebate allowancewhen we process a customer request for a rebate. At each month end, we analyze the allowance for commercial rebates againstactual rebates processed and make necessary adjustments as appropriate. Our provision for commercial rebates is fullyreserved for at the time sales revenues are recognized.The allowance for commercial rebates takes into consideration price adjustments which are credits issued to reflect increasesor decreases in the invoice or contract prices of our products. In the case of a price decrease, a shelf‑stock adjustment credit isgiven for product remaining in customer’s inventories at the time of the price reduction. Contractual price protection resultsin a similar credit when the invoice or contract prices of our products increase, effectively allowing customers to purchaseproducts at previous prices for a specified period of time. Amounts recorded for estimated shelf‑stock adjustments and priceprotections are based upon specified terms with direct customers, estimated changes in market prices, and estimates ofinventory held by customers. We regularly monitor these and other factors and evaluate the reserve as additional informationbecomes available.We ensure that commercial rebates are reasonable through review of contractual obligations, review of historical trends andevaluation of recent activity. Furthermore, other events that could materially alter commercial rebates include: changes inproduct pricing as a result of competitive market dynamics or negotiations with customers, changes in demand for specificproducts due to external factors such as competitor supply position or consumer preferences,90 Table of Contentscustomer shifts in buying patterns from direct to indirect through wholesalers, which could either individually or inaggregate increase or decrease the commercial rebates depending on the direction and velocity of the change(s).Commercial rebates were $257.9 million and $134.5 million, or 27.2% and 20.8% as a percentage of gross product sales, forthe years ended December 31, 2018 and 2017, respectively. Commercial rebates as a percentage of gross product salesincreased in 2018 as compared to 2017 primarily due to the change in product mix and customer contracts. We expect thatcommercial rebates will continue to significantly impact our reported net sales.Government Program Rebates—Federal law requires that a pharmaceutical distributor, as a condition of having federal fundsbeing made available to the states for the manufacturer’s drugs under Medicaid and Medicare Part B, must enter into a rebateagreement to pay rebates to state Medicaid programs for the distributor’s covered outpatient drugs that are dispensed toMedicaid beneficiaries and paid for by a state Medicaid program under a fee‑for‑service arrangement. CMS is responsible foradministering the Medicaid rebate agreements between the federal government and pharmaceutical manufacturers. Rebatesare also due on the utilization of Medicaid managed care organizations, or MMCOs. We also pay rebates to MCOs for thereimbursement of a portion of the sales price of prescriptions filled that are covered by the respective plans. The liability forMedicaid, Medicare and other government program rebates is settled in cash and is estimated based on historical and currentrebate redemption and utilization rates contractually submitted by each state’s program administrator and assumptionsregarding future government program utilization for each product sold, and accordingly recorded as a reduction of productsales. Medicaid rebates are typically billed up to 180 days after the product is shipped, but can be as much as 270 days afterthe quarter in which the product is dispensed to the Medicaid participant. In addition to the estimates mentioned above, ourcalculation also requires other estimates, such as estimates of sales mix, to determine which sales are subject to rebates andthe amount of such rebates. Periodically, we adjust the Medicaid rebate provision based on actual claims paid. Due to thedelay in billing, adjustments to actual claims paid may incorporate revisions of this provision for several periods. BecauseMedicaid pricing programs involve particularly difficult interpretations of complex statutes and regulatory guidance, ourestimates could differ from actual experience.Government program rebates were $18.6 million and $26.0 million, or 2.0% and 4.0% as a percentage of gross product sales,during the years ended December 31, 2018 and 2017, respectively.Product Returns—Certain of our products are sold with the customer having the right to return the product within specifiedperiods. Estimated return accruals are made at the time of sale based upon historical experience. Our return policy generallyallows customers to receive credit for expired products within six months prior to expiration and within one year afterexpiration. Our provision for returns consists of our estimates for future product returns.Historical factors such as one‑time recall events as well as pending new developments such as comparable product approvalsor significant pricing movement that may impact the expected level of returns are taken into account monthly to determinethe appropriate accrued expense. As part of the evaluation of the liability required, we consider actual returns to date that arein process, the expected impact of any product recalls and the amount of wholesaler’s inventory to assess the magnitude ofunconsumed product that may result in product returns to us in the future. The product returns level can be impacted byfactors such as overall market demand and market competition and availability for substitute products which can increase ordecrease the pull through for sales of our products and ultimately impact the level of product returns. In determining ourestimates for returns and allowances, we are required to make certain assumptions regarding the timing of the introduction ofnew products. In addition, we make certain assumptions with respect to the extent and pattern of decline associated withgeneric competition. To make these assessments, we utilize market data for similar products as analogs for our estimations.We use our best judgment to formulate these assumptions based on past experience and information available to us at thetime. We continually reassess and make the appropriate changes to our estimates and assumptions as new informationbecomes available to us. Product returns are fully reserved for at the time when sales revenues are recognized.Our estimate for returns may be impacted by a number of factors, but the principal factor relates to the level of inventory inthe distribution channel. When we are aware of an increase in the level of inventory of our products in the distributionchannel, we consider the reasons for the increase to determine whether we believe the increase is temporary orother‑than‑temporary. Increases in inventory levels assessed as temporary will not result in an adjustment to our91 Table of Contentsprovision for returns. Some of the factors that may be an indication that an increase in inventory levels will be temporaryinclude:·recently implemented or announced price increases for our products; and·new product launches or expanded indications for our existing products.Conversely, other‑than‑temporary increases in inventory levels may be an indication that future product returns could behigher than originally anticipated and, accordingly, we may need to adjust our provision for returns. Some of the factors thatmay be an indication that an increase in inventory levels will be other‑than‑temporary include:·declining sales trends based on prescription demand;·recent regulatory approvals to shorten the shelf life of our products, which could result in a period of higher returns;·slow moving or obsolete product still in the distribution channel;·introduction of new product(s) or generic competition;·increasing price competition from generic competitors; and·changes to the National Drug Codes, or NDCs, of our products, which could result in a period of higher returnsrelated to product with the old NDC, as our customers generally permit only one NDC per product for identificationand tracking within their inventory systems.We ensure that product returns are reasonable through inspection of historical trends and evaluation of recent activity.Furthermore, other events that could materially alter product returns include: acquisitions and integration activities thatconsolidate dissimilar contract terms and could impact the return rate as typically we purchase smaller entities with lesscontracting power and integrate those product sales to our contracts; and consumer demand shifts by products, which couldeither increase or decrease the product returns depending on the product or products specifically demanded and ultimatelyreturned.Product returns were $20.5 million and $26.3 million, or 2.2% and 4.1% as a percentage of gross product sales, during theyears ended December 31, 2018 and 2017, respectively. Product returns as a percentage of gross product sales decreased in2018 as compared to 2017 primarily due to the launch of methylphenidate ER in September, 2017, and product recalls whichwere not present in 2018. Product returns as a percentage of gross product sales are not expected to change materially for2019.Promotions and Co‑Pay Discount Cards—From time to time we authorize various retailers to run in-store promotional salesof our products. We accrue an estimate of the dollar amount expected to be owed back to the retailer. Additionally, weprovide consumer co-pay discount cards, administered through outside agents to provide discounted products whenredeemed. Upon release of the cards into the market, we record an estimate of the dollar value of co-pay discounts expectedto be utilized taking into consideration historical experience.Advertising and promotions as a percentage of gross product sales did not change materially during the periodspresented. Promotions and co-pay discount cards are included in advertising and promotions, which were $4.9 million and$4.4 million, or 0.5% and 0.7% as a percentage of gross product sales, during the years ended December 31, 2018 and 2017,respectively.Discounts and allowances were $20.2 million and $15.4 million, or 2.1% and 2.4% as a percentage of gross product sales,during the years ended December 31, 2018 and 2017, respectively. Discounts and allowances as a percentage of grossproduct sales did not change materially during the periods presented and are not expected to change materially for theremainder of 2018.92 Table of ContentsValuation of long‑lived assetsAs of December 31, 2018, our combined long‑lived assets balance, including property, plant and equipment and finite‑livedintangible assets, is $437.9 million.Long‑lived assets, other than goodwill and other indefinite‑lived intangibles, are evaluated for impairment whenever eventsor changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimatedundiscounted future cash flows derived from such assets. Factors that we consider in deciding when to perform an impairmentreview include significant changes in our forecasted projections for the asset or asset group for reasons including, but notlimited to, significant under‑performance of a product in relation to expectations, significant changes or planned changes inour use of the assets, significant negative industry or economic trends, and new or competing products that enter themarketplace. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from theuse of the asset group.Our long‑lived intangible assets, which consist of distribution rights, product rights, tradenames and developed technology,are initially recorded at fair value upon acquisition. To the extent they are deemed to have finite lives, they are thenamortized over their estimated useful lives using either the straight‑line method or based on the expected pattern of cashflows. Factors giving rise to our initial estimate of useful lives are subject to change. Significant changes to any of thesefactors may result in a reduction in the useful life of the asset and an acceleration of related amortization expense, whichcould cause our operating income, net income and net income per share to decrease.Recoverability of an asset that will continue to be used in our operations is measured by comparing the carrying amount ofthe asset to the forecasted undiscounted future cash flows related to the asset. In the event the carrying amount of the assetexceeds its undiscounted future cash flows and the carrying amount is not considered recoverable, impairment may exist. Ifimpairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the relatedfair value of the asset with the related impairment charge recognized within the statements of operations. Our reviews oflong‑lived assets during the two years ended December 31, 2018 and 2017 resulted in certain impairment charges. Thesecharges relate to both finite and indefinite-lived intangible assets, which are described in Note 7, Goodwill and OtherIntangible Assets, to our consolidated financial statements.These impairment charges were generally based on fair value estimates determined using either discounted cash flow modelsor preliminary offers from prospective buyers. The discounted cash flow models include assumptions related to productrevenue, growth rates and operating margin. These assumptions are based on management’s annual and ongoing budgeting,forecasting and planning processes and represent our best estimate of future product cash flows. These estimates are subjectto the economic environment in which we operate, demand for the products and competitor actions. The use of differentassumptions would have increased or decreased our estimated discounted future cash flows and the resulting estimated fairvalues of these assets, causing increases or decreases in the resulting asset impairment charges. Events giving rise toimpairment are an inherent risk in the pharmaceutical industry and cannot be predicted.We recorded impairment charges of $10.3 million and $15.9 million, regarding definite‑lived intangible assets for the yearsended December 31, 2018 and 2017, respectively.Goodwill and indefinite‑lived intangible assetsGoodwill and indefinite‑lived intangible assets are assessed for impairment on an annual basis as of October 1st of each yearor more frequently if events or changes in circumstances indicate that the asset might be impaired.Goodwill Impairment Assessment—We are organized in one reporting unit and evaluate goodwill for our company as awhole. Under the authoritative guidance issued by the Financial Accounting Standards Board, or FASB, we have the optionto first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit isless than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairmenttest. If we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, thenthe goodwill impairment test is performed. As further described in Note 2, Summary of Significant Accounting Policies to ourconsolidated financial statements included elsewhere in this Annual Report on93 Table of ContentsForm 10-K, effective January 1, 2017, we early adopted Accounting Standards Update (ASU) No. 2017‑04 “Intangibles —Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment” (ASU 2017‑04). Subsequent toadoption, we perform our goodwill impairment tests by comparing the fair value and carrying amount of our reporting unit.Any goodwill impairment charges we recognize for our reporting unit are equal to the lesser of (i) the total goodwill allocatedto that reporting unit and (ii) the amount by which that reporting unit’s carrying amount exceeds its fair value.The goodwill impairment test requires us to estimate the fair value of the reporting unit and to compare the fair value of thereporting unit with its carrying amount. If the carrying value exceeds its fair value, an impairment charge is recorded for thedifference. If the carrying value recorded is less than the fair value calculated then no impairment loss is recognized. The fairvalue of our reporting unit is determined using an income approach that utilizes a discounted cash flow model or, whereappropriate, the market approach, or a combination thereof. The discounted cash flow models are dependent upon ourestimates of future cash flows and other factors. Our estimates of future cash flows are based on a comprehensive product byproduct forecast over a ten‑year period and involve assumptions concerning (i) future operating performance, includingfuture sales, long‑term growth rates, operating margins, variations in the amounts, allocation and timing of cash flows and theprobability of achieving the estimated cash flows and (ii) future economic conditions, all which may differ from actual futurecash flows.Assumptions related to future operating performance are based on management’s annual and ongoing budgeting, forecastingand planning processes and represent our best estimate of the future results of our operations as of a point in time. Theseestimates are subject to many assumptions, such as the economic environments in which we operate, demand for the productsand competitor actions. Estimated future cash flows are discounted to present value using a market participant, weightedaverage cost of capital. The financial and credit market volatility directly impacts certain inputs and assumptions used todevelop the weighted average cost of capital such as the risk-free interest rate, industry beta, debt interest rate and our marketcapital structure. These assumptions are based on significant inputs not observable in the market and thus represent Level 3measurements within the fair value hierarchy. The use of different inputs and assumptions could increase or decrease ourestimated discounted future cash flows, the resulting estimated fair values and the amounts of related goodwill impairments,if any. The discount rates applied to the estimated cash flows for our October 1, 2018 and 2017 annual goodwill impairmenttest were 14% and 9.0%, respectively, depending on the overall risk associated with the particular asset and other marketfactors. We believe the discount rates and other inputs and assumptions are consistent with those that a market participantwould use.Based on the quantitative goodwill impairment assessment performed, we determined that there was no impairment ofgoodwill as of October 1, 2018 and for the year ended December 31, 2017. An increase of 50 basis points to our assumeddiscount rate used in our goodwill assessment would not have materially changed the results of our analyses.In December 2018, we determined that, subsequent to our annual impairment testing, circumstances and events related topricing on certain of our generic assets, together with our decision to discontinue commercialization of a developedtechnology asset, and discontinue development of an IPR&D asset, made it more likely than not that goodwill had becomeimpaired. As a result, we performed an assessment of goodwill as of December 31, 2018. Based on the results of thisassessment, it was determined that the carrying value of goodwill exceeded its fair value by $86.3 million and an impairmentcharge was recognized for the year ended December 31, 2018.IPR&D Intangible Asset Impairment Assessment—IPR&D, which are indefinite-lived intangible assets representing the valueassigned to acquired Research and Development, or R&D, projects that principally represent rights to develop and sell aproduct that we have acquired which has not yet been completed or approved. These assets are subject to impairment testinguntil completion or abandonment of each project. The fair value of our indefinite-lived intangible assets is determined usingan income approach that utilizes a discounted cash flow model and requires the development of significant estimates andassumptions involving the determination of estimated net cash flows for each year for each project or product (including netrevenues, cost of sales, R&D costs, selling and marketing costs and other costs which may be allocated), the appropriatediscount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s lifecycle, the potential regulatory and commercial success risks, and competitive trends impacting each asset and related cashflow stream as well as other factors. The discount rates applied to the estimated cash flows for our October 1, 2018 and 2017indefinite-lived intangible asset impairment test were 14% and94 Table of Contents9.0%, respectively. The major risks and uncertainties associated with the timely and successful completion of the IPR&Dprojects include legal risk, market risk and regulatory risk. If applicable, upon abandonment of the IPR&D product, the assetsare reduced to zero. Upon approval of the products in development for sale and placement into service, the associated IPR&Dintangible assets are transferred to Product Rights amortizing intangible assets. The useful life of an amortizing assetgenerally is determined by identifying the period in which substantially all of the cash flows are expected to be generated.If the fair value of the IPR&D is less than its carrying amount, an impairment loss is recognized for the difference. Based onresults of the impairment assessment performed, we recognized impairment charges to IPR&D of $7.6 million and $56.6million for the years ended December 31, 2018 and 2017, respectively. The 2018 impairment charge reflects our decision tocease development activities on a generic asset thereby reducing its fair value to zero.Income TaxesIncome taxes are recorded under the asset and liability method of accounting. Under this method, deferred tax assets andliabilities are recognized for the estimated future tax consequences attributable to differences between the financial statementcarrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities aremeasured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered orsettled.Deferred income tax assets are reduced, as is necessary, by a valuation allowance when we determine it ismore‑likely‑than‑not that some or all of the tax benefits will not be realizable in the future. Realization of the deferred taxassets is dependent on a variety of factors, some of which are subjective in nature, including the generation of future taxableincome, the amount and timing of which are uncertain. In evaluating the ability to recover the deferred tax assets, weconsider all available positive and negative evidence, including cumulative income in recent fiscal years, the forecast offuture taxable income exclusive of certain reversing temporary differences and significant risks and uncertainties related toour business. In determining future taxable income, management is responsible for assumptions utilized including, but notlimited to, the amount of U.S. federal, state and international pre‑tax operating income, the reversal of certain temporarydifferences, carryforward periods available to us for tax reporting purposes, the implementation of feasible and prudent taxplanning strategies and other relevant factors. These assumptions require significant judgment about the forecasts of futuretaxable income and are consistent with the plans and estimates that we are using to manage the underlying business. Weassess the need for a valuation allowance each reporting period, and would record any material changes that may result fromsuch assessment to income tax expense in that period.We account for uncertain tax positions in accordance with ASC 740‑10, Accounting for Uncertainty in Income Taxes. Weassess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years thatare still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with theinitial determination of the position’s sustainability and is measured at the largest amount of benefit that has a greater thanfifty percent likelihood of being realized upon ultimate resolution. The evaluation of unrecognized tax benefits is based onfactors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be takenin tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstancesrelated to a tax position. We evaluate unrecognized tax benefits and adjust the level of the liability to reflect any subsequentchanges in the relevant facts surrounding the uncertain positions. The liabilities for unrecognized tax benefits can berelieved only if the contingency becomes legally extinguished through either payment to the taxing authority or theexpiration of the statute of limitations, the recognition of the benefits associated with the position meet themore‑likely‑than‑not threshold or the liability becomes effectively settled through the examination process. We considermatters to be effectively settled once the taxing authority has completed all of its required or expected examinationprocedures, including all appeals and administrative reviews. We also accrue for potential interest and penalties related tounrecognized tax benefits in income tax benefit.The most significant tax jurisdictions are Ireland, the United States, Argentina and Hungary. Significant estimates arerequired in determining the provision for income taxes. Some of these estimates are based on management’s interpretations ofjurisdiction‑specific tax laws or regulations and the likelihood of settlement related to tax audit issues. Various internal andexternal factors may have favorable or unfavorable effects on the future effective income tax rate.95 Table of ContentsThese factors include, but are not limited to, changes in tax laws, regulations or rates, changing interpretations of existing taxlaws or regulations, changes in estimates of prior years’ items, changes in the international organization, likelihood ofsettlement, and changes in overall levels of income before taxes.As of December 31, 2018 and 2017, the Company has a federal net operating loss carryover of $3.3 million and $4.4 million,respectively and net operating loss carryovers in certain foreign tax jurisdictions of approximately $30.5 million and $90.2million, respectively which will begin to expire in 2022. At December 31, 2018 and 2017, the Company had total tax creditcarryovers of approximately $4.6 million and $9.1 million, respectively, primarily consisting of Federal Orphan Drug TaxCredit carryovers. These credit carryovers are expected to be fully realized prior to their expiration, beginning in 2036.We make an evaluation at the end of each reporting period as to whether or not some or all of the undistributed earnings ofour subsidiaries are indefinitely reinvested. While we have concluded in the past that some of such undistributed earnings areindefinitely reinvested, facts and circumstances may change in the future. Changes in facts and circumstances may include achange in the estimated capital needs of our subsidiaries, or a change in our corporate liquidity requirements. Such changescould result in our management determining that some or all of such undistributed earnings are no longer indefinitelyreinvested. In that event, we would be required to adjust our income tax provision in the period we determined that theearnings will no longer be indefinitely reinvested outside the relevant tax jurisdiction.For the year ended December 31, 2018, we have not recorded any measurement period adjustments to the provisionalestimates recorded as of December 31, 2017 in accordance with the SEC’s Staff Accounting Bulletin No. 118, or SAB 118.We analyzed the impact of the U.S. Tax Cuts and Jobs Act under SAB 118 and do not believe that any additionaladjustments were required.Share‑based compensationPrior to the consummation of the IPO, our employees were eligible to receive equity awards from the 2016 Plan (as definedbelow). Following the consummation of the IPO, employees are eligible to receive equity awards from the 2018 EquityIncentive Plan.Effective February 3, 2016, Osmotica Holdings S.C.Sp. adopted the 2016 Equity Incentive Plan, or the 2016 Plan, underwhich, the Company’s officers and key employees were granted options to purchase common units. The options awards weremade up of two components: 50% of options granted were Time Awards, or Time Based Options, and 50% were PerformanceAwards, or Performance Based Options. The Time Based Options vested 25% annually from original grant date. ThePerformance Based Options were to vest immediately upon the achievement by the majority investors in the Companyhaving received (on a cumulative basis) aggregate net proceeds exceeding certain return on investment targets. The TimeAwards and Performance Awards contained a sales restriction in the form of a liquidity event and subsequent disposal ofcommon units by the Major Limited Partners (as defined in the 2016 Plan) before the employee was able to sell vested andexercised common units and were required to remain employed to avoid Company’s call option on such common units at alower of cost or fair market value.Prior to the Company’s IPO on October 22, 2018, the Company amended the 2016 Plan effective upon the IPO. Under theamended 2016 Plan at the IPO, the Time Based Options and the Performance Based Options converted to options to purchaseour ordinary shares on the same basis as common units of Osmotica Holdings S.C.Sp. were converted to ordinary shares, withcorresponding adjustments to the exercise price and the number of the options as well as the removal of existing salesrestriction. In connection with this modification, the Time Based Options continued to vest in accordance with their originalvesting schedule while the Performance Based Options were converted into options which vest with the passage of time, inequal annual installments on the first four anniversaries of the IPO, subject to the continued employment on each vestingdate.In addition, prior to the IPO the Company adopted the 2018 Equity Incentive Plan, or the 2018 Plan effective upon theIPO. During 2018, the Company granted Time Based Options vesting in a single installment on the fourth anniversary of theCompany’s IPO, generally subject to the employee’s continued employment on the vesting date.96 Table of ContentsWe account for share-based compensation awards in accordance with the FASB Accounting Standards Codification, or ASC,Topic 718, Compensation — Stock Compensation, or ASC 718. ASC 718 requires service-based and equity settled share-based awards issued to employees to be recognized as expense based on their grant date fair values. We use the Black-Scholes option pricing model to value our share option awards and we account for forfeitures of share option awards as theyoccur in accordance with ASU No. 2016-09. For awards issued to employees, we recognize compensation expense on agraded vesting basis over the requisite service period, which is generally the vesting period of the award.The conversion of the Performance Based Options to new Time Based Options upon IPO was accounted for as a modificationunder ASC 718 where the fair value of such awards determined on the modification date, or the IPO date will be recognizedover their remaining vesting period.Each award was approved by our directors at a per share exercise price not less than the per share fair value in effect as of thataward date.Estimating the fair value of options requires the input of subjective assumptions, including the estimated fair value of ourordinary shares, the exercise price, the expected option term, share price volatility, the risk-free interest rate and expecteddividends. The assumptions used in our Black-Scholes option-pricing model represent management's best estimates andinvolve a number of variables, uncertainties and assumptions and the application of management's judgment, as they areinherently subjective. If any assumptions change, our share-based compensation expense could be materially different in thefuture.These assumptions used in our Black-Scholes option-pricing model are estimated as follows:·Expected Option Term. Due to the lack of sufficient company-specific historical exercise data, the expected term ofemployee options is determined using the "simplified" method, as prescribed in SEC's Staff Accounting Bulletin(SAB), Topic 14.D.2, whereby the expected life equals the arithmetic average of the vesting term and the originalcontractual term of the option.·Expected Volatility. Due to lack of a public market for the trading of our ordinary shares, the expected volatility isbased on historical volatilities of similar entities within our industry which were commensurate with the expectedterm assumption as described in SAB 14.D.6.·Risk-Free Interest Rate. The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities ineffect at the time of grant for a period that is commensurate with the assumed expected option term.·Expected Dividends. The expected dividend yield is 0% because we have not historically paid, and do not expectfor the foreseeable future to pay, a dividend on our ordinary shares.Historically for all periods prior to the IPO, our board of directors has determined the fair value of the common unitunderlying our options with assistance from management and based upon information available at the time of grant. Giventhe absence of a public trading market for our common units, estimating the fair value of our common units has requiredcomplex and subjective judgments and assumptions, including the most recent valuations of our common units based on theactual operational and financial performance, current business conditions and discounted cash flow projections. Theestimated fair value of our common unit was adjusted for lack of marketability and control existing at the grant date.For valuations after the consummation of the IPO, the board of directors determines the fair value of each share of underlyingordinary shares based on the closing price of our ordinary shares as reported on the date of grant.During the year end December 31, 2018 we recognized $1.9 million of stock compensation expense.97 Table of ContentsRecently Issued Accounting StandardsFor a discussion of recent accounting pronouncements, please see Note 2, Summary of Significant Accounting Policies to ourconsolidated financial statements included elsewhere in this Annual Report on Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKWe are exposed to various market risks, which may result in potential losses arising from adverse changes in market rates,such as interest rates and foreign exchange rates. We do not enter into derivatives or other financial instruments for trading orspeculative purposes and do not believe we are exposed to material market risk with respect to our cash and cash equivalents.Through the operation of our subsidiaries based in Argentina and Hungary, we are exposed to foreign exchange rate risks. Inaddition to the operations of our foreign subsidiaries, we also contract with vendors that are located outside the UnitedStates, and in some cases make payments denominated in foreign currencies. We are subject to fluctuations in foreigncurrency rates in connection with these arrangements. We do not currently hedge our foreign currency exchange rate risk. Asof December 31, 2018, our liabilities denominated in foreign currencies were not material.We are exposed to fluctuations in interest rates on our senior secured credit facilities. An increase in interest rates could havea material impact on our cash flow. As of December 31, 2018, a 100 basis point increase in assumed interest rates for ourvariable interest credit facilities would have an annual impact of approximately $2.7 million on interest expense.As of December 31, 2018, we had cash and cash equivalents of $70.8 million. We do not engage in any hedging activitiesagainst changes in interest rates. Because of the short-term maturities of our cash and cash equivalents, we do not believe thatan immediate 10% increase in interest rates would have a significant impact on the realized value of our investments.Inflation generally affects us by increasing our cost of labor, API costs and clinical trials. We do not believe that inflation hada material effect on our business, financial condition or results of operations during the years ended December 31, 2018 and2017.98 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independennt Registered Public Accounting Firm 100Consolidated Balance Sheets as of December 31,2018 and 2017 101Consolidated Statements of Operational and Comprehensive Loss for the Years Ended December 31, 2018 and2017 102Consolidated Statements of Changes in Shareholders’ Equity/Partners’ Capital for the Years Ended December31, 2018 and 2017 103Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 104Notes to Consolidated Financial Statements 105 99 Table of ContentsReport of Independent Registered Public Accounting FirmShareholders and Board of DirectorsOsmotica Pharmaceuticals plcDublin, IrelandOpinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Osmotica Pharmaceuticals plc (the “Company”) andsubsidiaries as of December 31, 2018 and 2017, the related consolidated statements of operations and comprehensiveloss, changes in shareholders’ equity/partners’ capital, and cash flows for each of the two years in the period endedDecember 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”). In ouropinion, the consolidated financial statements present fairly, in all material respects, the financial position of theCompany and subsidiaries at December 31, 2018 and 2017, and the results of their operations and their cash flows foreach of the two years in the period ended December 31, 2018, in conformity with accounting principles generallyaccepted in the United States of America.Change in Accounting Method Related to RevenueAs discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting forrevenue during the year ended December 31, 2018 due to the adoption of Accounting Standards Codification 606,“Revenue from Contracts with Customers.”Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on the Company’s consolidated financial statements based on our audits. We are a public accountingfirm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rulesand 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 andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such proceduresincluded examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements. We believe thatour audits provide a reasonable basis for our opinion. /s/ BDO USA, LLPWe have served as the Company's auditor since 2016. Woodbridge, New JerseyMarch 27, 2019 100 Table of ContentsOSMOTICA PHARMACEUTICALS PLCConsolidated Balance Sheets December 31, 2018 December 31, 2017Assets Current assets: Cash and cash equivalents $70,834,496 $34,743,152Trade accounts receivable, net 56,423,866 37,637,957Inventories, net 24,383,021 16,946,870Prepaid expenses and other current assets 20,743,685 25,498,092Total current assets 172,385,068 114,826,071Property, plant and equipment, net 31,263,432 31,410,133Intangibles, net 490,389,723 585,388,710Goodwill 100,854,816 187,172,816Other non-current assets 751,927 942,419Total assets $795,644,966 $919,740,149Liabilities and Shareholders' Equity/Partners' Capital Current liabilities: Trade accounts payable $24,869,593 $36,069,936Accrued liabilities 87,236,940 81,926,390Current portion of long-term debt, net of deferred financing costs 1,774,199 6,655,604Current portion of obligation under capital leases 119,344 24,245Income taxes payable - current portion 393,552 —Total current liabilities 114,393,628 124,676,175Long-term debt, net of non-current deferred financing costs 266,802,911 313,949,581Long-term portion of obligation under capital leases 137,949 57,059Income taxes payable - long term portion 1,803,512 1,334,645Deferred taxes 26,237,841 42,891,444Other long-term liabilities — 1,047,477Total liabilities 409,375,841 483,956,381Commitments and contingencies (See Note 14) Shareholders' equity/partners' capital: Ordinary shares ($0.01 nominal value 400,000,000 shares authorized, 52,518,924shares issued and outstanding) 525,189 —Preferred shares ($0.01 nominal value 40,000,000 shares authorized, no shares issuedand outstanding) — —Euro deferred shares (€1.00 nominal value 25,000 shares authorized, no shares issuedand outstanding) — —Additional paid in capital 489,949,791 —Accumulated deficit (102,359,672) —Partners’ capital — 436,416,914Accumulated other comprehensive loss (1,846,183) (633,146)Total shareholders' equity/partners' capital 386,269,125 435,783,768Total liabilities and shareholders' equity/partners' capital $795,644,966 $919,740,149 See accompanying notes to consolidated financial statements.101 Table of ContentsOSMOTICA PHARMACEUTICALS PLCConsolidated Statements of Operations and Comprehensive Loss Year Ended December 31, 2018 2017 Net product sales $261,398,205 $237,671,178Royalty revenue 1,958,571 6,449,095Licensing and contract revenue 344,573 1,628,759Total revenues 263,701,349 245,749,032Cost of goods sold (inclusive of amortization of intangibles) 135,013,998 125,188,435Gross profit 128,687,351 120,560,597Selling, general and administrative expenses 74,242,509 56,954,513Research and development expenses 48,761,494 42,688,062Impairment of intangibles and fixed assets 17,903,208 72,986,303Impairment of goodwill 86,318,000 —Total operating expenses 227,225,211 172,628,878Operating loss (98,537,860) (52,068,281)Interest expense and amortization of debt discount 20,790,714 29,052,363Other non-operating (income) loss, net (664,391) 4,521,898Total other non-operating expense, net 20,126,323 33,574,261Loss before income taxes (118,664,183) (85,642,542)Income tax benefit 9,267,917 44,500,731Net loss $(109,396,266) $(41,141,811)Other comprehensive loss, net Change in foreign currency translation adjustments (1,213,036) (907,927)Comprehensive loss $(110,609,302) $(42,049,738)Loss per share attributable to shareholders Basic $(2.42) $(0.96)Diluted $(2.42) $(0.96)Weighted average shares basic and diluted Basic and Diluted 45,276,278 42,855,722 See accompanying notes to consolidated financial statements.102 Table of ContentsOSMOTICA PHARMACEUTICALS PLCConsolidated Statements of Changes in Shareholders’ Equity/Partners’ Capital Accumulated other Ordinary shares Additional Accumulated Partners’ comprehensive Shares Amount paid incapital deficit capital loss TotalBalance atDecember 31, 2016 $ — — $ — $ — $477,430,725 $274,781 $477,705,506Net loss — — — — (41,141,811) — (41,141,811)Change in foreign currencytranslation — — — — — (907,927) (907,927)Partners’ contributions — — — — 128,000 — 128,000Balance atDecember 31, 2017 — $ — $ — $ — $436,416,914 $(633,146) $435,783,768Cumulative effect of changein accounting standard (SeeNote 2) — — — — 1,047,477 — 1,047,477Net loss — — — — (7,036,594) — (7,036,594)Change in foreign currencytranslation — — — — — (1,169,244) (1,169,244)Share compensation — — — — 1,248,023 — 1,248,023Partners’ distributions — — — — (2,026) — (2,026)Balance at October 17, 2018 — $ — $ — $ — $431,673,794 $(1,802,390) $429,871,404Effect of reorganization 42,857,139 428,571 431,245,223 — (431,673,794) — —Issuance of ordinary sharesin initial public offering andprivate placement, net ofoffering costs 9,661,785 96,618 57,987,245 — — — 58,083,863Share compensation — — 717,323 — — — 717,323Net loss — — — (102,359,672) — — (102,359,672)Change in foreign currencytranslation — — — — — (43,793) (43,793)Balance atDecember 31, 2018 52,518,924 $525,189 $489,949,791 $(102,359,672) $ — $(1,846,183) $386,269,125 See accompanying notes to consolidated financial statements.103 Table of ContentsOSMOTICA PHARMACEUTICALS PLCConsolidated Statements of Cash Flows Year Ended December 31, 2018 2017CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(109,396,266) $(41,141,811)Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 81,572,591 46,450,146Share compensation 1,965,346 —Impairment of intangibles and fixed assets 17,903,208 72,986,303Impairment of goodwill 86,318,000 Deferred income tax benefit (16,653,604) (48,506,649)Loss on sale of fixed assets 93,652 —Bad debt provision (1,771,487) 832,388Non-cash interest expense and amortization of deferred financing and loan origination fees 1,651,536 7,506,359Write off of deferred financing fees in connection with prepayment 875,576 4,981,624Expensed IPR&D — 16,372,476Change in fair value of contingent consideration — 182,396Payment for contingent consideration — (1,991,288)Payment of In-kind interest — (9,321,500)Change in operating assets and liabilities: Trade accounts receivable, net (17,040,991) 5,268,883Inventories, net (7,436,151) 2,892,119Prepaid expenses and other current assets 4,686,449 (14,569,647)Other non-current assets — 1,512,082Trade accounts payable (11,325,623) 588,238Accrued and other current liabilities 6,116,094 13,794,939Net cash provided by operating activities 37,558,330 57,837,058CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of fixed assets 10,000 —Payment for asset acquisition — (12,500,000)Purchase of property, plant and equipment (4,143,723) (6,895,332)Net cash used in investing activities (4,133,723) (19,395,332)CASH FLOWS FROM FINANCING ACTIVITIES: Payments to affiliates (2,026) —Contributions from Partners — 128,000Payments on capital lease obligations (111,554) (113,842)Proceeds from issuances of debt — 327,500,000Debt financing costs — (3,563,499)Proceeds from insurance financing loan 2,744,852 —Repayment of insurance financing loan (970,653) —Proceeds from initial public offering and private placement, net of issuance costs 58,083,863 —Debt repayment (56,140,063) (338,756,329)Payment for contingent consideration — (8,508,712)Net cash provided by (used in) financing activities 3,604,419 (23,314,382)Net change in cash and cash equivalents 37,029,026 15,127,344Effect on cash of changes in exchange rate (937,682) 57,237Cash and cash equivalents, beginning of period 34,743,152 19,558,571Cash and cash equivalents, end of period $70,834,496 $34,743,152Supplemental disclosure of cash and non-cash transactions: Cash paid for interest $19,618,614 $25,272,842Income taxes paid $2,637,560 $17,592,965Purchase of fixed assets by entering into capital lease $287,542 $ — See accompanying notes to consolidated financial statements. 104 Table of ContentsOSMOTICA PHARMACEUTICALS PLCNOTES TO CONSOLIDATED FINANCIAL STATEMENTSNote 1. Organization and Nature of OperationsOsmotica Pharmaceuticals plc (formerly known as Lilydale Limited and Osmotica Pharmaceuticals Limited) is an Irish publiclimited company. Osmotica Holdings S.C.Sp. acquired Osmotica Pharmaceuticals plc on April 30, 2018 for the purpose offacilitating an offering of ordinary shares in an initial public offering. On October 22, 2018, Osmotica Pharmaceuticals plccompleted its initial public offering (the “IPO”), in which it issued and allotted 7,647,500 ordinary shares at a public offeringprice of $7.00 per share. The number of shares issued in the IPO reflected the exercise in full of the underwriters’ option topurchase 997,500 additional ordinary shares. In addition, the Company issued and allotted 2,014,285 ordinary shares at thepublic offering price in a private placement to investment funds affiliated with Avista Capital Partners, Altchem Limited andan entity controlled by the Company’s Chief Financial Officer. The aggregate net proceeds from the IPO and the privateplacement were approximately $58.1 million after deducting underwriting discounts and commissions and estimated offeringexpenses.Immediately prior to the IPO and prior to the commencement of trading of Osmotica Pharmaceuticals plc’s ordinary shares onthe Nasdaq Global Select Market, Osmotica Holdings S.C.Sp. undertook a series of restructuring transactions that resulted inOsmotica Pharmaceuticals plc becoming the direct parent of Osmotica Holdings S.C.Sp with each holder of common units ofOsmotica Holdings S.C.Sp. receiving approximately 42.84 ordinary shares of Osmotica Pharmaceuticals plc in exchange foreach such common unit. In addition, each holder of an option to purchase common units of Osmotica Holdings S.C.Sp.received an option to purchase the number of ordinary shares of Osmotica Pharmaceuticals plc determined by multiplyingthe number of units underlying such option by approximately 42.84 (rounded down to the nearest whole share) and dividingthe exercise price per unit for such option by approximately 42.84 (rounded up to the nearest whole cent). These transactionsare referred to as the “Reorganization”. Accordingly, all share and share amounts for all periods presented in theaccompanying financial statements have been adjusted retroactively, where applicable, to reflect the stock split. Until the Reorganization on October 17, 2018, Osmotica Pharmaceuticals plc did not conduct any operations (other thanactivities incidental to its formation, the Reorganization and the pursuit of an initial public offering). Upon the completionof the Reorganization, the historical consolidated financial statements of Osmotica Holdings S.C.Sp. became the historicalfinancial statements of Osmotica Pharmaceuticals plc. Accordingly, the accompanying consolidated financial statementsincluded herein reflect the financial information of Osmotica Holdings S.C.Sp.Osmotica Holdings S.C.Sp.is a Luxembourg special limited partnership, formed on January 28, 2016. Osmotica HoldingsUS LLC, a subsidiary of Osmotica Holdings S.C.Sp. entered into a fifty-fifty partnership (the “Merger”), effective February 3,2016, pursuant to a definitive agreement between Vertical/Trigen Holdings, LLC (“Vertical/Trigen”) and members, andOsmotica Holdings Corp Limited and Subsidiaries. Osmotica Holdings S.C.Sp. and several other holding companies andpartnerships were formed as a result of the Merger. Pursuant to the Merger, Vertical/Trigen was deemed to be the accountingacquirer. Osmotica is a fully integrated biopharmaceutical company focused on the development and commercialization ofspecialty products that target markets with underserved patient populations.Unless otherwise indicated or required by the context, references throughout to “Osmotica,” or the “Company,” refer to (i)prior to the completion of the Reorganization, Osmotica Holdings S.C.Sp. and its consolidated subsidiaries, including, fromand after April 30, 2018, Osmotica Pharmaceuticals plc, and (ii) following the completion of the Reorganization, OsmoticaPharmaceuticals plc and its consolidated subsidiaries, including Osmotica Holdings S.C.Sp. Immaterial Correction of ErrorsSubsequent to the issuance of the unaudited condensed consolidated financial statements as of and for the three and ninemonths ended September 30, 2018 and 2017 in the Company’s Quarterly Report on Form 10-Q, the Company determinedthat a revision was required to correct misstatements associated with the business combination between105 Table of ContentsOsmotica Holdings Limited and subsidiaries and Vertical/Trigen Holdings LLC which occurred on February 3, 2016. For theyear ended December 31, 2017, the correction resulted in an increase in Goodwill of $34,357,100; a decrease in PrepaidExpenses of $316,197; an increase in Deferred Tax Liability of $17,527,389; an increase in Partners’ Capital of $16,513,514;and an increase in Income Tax Benefit and corresponding decrease in Net Loss of $4,013,161. The Company has correctedthese amounts in the periods presented in these consolidated financial statements with an adjustment to the Company’sconsolidated financial statements for the year ended December 31, 2016 and the adjustments were determined to beimmaterial to the Company’s financial position as previously reported.For the statement of changes in partners’ capital/shareholders equity, the correction resulted in an increase of $12,500,353 inthe balance of Partners’ Capital at December 31, 2016.For the consolidated statement of cash flows for the year ended December 31, 2017, within the Cash Flows from OperatingActivities section, Net loss decreased by $4,013,161, deferred income tax benefit increased by $4,013,161. The impacts of the corrections have been reflected throughout the consolidated financial statements, including theapplicable notes, as appropriate.The following table presents the amounts originally reported, net correction adjustments, and corrected amounts for itemsaffected by the corrections for the three months and nine months ended on September 30, 2018 and 2017, and year-to-dateperiods ended December 31, 2017: Year ended December 31, 2017 As originally Net As reported adjustments correctedPartners' capital as of 12/31/2016 $465,205,153 $12,500,353 $477,705,506Goodwill 152,815,716 34,357,100 187,172,816Prepaid expenses 25,814,289 (316,197) 25,498,092Total assets 885,699,246 34,040,903 919,740,149Deferred taxes 25,364,055 17,527,389 42,891,444Total liabilities 466,428,992 17,527,389 483,956,381Partners' capital as of 12/31/2017 419,270,254 16,513,514 435,783,768Total liabilities and partners' capital 885,699,246 34,040,903 919,740,149Income tax benefit 40,487,570 4,013,161 44,500,731Net loss (45,154,972) 4,013,161 (41,141,811)Comprehensive loss (46,062,899) 4,013,161 (42,049,738)Loss per share (1.05) 0.09 (0.96) Nine months ended September 30, 2018 As originally Net As reported adjustments correctedGoodwill $152,815,716 $34,357,100 $187,172,816Prepaid expense and other current assets 18,802,004 5,628,370 24,430,374Total assets 855,472,388 39,985,470 895,457,858Deferred taxes 13,124,607 22,048,491 35,173,098Total liabilites 439,969,303 22,048,491 462,017,794Partners' capital as of 9/30/2018 417,374,758 17,936,979 435,311,737Total liabilities and partners' capital 855,472,388 39,985,470 895,457,858Income tax benefit 1,999,323 1,423,465 3,422,788Net loss (3,574,093) 1,423,465 (2,150,628)Comprehensive loss (4,812,620) 1,423,465 (3,389,155)Loss per share (0.08) 0.03 (0.05)106 Table of Contents Nine months ended September 30, 2017 As originally Net As reported adjustments correctedIncome tax benefit $16,785,658 $(644,853) $16,140,805Net loss (42,332,512) (644,853) (42,977,365)Comprehensive loss (41,915,544) (644,853) (42,560,397)Loss per share (0.99) (0.02) (1.01) Three months ended September 30, 2017 As originally Net As reported adjustments correctedIncome tax benefit $12,046,928 $(1,704,498) $10,342,430Net loss (12,272,821) (1,704,498) (13,977,319)Comprehensive loss (11,979,971) (1,704,498) (13,684,469)Loss per share (0.29) (0.04) (0.33) Three months ended September 30, 2018 As originally Net As reported adjustments correctedIncome tax benefit $2,489,029 $1,557,842 $4,046,871Net loss (4,988,310) 1,557,842 (3,430,468)Comprehensive loss (5,136,493) 1,557,842 (3,578,651)Loss per share (0.12) 0.04 (0.08) Note 2. Basis of Presentation and Summary of Significant Accounting PoliciesSignificant Accounting PoliciesBasis of Presentation—The accompanying consolidated financial statements included herein have been prepared by theCompany in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).Principles of Consolidation—The accompanying consolidated financial statements include the accounts of OsmoticaPharmaceuticals plc and its wholly-owned domestic and foreign subsidiaries. All inter‑company transactions and balanceshave been eliminated in consolidation. The Company is not involved with variable interest entities.Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and relateddisclosures in the condensed consolidated financial statements and accompanying notes. Management bases it estimates onhistorical experience and on assumptions believed to be reasonable under the circumstances. Actual results could differmaterially from those estimates.Foreign Currency Translation—The financial position and results of operations of the Company’s non-U.S. subsidiaries aregenerally determined using U.S. Dollars as the functional currency, except our subsidiary in Argentina which uses the localcurrency as its functional currency. Assets and liabilities of this subsidiary are translated into U.S. dollars at the exchange ratein effect at each year end. Income statement accounts are translated into U.S. dollars at the average rate of exchangeprevailing during the year. Adjustments arising from the use of differing exchange rates from period to period are included inaccumulated other comprehensive loss in shareholders’ equity. Foreign currency transaction gains and losses are included inforeign exchange (loss) gain in the Company’s statements of operations.Cash and Cash Equivalents—The Company considers all highly liquid investments with an original maturity date of107 Table of Contentsthree months or less to be cash equivalents.Fair Value of Financial Instruments—The Company applies Accounting Standards Committee or ASC 820, Fair ValueMeasurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair valuewithin that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset orpaid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between marketparticipants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity tomaximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observableinputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based onmarket data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s ownassumptions based on market data and the entity’s judgments about the assumptions that market participants would use inpricing the asset or liability and are to be developed based on the best information available in the circumstances.The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and shortand long‑term debt. The fair values of these financial instruments approximate book value because of the short maturity ofthese instruments.The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowestlevel of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fairvalue measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities withsimilar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that areobservable at commonly quoted intervals.Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuationtechniques when little or no market data exists for the assets or liabilities.Inventories—Inventories are stated at the lower of cost or net realizable value at approximate costs determined on the first-infirst-out basis. The Company maintains an allowance for excess and obsolete inventory as well as inventory where the cost isin excess of its net realizable value (“NRV”) based on management’s assessments. The Company capitalizes inventory costsassociated with its products prior to regulatory approval when, based on management judgement, future commercialization isconsidered probable and future economic benefit is expected to be realized. As of December 31, 2018 and 2017, there wereno capitalized inventory costs associated with products that had not yet achieved regulatory approval. The Companyassesses the regulatory approval process and where the product stands in relation to that approval process including anyknown constraints or impediments to approval. The Company also considers the shelf life of the product in relation to theproduct timeline for approval. Sample inventory utilized for promoting the Company’s products are expensed and includedin cost of goods sold when the sample units are purchased or manufactured.Property, Plant and Equipment—Property, plant and equipment is stated at cost, less accumulated depreciation.Maintenance and repairs are charged to expense when incurred. Additions and improvements that extend the economicuseful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulateddepreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected incurrent earnings. Depreciation is provided using the straight‑line method in amounts considered to be108 Table of Contentssufficient to amortize the cost of the assets to operations over their estimated useful lives or lease terms, as follows:Asset category Depreciable lifeBuildings 20 - 30 yearsLeasehold improvements Lesser of the useful lifeof the improvement orthe terms of theunderlying leaseMachinery 3 - 15 yearsFurniture, fixtures and equipment 3 - 10 yearsComputer hardware and software 3 - 12 years Long‑Lived Assets, Including Definite‑Lived Intangible Assets—Intangible assets are stated at cost less accumulatedamortization. Amortization is generally recorded on a straight‑line basis or based on the expected pattern of cash flows overestimated useful lives ranging from 3 to 20 years. The Company periodically reviews the estimated useful lives of intangibleassets and makes adjustments when events indicate that a shorter life is appropriate.Long‑lived assets, other than goodwill and other indefinite‑lived intangibles, are evaluated for impairment whenever eventsor changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimatedundiscounted future cash flows derived from such assets.Factors that the Company considers in deciding when to perform an impairment review include significant changes in theCompany’s forecasted projections for the asset or asset group for reasons including, but not limited to, significantunder‑performance of a product in relation to expectations, significant changes, or planned changes in the Company’s use ofthe assets, significant negative industry or economic trends, and new or competing products that enter the marketplace. Theimpairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the assetgroup. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceedsthe related fair value of the asset with the related impairment charge recognized within the statements of operations.The Company recorded impairment charges of $10,303,208 and $15,894,843, in regard to definite‑lived intangible assets forthe years ended December 31, 2018 and 2017, respectively (see Note 8).Goodwill and Indefinite Lived Intangible Assets—Goodwill, which represents the excess of purchase price over the fair valueof net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment forimpairment by applying a fair value‑based test. The Company is organized in one reporting unit and evaluates the goodwillfor the Company as a whole. Goodwill is assessed for impairment on an annual basis as of October 1 of each year or morefrequently if events or changes in circumstances indicate that the asset might be impaired. Under the authoritative guidanceissued by the Financial Accounting Standards Board (the “FASB”), the Company has the option to first assess the qualitativefactors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amountas a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. If the Companydetermines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then thegoodwill impairment test is performed. The goodwill impairment test requires the Company to estimate the fair value of thereporting unit and to compare the fair value of the reporting unit with its carrying amount. If the fair value exceeds thecarrying value, then no impairment is recognized. If the carrying value recorded exceeds the fair value calculated, then animpairment charge is recognized for the difference. The judgments made in determining the projected cash flows used toestimate the fair value can materially impact the Company’s financial condition and results of operations. There was noimpairment of goodwill for the year ended December 31, 2017. For the year ended December 31, 2018 it was determined thatthe carrying value of goodwill exceeded its fair value. Accordingly, the Company recognized a goodwill impairment chargeof $86,318,000 for the year ended December 31, 2018 (see Note 8).In‑Process Research and Development (“IPR&D”) intangible assets represent the value assigned to acquired Research &109 stTable of ContentsDevelopment (“R&D”) projects that principally represent rights to develop and sell a product that the Company has acquiredwhich have not yet been completed or approved. These assets are subject to impairment testing until completion orabandonment of each project. Impairment testing requires the development of significant estimates and assumptionsinvolving the determination of estimated net cash flows for each year for each project or product (including net revenues,cost of sales, R&D costs, selling and marketing costs and other costs which may be allocated), the appropriate discount rateto select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, thepotential regulatory and commercial success risks, and competitive trends impacting each asset and related cash flow streamas well as other factors. The major risks and uncertainties associated with the timely and successful completion of the IPR&Dprojects include legal risk, market risk and regulatory risk. If applicable, upon abandonment of the IPR&D product, the assetsare reduced to zero. IPR&D is assessed for impairment on an annual basis as of October 1 of each year or more frequently ifevents or changes in circumstances indicate that the asset might be impaired. If the fair value of the IPR&D is less than itscarrying amount, an impairment is recognized for the difference. The Company recognized impairment charges to IPR&D of$7,600,000 and $56,625,436 for the years ended December 31, 2018 and 2017, respectively (see Note 8).Product Sales—Revenue is recognized at the point in time when the Company’s performance obligations with theapplicable customers have been satisfied. At contract inception, the Company determines if the contract is within the scopeof ASC Topic 606 and then evaluates the contract using the following five steps: (1) identify the contract with the customer;(2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to theperformance obligations; and (5) recognize revenue at the point in time when the entity satisfies a performance obligation.Revenue is recorded at the transaction price, which is the amount of consideration the Company expects to receive inexchange for transferring products to a customer. The Company considered the unit of account for each purchase order thatcontains more than one product. Because all products in a given purchase order are generally delivered at the same time andthe method of revenue recognition is the same for each, there is no need to separate an individual order into separateperformance obligations. The Company determines the transaction price based on fixed consideration in its contractualagreements, which includes estimates of variable consideration, and the transaction price is allocated entirely to theperformance obligation to provide pharmaceutical products. In determining the transaction price, a significant financingcomponent does not exist since the timing from when the Company delivers product to when the customers pay for theproduct is less than one year and the customers do not pay for product in advance of the transfer of the product.The Company records product sales net of any variable consideration, which includes estimated chargebacks, certaincommercial rebates, and discounts and allowances. The Company utilizes the expected value method to estimate all elementsof variable consideration included in the transaction price. The variable consideration is recorded as a reduction of revenueat the time revenues are recognized. The Company will only recognize revenue to the extent that it is probable that asignificant revenue reversal will not occur in a future period. These estimates may differ from actual consideration amountreceived and the Company will re-assess these estimates each reporting period to reflect known changes in factors.Royalty Revenue—For arrangements that include sales-based royalties, including milestone payments based on the level ofsales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue atthe later of (a) when the related sales occur, or (b) when the performance obligation to which some or all the royalty has beenallocated has been satisfied (or partially satisfied).Licensing and Contract Revenue—The Company has arrangements with commercial partners that allow for the purchase ofproduct from the Company by the commercial partners for purposes of sub-distribution. The Company recognizes revenuefrom an arrangement when control of such product is transferred to the commercial partner, which is typically upon delivery.In these situations, the performance obligation is satisfied when product is delivered to the Company’s commercial partner.Licensing revenue is recognized in the period in which the product subject to the sublicensing arrangement is sold by theCompany to its commercial partner. Sales deductions, such as returns on product sales, government program rebates, priceadjustments, and prompt pay discounts in regard to licensing revenue is generally the responsibility of the Company’scommercial partners and not recorded by the Company.110 stTable of ContentsFreight—The Company records amounts billed to customers for shipping and handling as revenue, and records shipping andhandling expenses related to product sales as cost of goods sold. The Company accounts for shipping and handling activitiesrelated to contracts with customers as costs to fulfill the promise to transfer the associated products. When shipping andhandling costs are incurred after a customer obtains control of the products, the Company also has elected to account forthese as costs to fulfill the promise and not as a separate performance obligation.Chargebacks—The Company enters into contractual agreements with certain third parties such as retailers, hospitals, andgroup-purchasing organizations (“GPOs”) to sell certain products at predetermined prices. Similarly, the Company maintainsan allowance for rebates and discounts related to chargebacks, wholesaler fees for service contracts, GPO administrative fees,government programs, prompt payment and other adjustments with certain customers. Most of the parties have elected tohave these contracts administered through wholesalers that buy the product from the Company and subsequently sell it tothese third parties. As noted elsewhere, these wholesalers represent a significant percentage of the Company’s gross sales.When a wholesaler sells products to one of these third parties that are subject to a contractual price agreement, the differencebetween the price paid to the Company by the wholesaler and the price under the specific contract is charged back to theCompany by the wholesaler. Utilizing this information, the Company estimates a chargeback percentage for each productand records an allowance as a reduction to gross sales when the Company records its sale of the products. The Companyreduces the chargeback allowance when a chargeback request from a wholesaler is processed. The Company’s provision forchargebacks is fully reserved for at the time when sales revenues are recognized.The Company obtains product inventory reports from major wholesalers to aid in analyzing the reasonableness of thechargeback allowance and to monitor whether wholesaler inventory levels do not significantly exceed customer demand.The Company assesses the reasonableness of its chargeback allowance by applying a product chargeback percentage that isbased on a combination of historical activity and current price and mix expectations to the quantities of inventory on hand atthe wholesalers according to wholesaler inventory reports. In addition, the Company estimates the percentage of gross salesthat were generated through direct and indirect sales channels and the percentage of contract vs. non-contract revenue in theperiod, as these each affect the estimated reserve calculation. In accordance with its accounting policy, the Companyestimates the percentage amount of wholesaler inventory that will ultimately be sold to third parties that are subject tocontractual price agreements based on a trend of such sales through wholesalers. The Company uses this percentage estimateuntil historical trends indicate that a revision should be made. On an ongoing basis, the Company evaluates its actualchargeback rate experience, and new trends are factored into its estimates each quarter as market conditions change.The Company ensures that chargebacks are reasonable through review of contractual obligations, historical trends andevaluation of recent activity. Furthermore, other events that could materially alter chargebacks include: changes in productpricing as a result of competitive market dynamics or negotiations with customers, changes in demand for specific productsdue to external factors such as competitor supply position or consumer preferences, customer shifts in buying patterns fromdirect to indirect through wholesalers, which could either individually or in aggregate increase or decrease the chargebacksdepending on the direction and trend of the change(s).Commercial Rebates—The Company maintains an allowance for commercial rebates that it has in place with certaincustomers. Commercial rebates vary by product and by volume purchased by each eligible customer. The Company trackssales by product number for each eligible customer and then applies the applicable commercial rebate percentage, using bothhistorical trends and actual experience to estimate its commercial rebates. The Company reduces gross sales and increases thecommercial rebates allowance by the estimated commercial rebates when the Company sells its products to eligiblecustomers. The Company reduces the commercial rebate allowance when it processes a customer request for a rebate. Ateach month end, the Company analyzes the allowance for commercial rebates against actual rebates processed and makesnecessary adjustments as appropriate. The Company’s provision for commercial rebates is fully reserved for at the time whensales revenues are recognized.The allowance for commercial rebates takes into consideration price adjustments which are credits issued to reflect increasesor decreases in the invoice or contract prices of the Company’s products. In the case of a price decrease, a credit is given forproducts remaining in customer’s inventories at the time of the price reduction. Contractual price protection results in asimilar credit when the invoice or contract prices of the Company’s products increase, effectively111 Table of Contentsallowing customers to purchase products at previous prices for a specified period of time. Amounts recorded for estimatedshelf-stock adjustments and price protections are based upon specified terms with direct customers, estimated changes inmarket prices, and estimates of inventory held by customers. The Company regularly monitors these and other factors andevaluates the reserve as additional information becomes available. The Company ensures that commercial rebates arereasonable through review of contractual obligations, review of historical trends and evaluation of recent activity.Furthermore, other events that could materially alter commercial rebates include: changes in product pricing as a result ofcompetitive market dynamics or negotiations with customers, changes in demand for specific products due to external factorssuch as competitor supply position or consumer preferences, customer shifts in buying patterns from direct to indirectthrough wholesalers, which could either individually or in aggregate increase or decrease the commercial rebates dependingon the direction and velocity of the change(s).Product Returns—Certain of the Company’s products are sold with the customer having the right to return the productwithin specified periods. Estimated return accruals are made at the time of sale based upon historical experience. Historicalfactors such as one-time recall events as well as pending new developments like comparable product approvals or significantpricing movement that may impact the expected level of returns are taken into account monthly to determine the appropriateaccrued expense. As part of the evaluation of the liability required, the Company considers actual returns to date that are inprocess, the expected impact of any product recalls and the amount of wholesaler’s inventory to assess the magnitude ofunconsumed product that may result in product returns to the Company in the future. The product returns level can beimpacted by factors such as overall market demand and market competition and availability for substitute products whichcan increase or decrease the pull through for sales of the Company’s products and ultimately impact the level of productreturns. Product returns are fully reserved for at the time when sales revenues are recognized.The Company ensures that product returns are reasonable through review of historical trends and evaluation of recentactivity. Furthermore, other events that could materially alter product returns include: acquisitions and integration activitiesthat consolidate dissimilar contract terms and could impact the return rate as typically the Company purchases smallerentities with less contracting power and integrates those product sales to Company contracts; and consumer demand shifts byproducts, which could either increase or decrease the product returns depending on the product or products specificallydemanded and ultimately returned.Accrual for Promotions and Co‑Pay Discount Cards—From time to time the Company authorizes various retailers to runin‑store promotional sales of its products. The Company accrues an estimate of the dollar amount expected to be owed backto the retailer. Additionally, the Company provides consumer co‑pay discount cards, administered through outside agents toprovide discounted products when redeemed. Upon release of the cards into the market, the Company records an estimate ofthe dollar value of co‑pay discounts expected to be utilized taking into consideration historical experience.Government Program Rebates—Federal law requires that a pharmaceutical distributor, as a condition of having federal fundsbeing made available to the States for the manufacturer’s drugs under Medicaid and Medicare Part B, must enter into a rebateagreement to pay rebates to state Medicaid programs for the distributor’s covered outpatient drugs that are dispensed toMedicaid beneficiaries and paid for by a state Medicaid program under a fee‑for‑service arrangement. The Centers forMedicare and Medicaid Services (“CMS”) are responsible for administering the Medicaid rebate agreements between thefederal government and pharmaceutical manufacturers. Rebates are also due on the utilization of Medicaid managed careorganizations (“MMCOs”).The Company also pays rebates to managed care organizations (“MCOs”) for the reimbursement of a portion of the salesprice of prescriptions filled that are covered by the respective plans. The liability for Medicaid, Medicare, and othergovernment program rebates is settled in cash and is estimated at the time when sales revenues are recognized based onhistorical and current rebate redemption and utilization rates contractually submitted by each state’s program administratorand assumptions regarding future government program utilization for each product sold; and accordingly recorded as areduction of product sales.Business Combinations—The Company accounts for its business combinations under the provisions of ASC Topic 805,Business Combinations (“ASC 805”), which requires that the purchase method of accounting be used for all business112 Table of Contentscombinations. Assets acquired, and liabilities assumed, are recorded at the date of acquisition at their respective fair values.Amounts allocated to acquire IPR&D are capitalized at the date of an acquisition and are not amortized. As products indevelopment are approved for sale, amounts are allocated to product rights and licenses and amortized over their estimateduseful lives. Definite‑lived intangible assets are amortized over the expected life of the asset. Any excess of the purchaseprice over the estimated fair values of the net assets acquired is recorded as goodwill.Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in abusiness combination. Acquisition‑related expenses are recognized separately from business combinations and are expensedas incurred. If the business combination provides for contingent consideration, the Company records the contingentconsideration at fair value at the acquisition date. Changes in fair value of contingent consideration resulting from eventsafter the acquisition date, such as earn‑outs, are recognized as follows: 1) if the contingent consideration is classified asequity, the contingent consideration is not re‑measured and its subsequent settlement is accounted for within equity, or 2) ifthe contingent consideration is classified as a liability, the changes in fair value are recognized in earnings.Purchases of developed products and licenses that are accounted for as an asset acquisition are capitalized as intangibleassets and amortized over an estimated useful life. IPR&D assets acquired as part of an asset acquisition are expensedimmediately if they have no alternative future uses.In‑Process Research and Development—In‑process research and development represent the fair value assigned to incompleteresearch projects that the Company acquires through business combinations or developed internally which, at that time, havenot reached technological feasibility. Intangible assets associated with IPR&D projects are not amortized until regulatoryapproval is obtained and product is launched, subject to certain specified conditions and management judgment. The usefullife of an amortizing asset generally is determined by identifying the period in which substantially all of the cash flows areexpected to be generated. During the years ended December 31, 2018 and 2017, $0 and $264,100,000 of IPR&D wastransferred to Product Rights as the products in development are approved for sale and placed into service (see Note 8). Suchamounts will be amortized over their respectful estimated useful lives of 7 and 10 years. At that time an evaluation of fairvalue was performed immediately prior to such transfer.Research and Development Costs—Research and development costs are expensed as incurred. These expenses include thecosts of proprietary efforts, as well as costs incurred in connection with certain licensing arrangements. Upfront payments arerecorded when incurred, and milestone payments are recorded when the specific milestone has been achieved.Advertising—Advertising expense consists primarily of print media promotional materials. Advertising costs are expensed asincurred. Advertising expense for the years ended December 31, 2018 and 2017 amounted to $6,193,610 and $2,650,540,respectively.Share‑based Compensation—The Company recognizes share‑based compensation expense for all options and otherarrangements within the scope of ASC 718, Stock Compensation, that are expected to vest. Share‑based compensationexpense is measured at the date of grant, based on the fair value of the award, and is recognized using the straight‑linemethod over the employee’s requisite service period. Compensation for share‑based awards with vesting conditions otherthan service are recognized at the time that those conditions will be achieved.Income Taxes—Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities arerecognized for the estimated future tax consequences attributable to differences between the financial statement carryingamounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured usingenacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Whereapplicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not berealizable in the future.The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns itfiles if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on thetechnical merits of the position. These tax benefits are measured based on the largest benefit that has a greater113 Table of Contentsthan 50% likelihood of being realized upon ultimate resolution.Comprehensive income (loss)—Comprehensive income (loss) refers to revenues, expenses, gains and losses that under U.S.GAAP are included in comprehensive loss but are excluded from net loss as these amounts are recorded directly as anadjustment to accumulated other comprehensive income (loss). The Company’s other comprehensive loss is comprised offoreign currency translation adjustments.Basic and Diluted Loss per Share—Basic and diluted net loss per share is determined by dividing net loss by the weightedaverage ordinary shares outstanding during the period. For all periods presented with a net loss, the shares underlying thecommon share options have been excluded from the calculation because their effect would have been anti‑dilutive.Therefore, the weighted average shares outstanding used to calculate both basic and diluted loss per share are the same forperiods with a net loss.Segment Reporting—The Company operates in one business segment which focuses on developing and commercializingpharmaceutical products that target markets with underserved patient populations. The Company’s business offerings havesimilar economic and other characteristics, including the nature of products, manufacturing and acquiring processes, types ofcustomers, distribution methods and regulatory environment. The chief operating decision maker (“CODM”) reviews profitand loss information on a consolidated basis to assess performance and make overall operating decisions. The consolidatedfinancial statements reflect the financial results of the Company’s one reportable operating segment. The Company has nosignificant revenues or tangible assets outside of the United States.Recently Adopted Accounting StandardsIn May 2014, the FASB issued ASC Topic 606, which, along with amendments issued in 2015, 2016 and 2017, supersedesthe revenue recognition requirements in ASC Topic 605, Revenue Recognition (ASC Topic 605), including mostindustry‑specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification.ASC Topic 606 provides a comprehensive new revenue recognition model that requires a company to recognize revenue todepict the transfer of goods or services to a customer in an amount that reflects the consideration it expects to receive inexchange for those goods or services. On January 1, 2018, the Company adopted the new revenue recognition standard for allcontracts not completed as of the adoption date using the modified retrospective method. The implementation of the newrevenue recognition standard did not have a material impact on the Company’s consolidated financial statements. Theinformation presented for the periods prior to January 1, 2018 has not been restated and is reported under ASC Topic 605.In January 2016, the FASB issued ASU 2016‑01, Financial Instruments‑Overall (Subtopic 825‑10): Recognition andMeasurement of Financial Assets and Financial Liabilities. The accounting standard primarily affects the accounting forequity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements forfinancial instruments. In addition, it includes a clarification related to the valuation allowance assessment when recognizingdeferred tax assets resulting from unrealized losses on available‑for‑sale debt securities. The accounting guidance is effectivefor annual reporting periods (including interim periods within those periods) beginning after December 15, 2017. TheCompany adopted ASU 2016‑01 as of January 1, 2018, and there was no material impact on the Company’s consolidatedfinancial statements resulting from the adoption of this guidance.In August 2016, the FASB issued ASU 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain CashReceipts and Cash Payments. ASU 2016‑15 eliminates the diversity in practice related to the classification of certain cashreceipts and payments for debt prepayment or extinguishment costs, the maturing of a zero‑coupon bond, the settlement ofcontingent liabilities arising from a business combination, proceeds from insurance settlements, distributions from certainequity method investees and beneficial interests obtained in a financial asset securitization. ASU 2016‑15 designates theappropriate cash flow classification, including requirements to allocate certain components of these cash receipts andpayments among operating, investing and financing activities. The Company adopted this standard on January 1, 2018 andadoption did not have a material impact on the consolidated financial statements.In October of 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other ThanInventory, ASU 2016-16 requires recognition of the current and deferred income tax effects of an intra-entity asset114 Table of Contentstransfer, other than inventory, when the transfer occurs, as opposed to current GAAP, which requires companies to defer theincome tax effects of intra-entity asset transfers until the asset has been sold to an outside party. The income tax effects ofintra-entity inventory transfers will continue to be deferred until the inventory is sold. The standard is required to be adoptedon a modified retrospective basis with a cumulative-effect adjustment recorded to retained earnings as of the beginning of theperiod of adoption. The Company adopted this standard on January 1, 2018. Subsequent to the issuance of the condensedconsolidated financial statements as of and for the six months ended June 30, 2018, the Company determined that a revisionwas required to correct for the adoption of this accounting standard resulting in an increase to Partners’ capital and decreaseto Other long-term liabilities in the amount of $1,047,477. These adjustments were not considered to be material to theCompany’s condensed consolidated financial statements.In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718). This standard requires thatan entity must apply modification accounting to changes in the terms or conditions of a share-based payment award unlessall of the following criteria are met: (1) the fair value of the modified award is the same as the fair value of the original awardimmediately before the modification provided that if the modification does not affect any of the inputs to the valuationtechnique used to value the award, the entity is not required to estimate the value immediately before and after themodification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original awardimmediately before the modification; and (3) the classification of the modified award as an equity instrument or a liabilityinstrument is the same as the classification of the original award immediately before the modification. The Company adoptedthis standard on January 1, 2018 and there was no impact to the Company’s consolidated financial statements.In March 2018, the FASB issued ASU 2018‑05, Income Taxes (Topic 740) — Amendments to SEC Paragraphs Pursuant toSEC Staff Accounting Bulletin No. 118 (“ASU 2018‑05”). This standard amends Accounting Standards Codification 740,Income Taxes (“ASC 740”) to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the Tax Act)pursuant to Staff Accounting Bulletin No. 118, which allows companies to complete the accounting under ASC 740 within aone‑year measurement period from the Tax Act enactment date. The amendments are effective upon addition to the FASBAccounting Standards Codification. This standard was effective upon issuance. The Company has evaluated the impact fromthe Tax Cut and Jobs Act pursuant to SAB 118, see Note 14 for further disclosures.Recent Accounting StandardsIn February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842) (“ASU 2016‑02”), which is effective for annualreporting periods beginning after December 15, 2019 and early adoption is permitted. Under ASU 2016‑02, lessees will berequired to recognize the following for all leases (with the exception of short‑term leases) at the commencement date: 1) alease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis,and 2) a right‑of‑use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset forthe lease term. ASU 2016‑02 must be adopted on a modified retrospective transition basis for leases existing at, or enteredinto after, the beginning of the earliest comparative period presented in the consolidated financial statements. In July 2018,the FASB issued ASU 2018-11, Leases: Targeted Improvements. Among other things, this ASU provides entities with atransition option to recognize the cumulative-effect adjustment from the modified retrospective application to the openingbalance of retained earnings in the period of adoption rather than the earliest period presented in the financial statements. Wewill adopt ASU 2016-02 on a modified retrospective basis at the adoption date of January 1, 2019. The adoption of ASU2016-02 will result in the recognition of right-of-use assets and lease liabilities of approximately $4.5 million on theconsolidated balance sheet as of January 1, 2019. The right-of-use assets and lease liabilities primarily relate to real estatelease. We will provide additional lease-related disclosures in the notes to the consolidated financial statements commencingwith our consolidated financial statements for the quarter ending March 31, 2019.In February 2018, the FASB issued ASU 2018‑02, Income Statement — Reporting Comprehensive Income (Topic 220) —Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This standard allows areclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from theTax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. This standard will be effective for theCompany for annual periods beginning after December 15, 2018 and should be applied either in the115 Table of Contentsperiod of adoption or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of thenew accounting standard. Note 3. Other Strategic InvestmentsRevitaLid Asset AcquisitionOn October 24, 2017, the Company entered into a stock purchase agreement with Nephron Pharmaceuticals Corporation,Point Guard Partners, LLC, VOOM LLC, Tom Riedhammer, Avery Family Trust, and Vision Quest Holdings, LLC(collectively, the “Sellers”) to purchase the outstanding stock of RevitaLid, Inc. (“RevitaLid”). RevitaLid is the owner ofRVL‑1201, an ophthalmic product that treats blepharoptosis, or droopy eyelid, which had been licensed from VOOM LLC.Osmotica obtained all rights to the VOOM LLC License Agreement and will be undertaking future development andcommercialization of RVL‑1201, which includes conducting clinical trials and filing a new drug application with the Foodand Drug Administration (“FDA”).The acquisition of RevitaLid included the license to intellectual property from VOOM LLC dated August 31, 2011 whichcontains future regulatory and sales milestone payments and royalties payable to VOOM LLC as well as a liability payable toOculos Clinical Research and unpaid Seller transaction expenses.The minimum purchase price for the transaction was $12,500,000 which was payable less the liability payable to OculosClinical Research less all Sellers’ transaction expenses, plus an earn‑out based on specified percentages of net sales onceregulatory approval has been given regarding commercialization, the Company determined that the earn‑out was notprobable on October 24, 2017 or as of December 31, 2017.The Company evaluated the acquisition of the RevitaLid assets under ASC 805, Business Combinations and ASU 2017‑01and concluded that as substantially all of the fair value of the gross assets acquired is concentrated in an identifiable group ofsimilar assets, the transaction did not meet the requirements to be accounted for as a business combination and therefore wasaccounted for as an asset acquisition. Accordingly, the purchase price of the RevitaLid assets, along with transaction costs of$681,952 were allocated over the relative fair value of the identified group of assets as follows:In-process research and development $12,500,000Net deferred tax assets and liabilities 3,872,476Total assets acquired $16,372,476 The acquired IPR&D was deemed to have no alternative future uses, thus, pursuant to ASC 730, Research and Development,$16,372,476 was recorded as an expense after the acquisition date and included in Research and development expenses inthe Consolidated Statements of Operations and Comprehensive Loss. The deferred tax liability of $5,566,642, a componentof the net deferred tax assets and liabilities acquired, was subsequently removed and included as a component of the incometax benefit for the year ended December 31, 2017. Note 4. RevenuesThe Company’s performance obligations are to provide its pharmaceutical products based upon purchase orders fromdistributors. The performance obligation is satisfied at a point in time, typically upon delivery, when the customer obtainscontrol of the pharmaceutical product. The Company invoices its customers after the products have been delivered andinvoice payments are generally due within 60 days of invoice date.116 Table of ContentsThe following table disaggregates revenue from contracts with customers by pharmaceutical products: Year Ended December 31, Pharmaceutical Product 2018 2017Venlafaxine ER $66,039,604 $96,054,161Methylphenidate ER 129,468,673 43,711,097Lorzone 17,171,894 22,275,831Divigel 23,313,679 18,541,774OB Complete 10,509,824 10,446,364Other 14,894,531 46,641,951Net product sales 261,398,205 237,671,178Royalty revenue 1,958,571 6,449,095License and contract revenue 344,573 1,628,759Total revenues $263,701,349 $245,749,032 When the Company receives consideration from a customer, or such consideration is unconditionally due from a customerprior to the transfer of products to the customer under the terms of a contract, the Company records a contract liability. TheCompany classifies contract liabilities as deferred revenue. The Company had no deferred revenue as of December 31, 2018and 2017. Upon adoption of ASC Topic 606, the Company did not have any contract assets or liabilities. The Company haselected to apply the exemption under paragraph 606‑10‑50‑14(a) related to remaining performance obligations as all openpurchase orders are expected to be satisfied with a period of one year from the date of the purchase order.Contract assets primarily relate to rights to consideration for goods or services transferred to the customer when the right isconditional on something other than the passage of time. Contract assets are transferred to accounts receivable when therights become unconditional. The Company had no contract assets as of December 31, 2018. The Company has no costs toobtain or fulfill contracts meeting the capitalization criteria under ASC Topic 340, Other Assets and Deferred Costs. Note 5. Accounts Receivable, Sales and AllowancesThe nature of the Company’s business inherently involves, in the ordinary course, significant amounts and substantialvolumes of transactions and estimates relating to allowances for product returns, chargebacks, rebates, doubtful accounts anddiscounts given to customers. This is typical of the pharmaceutical industry and not necessarily specific to the Company.Depending on the product, the end‑user customer, the specific terms of national supply contracts and the particulararrangements with the Company’s wholesale customers, certain rebates, chargebacks and other credits are deducted from theCompany’s accounts receivable. The process of claiming these deductions depends on wholesalers reporting to the Companythe amount of deductions that were earned under the terms of the respective agreement with the end‑user customer (which inturn depends on the specific end‑user customer, each having its own pricing arrangement, which entitles it to a particulardeduction). This process can lead to partial payments against outstanding invoices as the wholesalers take the claimeddeductions at the time of payment.Accounts receivable result primarily from sales of pharmaceutical products, amounts due under revenue sharing, license androyalty arrangements, which inherently involves, in the ordinary course of business, estimates relating to allowances forproduct returns, chargebacks, rebates, doubtful accounts and discounts given to customers. Credit is extended based on thecustomer’s financial condition, and, generally, collateral is not required. The Company ages its accounts receivable using thecorresponding sale date of the transaction and considers accounts past due based on terms agreed upon in the transaction,which is generally 30 to 60 days for branded and generic sales, depending on the customer and the products purchased.With the exception of the provision for doubtful accounts, which is reflected as part of selling, general and administrativeexpense, the provisions for the following customer reserves are reflected as a reduction of revenues in the accompanyingConsolidated Statements of Operations and Comprehensive Loss.117 Table of ContentsTrade accounts receivable, net consists of the following: December 31, December 31, 2018 2017Gross trade accounts receivable Trade accounts receivable $146,419,682 $110,592,198Royalty accounts receivable 238,960 25,712Other receivable 1,562,287 4,161,368Less reserves for: Chargebacks (38,861,232) (32,342,377)Commercial rebates (49,231,445) (39,233,419)Discounts and allowances (3,510,242) (3,484,587)Doubtful accounts (194,144) (2,080,938)Total trade accounts receivable, net $56,423,866 $37,637,957 Subsequent to the issuance of the 2017 consolidated financial statements, the Company determined that a reclassificationwas required to correct disclosure of the components of the royalty and other accounts receivable. These reclassifications hadno effect on net earnings, cash flows or the Company’s financial position as previously reported.For the years ended December 31, 2018 and 2017, the Company recorded the following adjustments to gross product sales: Year Ended December 31, 2018 2017Gross product sales $948,560,626 $646,701,628Less provisions for: Chargebacks (365,042,883) (202,366,801)Government rebates (18,582,352) (26,007,632)Commercial rebates (257,916,721) (134,525,716)Product returns (20,492,281) (26,299,811)Discounts and allowances (20,245,486) (15,387,024)Advertising and promotions (4,882,698) (4,443,466)Net product sales $261,398,205 $237,671,178 For the years ended December 31, 2018 and 2017, the activity in the Company’s allowance for customer deductions againsttrade accounts receivable is as follows: Discounts Commercial and Doubtful Chargebacks Rebates Allowances Accounts TotalBalance at January 1, 2017 $24,311,153 $30,552,734 $3,631,326 $4,910,478 $63,405,691Provision 202,366,801 134,525,716 15,387,024 832,388 353,111,929Charges processed (194,335,577) (125,845,031) (15,533,763) (3,661,928) (339,376,299)Balance at December 31, 2017 32,342,377 39,233,419 3,484,587 2,080,938 77,141,321Provision 365,042,883 257,916,721 20,245,486 (1,771,487) 641,433,603Charges processed (358,524,028) (247,918,695) (20,219,831) (115,307) (626,777,861)Balance at December 31, 2018 $38,861,232 $49,231,445 $3,510,242 $194,144 $91,797,063 118 Table of ContentsThe annual activity in the Company’s accrued liabilities for customer deductions by account for the years ended December31, 2018 and 2017, is as follows: Product Government Returns Rebates TotalBalance at January 1, 2017 $30,340,749 $6,485,749 $36,826,498Provision 26,299,811 26,007,632 52,307,443Charges processed (13,341,236) (18,341,667) (31,682,903)Balance at December 31, 2017 $43,299,324 $14,151,714 $57,451,038Provision 20,492,281 18,582,352 39,074,633Charges processed (15,328,096) (22,753,190) (38,081,286)Balance at December 31, 2018 $48,463,509 $9,980,876 $58,444,385 Provisions and utilizations of provisions activity in the current period which relate to the prior period revenues are notprovided because to do so would be impracticable. The Company's current systems and processes do not capture thechargeback and rebate settlements by the period in which the original sales transaction was recorded. Chargeback, rebateclaims and certain other gross to net items are not submitted by customers with sufficient details to link the accrual recordedat the point of sale with the settlement of the accrual. As a result, the Company is unable to reasonably determine the dollaramount of the change in estimate in its gross to net reporting reflected in its results of operations for each period presented,and, those changes could be significant. However, the Company uses a combination of factors and applications to estimatethe dollar amount of reserves for chargebacks and rebates at each month end. The Company regularly monitors the reservesbased on an analysis of the Company’s product sales and most recent claims, wholesaler inventory, current pricing, andanticipated future pricing changes. If amounts are different from the estimate due to changes from estimated rates, accrual rateadjustments are considered prospectively when determining provisions in accordance with authoritative U.S. GAAP. Note 6. InventoriesThe components of inventories, net of allowances, are as follows: December 31, December 31, 2018 2017Finished goods $15,577,104 $10,467,243Work in process 1,138,906 789,413Raw materials and supplies 7,667,011 5,690,214 $24,383,021 $16,946,870 The Company maintains an allowance for excess and obsolete inventory, as well as inventory where its cost is in excess of itsnet realizable value. The activity in the allowance for excess and obsolete inventory account for the years ended December31, 2018 and 2017, was as follows: Year Ended December 31, December 31, 2018 2017Balance at beginning of year $3,066,620 $7,754,596Provision 2,926,472 9,183,372Charges processed (4,432,010) (13,871,348)Balance at end of year $1,561,082 $3,066,620 119 Table of ContentsNote 7. Property, Plant and Equipment, NetProperty, plant and equipment consist of the following: Year Ended December 31, 2018 2017Land $2,120,000 $2,120,000Buildings 11,567,677 11,363,109Leasehold improvements 2,109,106 2,095,784Machinery 13,851,886 11,495,856Furniture, fixtures and equipment 1,447,819 266,314Computer hardware and software 6,984,055 5,838,823 38,080,543 33,179,886Accumulated depreciation (10,235,900) (5,852,660) 27,844,643 27,327,226Construction in progress 3,418,789 4,082,907 $31,263,432 $31,410,133 Depreciation expense was $4,476,813 and $3,069,223 for the years ended December 31, 2018 and 2017, respectively. Thereis approximately $1,502,000 of remaining construction in progress expenditures to substantially complete the projects.Note 8. Goodwill and Other Intangible AssetsThe Company tests goodwill and indefinite‑lived intangible assets for impairment annually as of October 1, or morefrequently whenever events or changes in circumstances indicate that the asset might be impaired. As further describedbelow, in December 2018, changes in events and circumstances made it more likely than not goodwill had been impaired. Asa result we recognized a goodwill impairment charge of $86,318,000. The following table sets forth the carrying value ofgoodwill as of December 31, 2018 and 2017, respectively. GoodwillJanuary 1, 2017 $187,172,816Impairments —December 31, 2017 187,172,816Impairments (86,318,000)December 31, 2018 $100,854,816 120 stTable of ContentsThe following table sets forth the major categories of the Company’s intangible assets and the weighted‑average remainingamortization period as of December 31, 2018 and 2017, for those assets that are not already fully amortized: December 31, 2018 Weighted Average Remaining Gross Net Amortization Carrying Accumulated Carrying Period Amount Amortization Reclassifications Impairment Amount (Years)Distribution Rights $98,433,377 $(17,229,374) $ — $ — $81,204,003 12.0Product Rights 326,530,149 (109,056,754) — — 217,473,395 4.0Tradenames 13,485,000 (2,329,284) — — 11,155,716 16.0Developed Technology 138,133,333 (30,973,516) — (10,303,208) 96,856,609 12.6IPR&D 91,300,000 — — (7,600,000) 83,700,000 IndefiniteLived $667,881,859 $(159,588,928) $ — $(17,903,208) $490,389,723 The gross carrying amount and accumulated amortization in the table above is inclusive of $6,156,564 of accumulatedamortization for assets that have been fully impaired as of December 31, 2018. December 31, 2017 Weighted Average Gross Net Remaining Carrying Accumulated Carrying Amortization Amount Amortization Reclassifications Impairment Amount Period (Years)Distribution Rights $98,433,377 $(9,890,282) $ — $ — $88,543,095 13.0Product Rights 69,558,325 (49,902,094) 264,100,000 (7,128,176) 276,628,055 5.4Tradenames 13,485,000 (1,623,368) — — 11,861,632 17.1Developed Technology 146,900,000 (21,077,405) — (8,766,667) 117,055,928 13.1IPR&D 412,025,436 — (264,100,000) (56,625,436) 91,300,000 IndefiniteLived $740,402,138 $(82,493,149) $ — $(72,520,279) $585,388,710 The gross carrying amount and accumulated amortization in the table above is inclusive of $3,786,772 of accumulatedamortization for assets that have been fully impaired in 2017.Changes in intangible assets during the years ended December 31, 2018 and 2017, were as follows: Distribution Product Developed Rights Rights Tradenames Technology IPR&D TotalJanuary 1, 2017 $95,741,106 $44,091,974 $12,759,363 $136,672,033 $412,025,436 $701,289,912Acquisitions — — — — 16,372,476 16,372,476Amortization (7,198,011) (24,435,743) (897,731) (10,849,438) — (43,380,923)Impairments — (7,128,176) — (8,766,667) (56,625,436) (72,520,279)Reclassifications (A) — 264,100,000 — — (264,100,000) —Expensed (B) — — — — (16,372,476) (16,372,476)December 31, 2017 $88,543,095 $276,628,055 $11,861,632 $117,055,928 $91,300,000 $585,388,710Amortization (7,339,092) (59,154,660) (705,916) (9,896,111) — (77,095,779)Impairments — — — (10,303,208) (7,600,000) (17,903,208)December 31, 2018 $81,204,003 $217,473,395 $11,155,716 $96,856,609 $83,700,000 $490,389,723121 Table of Contents(A)IPR&D related to the methylphenidate ER asset group was reclassified to Product Rights at the time the product waslaunched. The amount will be amortized over the estimated useful life of 7 years which was determined to be the periodin which the Product Rights are expected to contribute to cash flow. The amount will be amortized on an acceleratedmethod based on estimated pattern of cash flows.(B)The amount acquired for IPR&D in the RevitaLid Asset Acquisition was deemed to have no alternative future uses, thusthe full amount was expensed (see Note 3).The Company tests goodwill and indefinite-lived intangible assets for impairment annually on October 1st, or morefrequently whenever events or changes in circumstances indicate that the asset might be impaired.As part of the Company’s goodwill and intangible asset impairment assessments and when IPR&D assets are put into service,the Company estimates the fair values of the reporting unit and intangible assets using an income approach that utilizes adiscounted cash flow model, or, where appropriate, a market approach. The discounted cash flow models are dependent uponour estimates of future cash flows and other factors. These estimates of future cash flows involve assumptions concerning(i) future operating performance, including future sales, long‑term growth rates, operating margins, variations in the amounts,allocation and timing of cash flows and the probability of achieving the estimated cash flows and (ii) future economicconditions. These assumptions are based on significant inputs not observable in the market and thus represent Level 3measurements within the fair value hierarchy. The discount rates applied to the estimated cash flows for the Company’sOctober 1, 2018 and 2017 annual goodwill and indefinite‑lived intangible assets impairment test ranged from 14.0% to9.0%, respectively, depending on the overall risk associated with the particular assets and other market factors. The Companybelieves the discount rates and other inputs and assumptions are consistent with those that a market participant would use.Impairment charges resulting from annual or interim goodwill and intangible asset impairment assessments, if any, arerecorded to Impairment of intangible assets in the Consolidated Statements of Operations and Comprehensive Loss.In December 2018, we determined that, subsequent to our annual impairment testing, circumstances and events related topricing on certain of our generic assets together with our decision to discontinue commercialization of a developedtechnology asset, and discontinue development of an IPR&D asset, made it more likely than not that goodwill had becomeimpaired. As a result, we performed an assessment of goodwill as of December 31, 2018. Based on the results of thisassessment, it was determined that the carrying value of goodwill exceeded its fair value by approximately $86.3 million andan impairment charge was recognized for the year end December 31, 2018.During the fourth quarter of 2017, the Company performed an evaluation of the carrying value of the intangible assetsacquired. After completing the valuations, the Company realized the net present value of the intangible assets had decreasedbelow the net book value and thus impaired the intangible assets. Product Rights, Developed Technologies, and IPR&D hadbeen impaired by $7,128,176, $8,766,667, and $56,625,436 respectively due to lower than expected cash flows and, in thecase of IPR&D, delays in the anticipated timing of development.Amortization expense was $77,095,779 and $43,380,923 for the years ended December 31, 2018 and 2017, respectively.The amortization expense of acquired intangible assets for each of the following five years are expected to be as follows: AmortizationYears ending December 31 Expense2019 $68,899,1972020 67,512,2492021 65,348,1682022 43,107,4412023 38,906,920Thereafter 122,915,748Total $406,689,723 122 Table of ContentsNote 9. Accrued LiabilitiesAccrued liabilities consist of the following: December 31, December 31, 2018 2017Accrued product returns $48,463,509 $43,299,324Accrued royalties 3,597,957 12,325,232Accrued compensation 8,672,913 6,342,731Accrued government rebates 9,980,876 14,151,714Accrued research and development 8,337,812 1,248,800Accrued expenses and other liabilities 7,362,941 3,904,556Customer coupons 719,578 425,911Deferred revenue 101,354 228,122Total $87,236,940 $81,926,390 In the ordinary course of business, the Company enters into contractual agreements with wholesalers pursuant to which thewholesalers distribute sales of Company products to customers and provide sales data to the Company. In return thewholesalers charge the Company a fee for services and other customary rebates and chargebacks based on distribution salesof Company products through the wholesalers and downstream customers. Note 10. Financing ArrangementsThe composition of the Company’s debt and financing obligations are as follows: December 31, December 31, 2018 2017CIT Bank, N.A. Term Loan, net of deferred financing costs of $4,557,025 and $6,894,816 as of December 31, 2018 and December 31, 2017, respectively $266,802,911 $320,605,185Note payable — insurance financing 1,774,199 — 268,577,110 320,605,185Less: current portion (1,774,199) (6,655,604)Long-term debt $266,802,911 $313,949,581 Term LoanConcurrent with the closing of the Company's acquisition of Osmotica Holdings Corp Limited, the Company entered into a$160,000,000 Term Loan (the "Term Loan") pursuant to a Credit Agreement dated February 3, 2016 (the "Term LoanAgreement") between the Company as borrower, certain other lenders and CIT Bank, N.A. ("CIT Bank") acting asadministrative agent. The Term Loan is secured by certain assets of the Company, excluding certain intangibles and foreignproperty.The Term Loan Agreement required quarterly principal repayments equal to 0.625% of the initial aggregate Term Loanamount beginning on the last day of the first full fiscal quarter following the closing of the Term Loan Agreement, with finalpayment of the remaining principal balance due at maturity six years from the date of closing of the Term Loan Agreement.At the Company's election, interest accrues on a Prime Rate/Federal Funds Effective Rate ("ABR Loan") or a LIBOR ("LIBORLoan") rate, plus a margin of 4.00% for ABR Loan, and 5.00% for LIBOR Loan. As of December 31, 2016, this rate was6.00%.For the year ended December 31, 2016, the Company incurred debt issuance costs associated with the Term Loan Agreementin the amount of $5,734,332, which were deferred and are amortized over the length of the Term Loan using the effectiveinterest method.123 Table of ContentsOn November 10, 2016, the Company amended the Term Loan Agreement (the "Amended Term Loan Agreement") inconjunction with the reacquisition of venlafaxine distribution rights. Pursuant to the Amended Term Loan Agreement, CITBank and certain other lenders agreed to make available to the Company, an Incremental Term Loan in the aggregateprincipal amount of $117,500,000, which was added to the Term Loan; there were no other modifications to the Term LoanAgreement.The Company accounted for the Amended Term Loan Agreement as a modification of debt in accordance with ASC 470-50,Debt — Modifications and Extinguishments. In accordance with modification guidance detailed in ASC 470-50, lender feesincurred in the amount of $4,000,000 were deferred and are amortized over the length of the Term Loan using the effectiveinterest rate method. In addition, the Company incurred third party fees associated with the Amended Term Loan Agreementin the amount of $398,558, which were expensed as professional fees in accordance with modification guidance andincluded in selling, general and administrative expense during the year ended December 31, 2016.On April 28, 2017, the Company amended the Amended Term Loan Agreement (the "Second Amended Term LoanAgreement"), in which the due date of the Company's annual financial statements was modified for the first fiscal year afterthe closing of the Second Amended Term Loan Agreement.Furthermore, on December 21, 2017, the Company amended the Second Amended Term Loan Agreement (the "ThirdAmended Term Loan Agreement"). Pursuant to the Third Amended Term Loan Agreement, CIT Bank and certain otherlenders agreed to increase the principal amount of the Term Loan to an aggregate principal amount of $327,500,000. Of theaggregate principal amount, $277,500,000 will be designated as the Term A Loan and $50,000,000 will be designated as theTerm B Loan.The Third Amended Term Loan Agreement requires quarterly principal repayments to 0.6925% of the original principalamount of the Term A Loan and in the case of the Term B Loan 0.25% of the original principal amount of the Term B Loan,with final payment of the remaining principal balance due at maturity five years from the date of closing of the ThirdAmended Term Loan Agreement.At the Company's election, for the Term A Loan, interest accrues on a Prime Rate/Federal Funds Effective Rate ("ABR Loan")or an LIBOR ("LIBOR Loan") rate in which the applicable rate per annum set forth below under the caption "ABR Spread" or"LIBOR Rate Spread," based upon the Total Leverage Ratio (as defined in the Third Amended Term Loan Agreement) as oflast day of the most recently ended fiscal quarter is as follows:Total Leverage Ratio LIBOR Rate Margin ABR Margin Category 1 3.75% 2.75%Greater than 2.00 to 1.00 Category 2 3.25% 2.25%Equal to or less than 2.00 to 1.00 For Term B Loan, interest accrues with respect to any ABR Loan, 3.25% per annum, and with respect to any LIBOR RateLoan, 4.25% per annum. As of December 31, 2018 and 2017, the interest rates were 6.09% and 5.25% for Term A Loan and6.59% and 5.75% for Term B Loan, respectively.The Company accounted for the Third Amended Term Loan Agreement as a modification of debt in accordance with ASC470-50, Debt — Modifications and Extinguishments. In accordance with modification guidance detailed in ASC 470-50,lender fees incurred in the amount of $3,126,000 were deferred and are amortized over the length of the Term Loan using theeffective interest rate method. In addition, deferred financing fees and a prepayment premium in the total amount of$4,981,624 were charged to other non-operating (loss)/income, net during the year ended December 31, 2017, as certainprevious lenders did not participate in the Third Amended Term Loan. In addition, the Company incurred third party feesassociated with the Third Amended Term Loan Agreement in the amount of $389,234, which were expensed as professionalfees in accordance with modification guidance and included in selling, general and administration expense during the yearended December 31, 2017.124 Table of ContentsThe Third Amended Term Loan Agreement contains covenants that require the Company to deliver quarterly and annualfinancial statements along with certain supplementary financial information and schedules and ratios. The Third AmendedTerm Loan Agreement also contains covenants that limit the ability of the Company to, among other things: incur additionalindebtedness; incur liens; make investments; make payments on indebtedness; dispose of assets; enter into mergertransactions; and make distributions. In addition, the Company shall not permit the total leverage ratio to be greater than4.75:1.00 until March 31, 2020 at which time the total leverage ratio remains constant at a required 4.50:1.00. The totalleverage ratio is the ratio, as of any date of determination, of (a) consolidated total debt, net of unrestricted cash and cashequivalents as of such date to (b) consolidated adjusted earnings before income taxes, depreciation and amortization("Consolidated EBITDA") for the test period then most recently ended for which financial statements have been delivered.Also, the Company will not permit the fixed charge coverage ratio to fall below 1.25:1.00 beginning on March 31, 2018through the final maturity date. The fixed charge coverage ratio, as of the date of determination, is the ratio of (x)Consolidated EBITDA net of capital expenditures and cash taxes paid to (y) interest payments, scheduled principalpayments, restricted payments and management fees paid to related parties. The Company obtained a waiver from CIT Bankin regard to its non-compliance of its covenant to deliver annual financial statements by April 2, 2018. The Company did notincur a waiver fee as a condition to the waiver. The Company was in compliance with all covenants of the Third AmendedTerm Loan Agreement as of December 31, 2018.On October 31, 2018, the Company used a portion of the proceeds resulting from the IPO on October 22, 2018 to repay$50,000,000 in aggregate of the outstanding principal amount and $1,787,924 of accrued interest of indebtedness under theCompany’s senior secured credit facilities.The prepayments made on October 31, 2018 were as follows: (1) $42,278,907 and $1,492,597 on Term Loan A outstandingprincipal and accrued interest, respectively, and (2) $7,721,093 and $295,327 on Term Loan B outstanding principal andaccrued interest respectively. The prepayments were made on a pro rata basis which is consistent with the requirements of theThird Amendment. The prepayments were applied to the remaining scheduled installments of principal due in respect of theTerm Loans of such class in direct order of maturity. As a result, there are no remaining scheduled installments of principaldue in respect of the Term Loans until the final maturity date. The Company will continue to make interest payments accruedon the outstanding remaining balance through the date of maturity.In accordance with ASC 470, when debt is prepaid within its contractual terms and the terms of the remaining debt are notmodified, the prepayment should be treated as a partial extinguishment rather than a modification. This conclusion isreached without regard to consideration of the 10% cash flow test since no change to terms of the original debt instrumentwas modified in connection with the prepayment. The Third Agreement allows for partial prepayments without creatingchanges to the terms of Term Loan A or Term Loan B.The Company incurred debt issuance costs associated with the Third Amendment. Pursuant to ASC 835-30-35-2, with respectto a note for which the imputation of interest is required, the difference between the present value and the face amount shallbe treated as a discount or premium and amortized as interest expense or income over the life of the note in such a way as toresult in a constant rate of interest when applied to the amount outstanding at the beginning of any given period. As such, inaccordance with ASC 835-30-35-2, the Company deferred and amortized the debt issuance costs amortized over the length ofthe Term Loan using the effective interest method. The balance of the debt issuance costs as of the date of the partialprepayment made on October 31, 2018 was $5,627,508.As a result of the partial extinguishment, the Company has elected, as an accounting policy in accordance with ASC 470-50-40-2, to write off a proportionate amount of the unamortized fees at the time that the financing was partially settled inaccordance with the terms of the Third Amendment. The unamortized debt issuance costs are allocated between theremaining original loan balance and the portion of the loan paid down on a pro-rata basis. At the time of repayment, theCompany wrote off $875,576 in debt issuance costs and recorded the expense in the accompanying Consolidated Statementof Operations and Comprehensive Loss.Revolving FacilityConcurrent with the closing of the Company's acquisition of Osmotica Holdings Corp Limited, the Company entered into aRevolving Facility in an aggregate amount of $30,000,000 (the "Revolving Facility") pursuant to a Credit125 Table of ContentsAgreement dated February 3, 2016 between the Company as borrower, certain other lenders and CIT Bank, N.A. ("CIT Bank")acting as administrative agent, as discussed above. The Company incurred closing costs associated with the RevolvingFacility in the amount of $1,075,187, which were deferred and amortized over the length of the Revolving Facility on astraight-line basis.On December 21, 2017, the Company amended the Revolving Facility (the "Amended Revolving Facility"). Pursuant to theAmended Revolving Facility, CIT Bank and certain other lenders agreed to increase the revolving credit commitments up to$50,000,000. The Company accounted for the Amended Revolving Facility as a modification of debt in accordance withASC 470-50, Debt — Modifications and Extinguishments and ASU 2015-15, Presentation and Subsequent Measurement ofDebt Issuance Costs Associated with Line of Credit Arrangements. Lender fees incurred in the amount of $437,500 weredeferred and are amortized over the length of the Amended Revolving Facility on a straight-line basis.The total amount available under the Revolving Facility includes a Swingline Loan and Letter of Credit subfacility,respectively, in an aggregate principal amount at any time outstanding not to exceed the lesser of (x) in the case of each ofthe Swingline Loan and Letter of Credit, $5,000,000 and (y) the total revolving commitment, based on certain terms andconditions of the Credit Agreement.The Company will be required to repay the Revolving Facility upon its expiration five years from issuance, subject topermitted extension, and will pay interest on the outstanding balance monthly based, at the Company's election, on anadjusted prime/federal funds rate ("ABR") or an adjusted LIBOR ("LIBOR"), in which the applicable rate per annum set forthbelow under the caption "ABR Spread" or "LIBOR Rate Spread," based upon the Total Leverage Ratio (as defined in theCredit Agreement) as of last day of the most recently ended fiscal quarter is as follows:Total Leverage Ratio LIBOR Rate Margin ABR Margin Category 1 3.75% 2.75%Greater than 2.00 to 1.00 Category 2 3.25% 2.25%Equal to or less than 2.00 to 1.00 At December 31, 2018 and 2017, there were no outstanding borrowings or outstanding letters of credit. Availability underthe Revolving Facility as of December 31, 2018, was $50,000,000.Subordinated NoteConcurrent with the closing of the Company's acquisition of Osmotica Holdings Corp Limited, the Company entered into a$40,000,000 Subordinated Note Purchase Agreement (the "Subordinated Note") between the Company as borrower andNewstone Capital Partners, LLC. Interest on the outstanding principal balance of the Subordinated Note accrues, at theCompany's election, at a rate equal to ABR plus a margin of 9.00% or LIBOR plus a margin of 10.00%. As of December 31,2016, the effective interest rate on the Subordinated note was 11.00%. The Subordinated Note was to mature on February 3,2023. As part of the Third Amended Term Loan Agreement, the Subordinated Note was paid in full including associatedaccrued interest. $1,159,557 and $800,000 of deferred financing and prepayment costs, respectively, associated with theSubordinated Note was expensed in accordance with ASC 470-50, Debt — Modifications and Extinguishments and includedin the total amount of $4,981,624 as a component of other non-operating (loss) income, net on the accompanyingConsolidated Statement of Operations and Comprehensive Loss.Promissory NotesConcurrent with the closing of the Company's acquisition of Osmotica Holdings Corp Limited, the Company entered intofour promissory note agreements (collectively the "PIK Notes") for total proceeds of $25,000,000. The PIK Notes are identicalto each other with exception for the Lender (as identified below) and principal sum. Interest accrued on a126 Table of Contentsdaily basis at a rate equal to 18% per annum on the unpaid principal balance of the PIK Notes outstanding. The lenders andprincipal sum of the PIK Notes are below:Lender Principal SumAltchem Limited (Cyprus) $12,500,000ACP III AIV, L.P. 7,661,834ACP Holdco (Offshore), L.P. 4,272,166Newstone Capital Partners II, L.P. 566,000 $25,000,000 As part of the Third Amended Term Loan Agreement, the PIK Notes were paid in full including associated accrued in-kindinterest that had been accrued and capitalized in a total amount of $9,321,500.Aggregated cumulative maturities of long-term obligations (including the incremental and existing Term Loan and theRevolving Facility), excluding deferred financing costs of $4,557,025, as of December 31, 2018 are: Maturities of Long-termYears ending December 31, Obligations 2019 $1,774,1992020 —2021 —2022 271,359,936Total $273,134,135 Note 11. Concentrations and Credit RiskFor the years ended December 31, 2018 and 2017, a significant portion of the Company’s gross product sales reported werethrough three customers, and a significant portion of the Company’s accounts receivable as of December 31, 2018 and 2017were due from these customers as well. The following table sets forth the percentage of the Company’s gross sales andaccounts receivable attributable to these customers for the periods indicated: Gross ProductSales Year Ended December 31, 2018 2017 Amerisource Bergen 7% 23%Cardinal Health 55% 37%McKesson 34% 32%Combined Total 96% 92% Gross Account Receivables December 31, December 31, 2018 2017 Amerisource Bergen 6% 7%Cardinal Health 61% 57%McKesson 29% 29%Combined Total 96% 93% PurchasingFor the year ended December 31, 2018, four suppliers accounted for more than 96% of the Company’s purchases of rawmaterials for products that are manufactured by the Company.127 Table of ContentsThree suppliers accounted for more than 91% of the Company’s purchases of raw materials manufactured by the Company forthe year ended December 31, 2017.The Company purchases various API of finished products at contractual minimum levels through agreements with thirdparties. Individually, none of these agreements are material to the Company, therefore, the Company does not believe at thistime that any of the purchase obligations represent levels above the normal course of business.Sales by ProductFor the years ended December 31, 2018 and 2017, one product accounted for 66% and 15%, respectively, of the Company'stotal gross product sales.Royalty SalesThe following tables set forth the percentage of the revenues and accounts receivable recognized in connection withCompany's royalty contracts for the years ended December 31, 2018 and 2017, respectively: Year ended December 31, 2018 Gross Gross Royalty RoyaltyRevenue AccountsReceivable Customer 4 36% 43% Customer 5 31% 30% Customer 6 —% —% Combined Total 67% 73% Year ended December 31, 2017 Gross Gross Royalty RoyaltyRevenue AccountsReceivable Customer 4 54% NM%Customer 5 14% NM%Customer 6 21% NM%Combined Total 89% —% Note 12. Incentive PlansOsmotica Pharmaceuticals plc 2018 Equity Incentive PlanPrior to the IPO, the Company adopted the 2018 Incentive Plan (the "2018 Plan") which became effective upon our IPO andallows for the issuance of up to 4,100,000 ordinary shares of the Company ("Shares") in satisfaction of awards under the 2018Plan. The 2018 Plan provides for the grant of share options, SARs, restricted and unrestricted share and share units,performance awards, and other awards that are convertible into or otherwise based on the Company’s shares to employees andnon-employee directors, consultants and advisors to the Company. The Company's compensation committee shall determinethe time at which an award vests or becomes exercisable. In connection with the IPO, the Company granted share optionsunder the 2018 Plan that will vest on the fourth anniversary of the grant date, subject to the employee’s continuedemployment through such vesting date. Osmotica Holdings S.C.Sp. 2016 Equity Incentive PlanEffective February 3, 2016, Osmotica Holdings S.C.Sp. adopted the 2016 Equity Incentive Plan (the "2016 Plan") whichallows for the issuance of up to 75,000 Units in Osmotica Holdings S.C.Sp. Options to purchase common units granted underthe 2016 Plan vest and become exercisable in whole or in part, in accordance with vesting conditions set by the128 Table of ContentsCompany's board of directors. Each option award had a maximum term of ten years from the date of grant. The option awardsgranted under the 2016 Plan were made up of two components: Time Awards and Performance Awards. The Time Awardsvested 25% annually from original grant date, subject to continuous employment on each vesting date. The vesting of thePerformance awards was subject to performance criteria, requiring the majority investors in the Company to receive (on acumulative basis) aggregate net proceeds exceeding certain return on investment targets. The Time Awards and PerformanceAwards contained a sales restriction in the form of a liquidity event and subsequent disposal of common units by the MajorLimited Partners (as defined in the 2016 Plan) before the employee was able to sell vested and exercised common units andwere required to remain employed to avoid Company’s call option on such common units at a lower of cost or fair marketvalue. Amended and Restated Osmotica Pharmaceuticals plc. 2016 Equity Incentive PlanOn August 14, 2018, the board of directors amended and restated the 2016 Plan in connection with the Reorganization. TheAmended and Restated 2016 Equity Incentive Plan (the “Amended 2016 Plan”) became effective upon our IPO which closedon October 22, 2018. In connection with the Reorganization, options to purchase common units of Osmotica HoldingsS.C.Sp. were converted into options to purchase shares of the Company and existing sales restriction was removed. Inconnection with the IPO, the number of shares issuable pursuant to the Amended 2016 Plan and the corresponding exerciseprices of options were adjusted to reflect a stock split initiated prior to the IPO. Additionally, effective upon the IPO, theAmended 2016 Plan modified the terms of Performance Awards previously issued under the 2016 Plan by converting theseawards to time based awards vesting in equal annual installments on the first four anniversaries of the IPO, subject tocontinuous employment. There were 3,015,572 ordinary shares issuable upon exercise of options issued and outstanding asof December 31, 2018 under the Amended 2016 Plan. Prior to the modification date, there was no share based compensationrecognized for the Performance Awards due to a performance condition based upon the majority investors in the Companyreceiving aggregate net proceeds exceeding certain return on investment targets.Share-based CompensationThe estimated fair value of the options is expensed over the requisite service period, which is generally the vesting period ona graded vesting basis. The compensation cost that has been charged against income for those incentive plans was$1,965,346 for the year ended December 31, 2018, $1.2 million of which related to share based compensation incurred priorto the IPO related to the fiscal year 2018. The total income tax benefit recognized in the statement of operations andcomprehensive loss for share-based compensation arrangements was $439,318 for the year ended December 31, 2018. Theconversion of the Performance Awards issued under the 2016 Plan to Time Awards upon IPO under the Amended 2016 Planwas accounted for as a modification where the fair value of such awards determined on a modification date, or the IPO date isbeing recognized over their remaining vesting period. 129 Table of ContentsShare-Based Award ActivityA summary of option activity granted under the 2016 Plan and the Amended 2016 Plan as of December 31, 2018, andchanges during the year then ended is presented below:2016 Equity Incentive Plan Weighted Weighted Average Average Number of Units Exercise Contractual Time Performance Total Price TermOutstanding at December 31, 2016 35,650 35,650 71,300 $ — Granted 3,150 3,150 6,300 646 Exercised — — — — Expired / Forfeited (2,700) (2,700) (5,400) 640 Outstanding at December 31, 2017 36,100 36,100 72,200 $ — 8.3 yearsGranted — — — — Exercised — — — — Expired / Forfeited (900) (900) (1,800) 640 Outstanding at date of conversion 35,200 35,200 70,400 641 Unit options converted to share options 1,507,786 1,507,786 3,015,572 14.96 Performance options modified to time options 1,507,786 (1,507,786) — 14.96 Granted — — — — Exercised — — — — Expired / Forfeited — — — — Outstanding at December 31, 2018 3,015,572 — 3,015,572 — 7.5 yearsVested Options at December 31, 2018 720,131 — 720,131 $14.96 There were no options granted during 2018 under the 2016 Plan. The weighted-average grant-date fair value of optionsgranted during 2018 under the 2016 Plan was $184.69. A summary of option activity granted under the 2018 Plan as of December 31, 2018, and changes during the year then endedis presented below: Weighted Weighted Average Average Number of Shares Exercise Contractual Time Performance Total Price TermOutstanding at December 31, 2017 — — — $7.00 Granted 179,700 — 179,700 — Exercised — — — — Expired / Forfeited (1,100) — (1,100) 7.00 Outstanding at December 31, 2018 178,600 — 178,600 $ — 9.8 yearsVested Options at December 31, 2018 — — — $7.00 The weighted-average grant-date fair value of options granted during 2018 under the 2018 Plan was $3.82.As of December 31, 2018, there was $5,062,986 of total unrecognized compensation cost related to nonvested optionsgranted under the Incentive Plans. That cost is expected to be recognized over a weighted-average period of 9.8 years. The fair value of option awards is estimated using the Black-Scholes option-pricing model. Exercise price of each award isgenerally not less than the per share fair value in effect as of that award date. The determination of fair value using the Black-Scholes model is affected by the Company’s share fair value as well as assumptions regarding a number of complex andsubjective variables, including expected price volatility, risk-free interest rate and projected employee share130 Table of Contentsoption exercise behaviors. Options granted or modified under the 2016 Plan and 2018 Plan during the years ended December2018 and 2017 were valued using the Black-Scholes option-pricing model with the following assumptions: Years ended December 31, 2018 2017 Expected volatility 50% - 63.1% 50% - 55%Risk-free interest rate 3.03% -3.11% 1.94% -2.27%Expected dividend yield —% —%Expected life of options in years 5.02 - 7.00 6.25 The Company estimates its expected volatility by using a combination of historical share price volatilities of similarcompanies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriateterm of the Company’s options on a grant date. The expected option term assumption is estimated using the simplifiedmethod and is based on the mid-point between vest date and the remaining contractual term of the option, since theCompany does not have sufficient exercise history to estimate expected term of its historical option awards.For all periods prior to the IPO, our Board of Directors has determined the fair value of the common unit underlying ouroption with assistance from management and based upon information available at the time of grant. Prior to our IPO, giventhe absence of a public trading market for our common units, estimating the fair value of our common units based on theactual operational and financial performance, current business conditions and discounted cash flow projections. Theestimated fair value of our common units, prior to our IPO was adjusted for lack of marketability and control existing at thegrant date. Note 13. Earnings (Loss) per Ordinary ShareBasic net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted-average number ofshares of ordinary shares outstanding during the period. Diluted net income per ordinary shares is computed by dividing netincome by the weighted average number of shares of ordinary shares and potentially dilutive outstanding shares of ordinaryshares during the period to reflect the potential dilution that could occur from ordinary shares issuable through contingentshare arrangements, share options and warrants.The following potentially dilutive securities have been excluded from the computation of diluted weighted average sharesand units outstanding as they would have been anti‑dilutive at December 31, 2018 and 2017: Year Ended December 31, 2018 2017Unit options to purchase units — 74,200Options to purchase ordinary shares 3,193,072 — Note 14. Commitments and ContingenciesThe Company leases its New Jersey office and warehouse facilities under non‑cancelable leases that expire in July 2022 andDecember 2023, respectively. On September 6, 2018, the Company entered into a sublease agreement to lease additionaloffice space in its New Jersey location that expires November 2023. The Company also leases office and warehouse facilitiesin Tampa, Florida, under a non‑cancelable lease that expires in October 2023. The Company also leases its Argentina officeand warehouse facilities which originally expired in December 31, 2014, but the contract was amended to extend toDecember 31, 2020. The Company also leases its Hungary office and warehouse facilities which expired on February 15,2017 and automatically renewed for a two‑year term. The lease will continue to renew for successive two‑year periods unlesseither party elects not to renew. The Company also leases its North Carolina office and warehouse facilities that expires onJuly 31, 2019. In 2018, the Company began leasing vehicles under a cancelable fleet lease that has successive one-yearrenewal terms. The lease may be terminated by either party by providing written notice to the other.131 Table of ContentsTotal rent expense charged to selling, general and administrative expenses was $1,000,994 and $598,159 for the years endedDecember 31, 2018 and 2017, respectively. Total rent expense charged to research and development was $229,448 and$273,706 for the years ended December 31, 2018 and 2017, respectively. The rent expense charged to cost of goods sold was$343,793 and $372,429 the years ended December 31, 2018 and 2017, respectively. The table below shows the futureminimum rental payments, exclusive of taxes, insurance and other costs, under the leases as of December 31, 2018:Years ending December 31 Operating Leases2019 $1,997,5642020 1,371,4442021 1,084,5662022 859,1842023 490,514Thereafter —Total $5,803,272 Capital LeasesAmortization of assets held under the capital lease is included in depreciation expense as a component of selling, general andadministrative expenses. The Company has future minimum lease payments for the year ended December 31, 2018 requiredunder the capital leases together with its present value of the net minimum lease payments of $257,293.Contingent Milestone PaymentsThe Company has entered into strategic business agreements for the development and marketing of finished dosage formpharmaceutical products with various pharmaceutical development companies. Each strategic business agreement includes afuture payment schedule for contingent milestone payments and in certain strategic business agreements, minimum royaltypayments. The Company will be responsible for contingent milestone payments and minimum royalty payments to thesestrategic business partners based upon the occurrence of future events. Each strategic business agreement defines thetriggering event of its future payment schedule, such as meeting product development progress timelines, successful producttesting and validation, successful clinical studies, and various U.S. Food and Drug Administration and other regulatoryapprovals.Royalty ObligationsThe Company has agreements with third parties that require the Company to make minimum royalty payments on a calendaryear basis.The following table lists the Company’s enforceable and legally binding royalty obligations as of December 31, 2018: Royalty ObligationsLess than 1 year $1,375,0001 to 3 years 3,188,0003 to 5 years 3,000,000More than 5 years 1,083,000Total $8,646,000 Supply Agreement ObligationsThe Company is engaged in various supply agreements with third parties which obligate the Company to purchase variousAPI or finished products at contractual minimum levels. None of these agreements are individually in the aggregate materialto the Company. Further, the Company does not believe at this time that any of the purchase obligations represent levelsabove that of normal business demands.132 Table of ContentsThe following table lists the Company’s enforceable and legally binding purchase obligations as of December 31, 2018: Purchase ObligationsLess than 1 year $4,000,0001 to 3 years —3 to 5 years —Total $4,000,000 Defined Contribution PlanVertical/Trigen and Legacy Osmotica both had a defined contribution plan under Section 401(k) of the Internal RevenueCode ("IRC") as of December 31, 2016 pursuant to the Merger (the "Contribution Plans"). The employees of the respectiveCompanies are eligible to participate in the Contribution Plans. Participants may contribute amounts through payrolldeductions not to exceed IRC limitations. For the year ended December 31, 2016, the Vertical/Trigen Plan provided fornonelective employer contributions equal to 3% of basic compensation. The separate Contribution Plans were merged intoone plan effective January 1, 2017. Effective January 1, 2017, the plan provides for employer matching contributions equalto 100% of each employee's elective deferrals up to 3% of base salary, plus 50% of each employee's elective deferralsbetween 3% and 5% of base salary. For the years ended December 31, 2018 and 2017, the Company recognized expensesrelated to its contributions under the Plan of $1,076,677 and $896,632, respectively.Legal ProceedingsThe Company is a party in legal proceedings and potential claims arising from time to time in the ordinary course of itsbusiness. The amount, if any, of ultimate liability with respect to such matters cannot be determined. Despite the inherentuncertainties of litigation, management of the Company believes that the ultimate disposition of such proceedings andexposures will not have a material adverse impact on the financial condition, results of operations, or cash flows of theCompany.Osmotica was a party to patent infringement litigation in the U.S. District Court for the Northern District of Georgia withShire Development, LLC (“Shire”) over the Company’s proposed delayed‑release mesalamine abbreviated new drugapplication (“ANDA”) product which is a generic version of Shire’s LIALDA. (Shire Development LLC et al. v. OsmoticPharmaceutical Corp., No. 1‑12‑cv‑00904 (N.D. Georgia, filed March 16, 2012)). The litigation over the mesalamine productwas limited to one (1) patent, U.S. Patent No. 6,773,720 (the “720 Patent”), which is directed to a particular controlled‑releaseformulation. Absent invalidation by a generic challenger, the ‘720 Patent will expire on June 8, 2020.On March 29, 2017, Osmotica sent a notice to the FDA requesting that their ANDA be withdrawn, and on March 31, 2017,Osmotica received confirmation from FDA that the ANDA was withdrawn. On May 5, 2017, Osmotica was dismissed from thelitigation, as such no loss or accrual was deemed necessary.On February 16, 2018, the Company received FDA approval for its amantadine extended release tablets under the trade nameOsmolex ER. On that same date the Company filed in the Federal District Court for the District of Delaware a Complaint forDeclaratory Judgment of Noninfringement of certain patents owned by Adamas Pharmaceuticals, Inc. (OsmoticaPharmaceutical US LLC and Vertical Pharmaceuticals, LLC vs. Adamas Pharmaceuticals, Inc. and Adamas Pharma, LLC).Adamas was served with the Complaint on February 21, 2018. Adamas filed an answer on April 13, 2018 denying theallegations in the Complaint. On September 20, 2018, Adamas filed an amended answer to the Company’s Complaint forDeclaratory Judgment of Noninfringement, with counterclaims alleging infringement of certain patents included in theCompany’s Complaint and requesting that the court grant Adamas damages, injunctive relief and attorneys’ fees. 133 ®Table of ContentsNote 15. Income TaxesOsmotica Pharmaceuticals plc (formerly known as Lilydale Limited and Osmotica Pharmaceuticals Limited) is an Irish publiclimited company. Osmotica Holdings S.C.Sp. acquired Osmotica Pharmaceuticals plc on April 30, 2018 for the purpose offacilitating an offering of ordinary shares in an initial public offering. On October 22, 2018, Osmotica Pharmaceuticals plccompleted its initial public offering (the “IPO”). Immediately prior to the IPO and prior to the commencement of trading ofOsmotica Pharmaceuticals plc’s ordinary shares on the Nasdaq Global Select Market, Osmotica Holdings S.C.Sp. undertook aseries of restructuring transactions that resulted in Osmotica Pharmaceuticals plc being the direct parent of OsmoticaHoldings S.C.Sp. Osmotica Holdings S.C.Sp. is a Luxembourg special limited partnership, formed on January 28, 2016.Osmotica Holdings US LLC, a subsidiary of Osmotica Holdings S.C.Sp. entered into a fifty‑fifty partnership (the “Merger”),effective February 3, 2016, pursuant to a definitive agreement between Vertical/Trigen Holdings, LLC (“Vertical/Trigen”)and members, and Osmotica Holdings Corp Limited and Subsidiaries. Osmotica Holdings S.C.Sp. and several other holdingcompanies and partnerships were formed as a result of the Merger. Vertical/Trigen Holdings, LLC became a wholly-ownedsubsidiary of certain U.S. corporations that are directly or indirectly owned by Osmotica Holdings U.S. LLC. Thesesubsidiaries are included in the consolidated financial statements and are designated as C Corp filers for U.S. tax purposes. Assuch, the activity of Vertical/Trigen Holdings, LLC is subject to federal income tax at the level of its U.S. corporate parentsbeginning in 2016. In addition, the Company’s foreign entities are subject to income tax in various foreign jurisdictions.The Company follows the Income Taxes topic of ASC 740, which prescribes a recognition threshold and measurementattribute criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in atax return, as well as guidance on de-recognition, classification, interest and penalties, accounting in interim periods,disclosure and transition. The loss before income taxes and the related tax benefit are as follows: December 31, December 31, 2018 2017Loss before income taxes U.S. operations $(52,758,931) $(41,276,187)Non-U.S. operations (65,905,252) (44,366,355)Total loss before income taxes (118,664,183) (85,642,542)Current provision Federal 4,039,243 2,198,256State 1,537,683 212,416Foreign 1,808,761 1,595,246Total current tax expenses 7,385,687 4,005,918Deferred (benefit) provision Federal (8,962,037) (41,477,737)State (4,005,413) (3,282,520)Foreign (3,686,154) (3,746,392)Total deferred tax benefit (16,653,604) (48,506,649)Total benefit for income taxes $(9,267,917) $(44,500,731) A reconciliation of the statutory federal income tax rate to the Company's effective tax rate for the years ended December 31,2018 and 2017 respectively are as follows:134 Table of Contents December 31, December 31, 2018 2017 Federal tax at 34% statutory rate 21.00% 34.00%State and local income taxes, net of federal benefit 1.68% 2.37%Differences in tax effects on foreign income (10.08)% (14.79)%Federal tax credits 4.54% 8.69%Uncertain tax positions — interest & penalties (0.08)% (0.07)%Enacted change in statutory rates 0.00% 22.24%Change in valuation allowance 0.00% 0.00%Permanent adjustments (8.70)% 0.09%Other (0.55)% (0.57)%Effective tax rate 7.81% 51.96% For the year ended December 31, 2018 differences between the Federal statutory income tax rate of 21% and the effective taxrate are primarily due to the foreign tax rate differential and Orphan Drug/Research & Development federal credits.For the year ended December 31, 2017, differences between the Federal statutory income tax rate of 34% and the effective taxrate are primarily due to the enactment of U.S. tax legislation known as the Tax Cuts and Jobs Act (“TCJA”), foreign tax ratedifferential and a change in estimate with regard to the prior year Orphan Drug credit. In December 2017, the Securities andExchange Commission staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cutsand Jobs Act (SAB 118), which allowed us to record provisional amounts during a measurement period not to exceed beyondone year of the enactment date. In the fourth quarter of 2018, we completed our analysis to determine the effect of the 2017Tax Act, which did not require any adjustments as of December 31, 2018.Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financialstatement purposes and the comparable amounts recorded for income tax purposes. Significant components of the deferredtax assets (liabilities) at December 31, 2018 and 2017 respectively are as follows: December 31, December 31, 2018 2017Deferred tax assets: Accounts receivable $44,241 $495,373Accrued expenses 12,640,052 11,259,586Inventory 490,574 341,539Investment in partnership 9,536,754 7,730,044Net operating losses 3,742,237 5,716,378Tax credits 4,616,722 9,091,441Share compensation 439,318 —Other 2,634,429 1,932,521Less: valuation allowance (298,219) (137,061)Deferred tax liabilities: Prepaid expenses (828,216) (9,200,249)Property plant & equipment (3,002,215) (2,827,186)Intangible assets (56,253,518) (67,293,830)Total deferred income taxes $(26,237,841) $(42,891,444) On December 22, 2017, the U.S. enacted the TCJA, which resulted in the revaluation of the Company's U.S. related deferredtax assets and liabilities and had an impact on the Company's total 2017 tax benefit.Included in the deferred tax balances above is a net deferred tax liability of $30,289,469 and $44,655,585 respectively for2018 and 2017 related to the assets and liabilities in Vertical/Trigen Holdings, LLC, which is a partnership for135 Table of ContentsFederal income tax purposes. The Company owns in aggregate 100% of Vertical/Trigen Holdings, LLC and the assets andliabilities of this entity are included in the consolidated financial statements of the Company.As of December 31, 2018 and 2017, the Company had a federal net operating loss carryover of $3.3 million and $4.4 million,respectively and net operating loss carryovers in certain foreign tax jurisdictions of approximately $30.5 million and $90.2million, respectively which will begin to expire in 2022. At December 31, 2018 and 2017, the Company had total tax creditcarryovers of approximately $4.6 million and $9.1 million primarily consisting of Federal Orphan Drug Tax Creditcarryovers. These credit carryovers begin to expire in 2036. The Company assesses the realizability of the deferred tax assetsat each balance sheet date based on actual and forecasted operating results in order to determine the proper amount, if any,required for a valuation allowance. As of December 31, 2018 and 2017, the Company maintains valuation allowances ondeferred tax assets applicable to entities in foreign jurisdictions for which separate income tax returns are filed, whererealization of the related deferred tax assets from future profitable operations is not reasonably assured. In 2018, the valuationallowance increased by $1.8 million due to incremental net operating losses applicable to entities in foreign jurisdictions.The Company leverages its significant resources in research and development and proprietary drug delivery technology toaddress the growing need of the global patient population. The Company completed a tax evaluation project for its yearended December 31, 2017 to determine its appropriate research and development credits for the Orphan Drug and Research &Development credit. This project resulted in the engagement of professional technical experts and the investment insignificant time to evaluate historical records to identify the maximum credits as permitted by the relevant tax law. Thisproject was concluded in connection with the preparation of the current year financial statements. As a result of thesignificant effort required to attain, validate and conclude on the appropriate credits, the Company considers the results ofthe tax project to be new information and therefore the results of such project are recorded in the current year as a change inaccounting estimate. In the year ended December 31, 2017, the adjustment recorded was an increase in tax credits ofapproximately $5.7 million net of a reduction in income tax expense of approximately $2.7 million for a net tax effect of$3.0 million.The Company files income tax returns in U.S. federal, state and certain international jurisdictions. For federal and certainstate income tax purposes, the Company's 2014 through 2017 tax years remain open for examination by the tax authoritiesunder the normal statute of limitations. For certain international income tax purposes, the Company's 2010 through 2017 taxyears remain open for examination by the tax authorities under the normal statute of limitations.No provision is made for foreign withholding or income taxes associated with the cumulative undistributed earnings of theforeign subsidiaries. The cumulative undistributed earnings, if any, are expected to be reinvested in working capital andother business needs indefinitely. Any future foreign withholding or income taxes associated with the undistributed earningsare not anticipated to be material.A reconciliation was completed of the beginning and ending amounts of unrecognized tax benefits, excluding accruedinterest, for December 31, 2018 and 2017. It is not anticipated that the amount of unrecognized tax benefits will materiallychange in the next 12 months. If recognized, the total amount of unrecognized benefits of $1.5 million would have no impacton the effective tax rate. Note 16. Related PartiesAs of December 31, 2018 and 2017, respectively, the Company had a $83,818 and $125,000 accrued liability whichcomprised of quarterly advisory and monitoring fees payable to shareholders. Further, the Company leases its Argentinaoffice and warehouse space facilities through a related party lease. The term of the operating lease is through December 31,2020. For the years ended December 31, 2018 and 2017, the Company incurred rent expense of $246,092 and $325,838,respectively.On August 22, 2018, the Company entered into a Master Service Agreement with United Biosource, LLC or UBC, an Avistaportfolio company, for prescription processing and patient access services. In November 2018, the Company and UBCentered into a Statement of Work for services valued at approximately $2.4 million.136 Table of ContentsIn 2016 the Company entered into a two‑year consulting agreement with two Vertical/Trigen shareholders. The term of theagreement requires a compensation rate of $20,833 per month and is a component of the selling, general and administrativeexpenses. This agreement terminated in January 2018. 137 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A. Controls and ProceduresDisclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of our disclosure controls and procedures as of December 31, 2018. The term “disclosure controls andprocedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of acompany that are designed to ensure that information required to be disclosed by a company in the reports that it files orsubmits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act isaccumulated and communicated to the company’s management, including its principal executive and principal financialofficers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving theirobjectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controlsand procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2018, our ChiefExecutive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures wereeffective.Changes in internal control over financial reportingOn January 1, 2018, we adopted Accounting Standards Codification 606, Revenue from Contracts with Customers, and as aresult, we have incorporated internal controls over significant process changes for revenue recognition that we believe to beappropriate and necessary in consideration of the related integration of the new standard.In connection with the preparation of our audited financial statements as of and for the years ended December 31, 2017 and2016, we identified a material weakness in our period-end financial closing process related to our lack of sufficient availableresources in our accounting and financial reporting functions with sufficient experience and expertise with respect to theapplication of GAAP and related financial reporting to ensure that we identified, accumulated and timely prepared andreviewed all required supporting information to establish the completeness and accuracy of our consolidated financialstatements and disclosures.We have identified and implemented the actions described below to remediate the underlying causes of the controldeficiencies that gave rise to the material weakness. To address the material weakness, we:·hired additional personnel and engaged external consultants who possess the requisite skills in certain technicalareas important to our financial reporting;·assessed the required training needs to provide for the continued development of our finance personnel;·performed a comprehensive review of current procedures to ensure compliance with our accounting policies andGAAP;·improved the process of reviewing the consolidation, supporting schedules and related reconciliations in ourfinancial reporting;·enhanced existing and continue developing additional monitoring controls to provide reasonable assurance thatwe maintain sufficient oversight of the performance of internal control over financial reporting responsibilities;138 Table of Contents·reassessed our existing framework used to identify and implement corrective actions on a timely, prioritized basiswith defined accountability; and·designed and implemented enhanced controls over the preparation, analysis and review of significant accounts thatoperate at the appropriate level of precision to prevent or detect a material misstatement of such balances at periodend.Based on the aforementioned actions, management has therefore concluded that the previously reported material weakness ininternal controls over financial reporting related to our lack of sufficient available resources in our accounting and financialreporting functions with sufficient experience and expertise with respect to the application of GAAP and related financialreporting for our period-end financial closing process had been remediated as of December 31, 2018.Except as described above, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended December 31, 2018 that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.Management’s Annual Report on Internal Control Over Financial ReportingThis Annual Report does not include a report of management’s assessment regarding internal control over financial reportingor an attestation report of our independent registered public accounting firm due to a transition period established by therules of the SEC for newly public companies. ITEM 9B. OTHER INFORMATIONNone. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEBrian Markison, 59, became a director and our Chief Executive Officer in 2016. Mr. Markison has been a healthcare industryadvisor to Avista since September 2012 and has more than 30 years of operational, marketing, commercial development andsales experience with international pharmaceutical companies. From July 2011 to July 2012, he served as the President andChief Executive Officer and member of the board of directors of Fougera Pharmaceuticals Inc., a specialty pharmaceuticalcompany in dermatology that was sold to Sandoz Ltd., the generics division of Novartis AG. Before leading Fougera,Mr. Markison was Chairman and Chief Executive Officer of King Pharmaceuticals, Inc., which he joined as Chief OperatingOfficer in March 2004. He was promoted to President and Chief Executive Officer later that year and elected Chairman in2007. Prior to joining King Pharmaceuticals, Inc., Mr. Markison held various senior leadership positions at Bristol-MyersSquibb Company, including President of Oncology, Virology and Oncology Therapeutics Network; President ofNeuroscience, Infectious Disease and Dermatology; and Senior Vice President, Operational Excellence and Productivity. Heserves as Chairman of the board of Lantheus Holdings, Inc. and is on the board of directors of Avista Healthcare PublicAcquisition Corp., National Spine and Pain Centers, LLC and Braeburn Pharmaceuticals, Inc. He is also a Director of theCollege of New Jersey. Mr. Markison received a B.S. degree from Iona College. Tina deVries, Ph.D., 58, became our Executive Vice President, Research & Development in May 2016. Dr. deVries mostrecently served as the Principal of TM deVries Consulting, LLC from October 2014 to April 2016. From October 2013 toSeptember 2014, she held the position of Vice President of Nonclinical and Clinical Pharmacology at Actavis plc.Dr. deVries previously served as the Vice President of Clinical Pharmacology at Warner Chilcott plc, a specialtypharmaceutical company, from April 1996 until the company was acquired by Actavis in October 2013. Dr. deVries holds aB.S. in Pharmacy and a Ph.D. in Pharmaceutics and Pharmaceutical Chemistry from The Ohio State University. 139 Table of ContentsAndrew Einhorn, 59, became our Chief Financial Officer in September 2017. Mr. Einhorn has more than 15 years ofexperience in the pharmaceutical industry. From March 2014 to March 2017, Mr. Einhorn served as the Chief FinancialOfficer of Edge Therapeutics, Inc., a clinical-stage biotechnology company that he joined as Executive Vice President ofCorporate Development in May 2013. Prior to that, he was a co-founder, Executive Vice President and Chief FinancialOfficer at Oceana Therapeutics, Inc. from May 2008 to January 2012. Previously, Mr. Einhorn was a co-founder and ChiefFinancial Officer of both Esprit Pharma, Inc., from June 2005 to October 2007, and ESP Pharma, Inc., from April 2003 toMarch 2005. From 1983 to 2003, Mr. Einhorn was an investment banker with Credit Lyonnais Securities, PNC CapitalMarkets, Chase Securities, Inc., Bankers Trust Company and the Chase Manhattan Bank. Mr. Einhorn is licensed as aCertified Public Accountant in the State of New Jersey and holds a B.S. in Finance and Accounting from The AmericanUniversity. James Schaub, 37, has served as our Executive Vice President and Chief Operating Officer since 2016. Prior to that he servedas Chief Operating Officer, Trigen Laboratories beginning in December 2013. Mr. Schaub previously served as VicePresident, M&A of Fougera Pharmaceuticals, Inc. from August 2011 to September 2012. Prior to that, Mr. Schaub spent fiveyears with King Pharmaceuticals, Inc., where he held several commercial roles of increasing responsibility. He joined ourcompany in December 2013. Mr. Schaub holds a B.A. in Economics from Middlebury College and an M.B.A. from RutgersBusiness School. Christopher Klein, 55, became our General Counsel and Secretary in December 2013. Mr. Klein previously served as theGeneral Counsel of Fougera Pharmaceuticals Inc. from August 2011 to September 2012. Prior to his time at FougeraPharmaceuticals Inc., Mr. Klein spent six years with King Pharmaceuticals, Inc. where he held the position of Deputy GeneralCounsel prior to King Pharmaceuticals, Inc.'s acquisition by Pfizer, Inc. Prior to that, Mr. Klein spent six years in senior legalroles with Bristol-Myers Squibb Company. Mr. Klein holds a B.A. in Biology from Adelphi University, an M.A. in Educationfrom Columbia University and a J.D. from Fordham University. The remaining information required with respect to this Item 10 is incorporated by reference to the information to becontained in our Proxy Statement for the 2018 Annual Meeting of Shareholders, or the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATIONThe information required by this Item 11 is incorporated by reference to the information to be contained in our definitiveProxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERSThe information required by this Item 12 is incorporated by reference to the information to be contained in our ProxyStatement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this Item 13 is incorporated by reference to the information to be contained in our ProxyStatement. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by this Item 14 is incorporated by reference to the information to be contained in our ProxyStatement. ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES140 Table of ContentsFinancial StatementsNoneFinancial Statement SchedulesNoneITEM 16. FORM 10-K SUMMARYNone 141 Table of ContentsExhibits Exhibit No. Description2.1#Business Combination Agreement, dated as of December 3, 2015, among Osmotica Holdings Corp Limited,the shareholders of Osmotica Holdings Corp Limited party thereto, Altchem Limited, Vertical/TrigenHoldings, LLC, the shareholders of Vertical/Trigen Holdings, LLC party thereto, Avista Capital PartnersIII GP, LP, and Osmotica Holdings S.C.Sp. (incorporated by reference to Exhibit 2.1 to the Company’sRegistration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 2.2#†Stock Purchase Agreement, dated as of October 24, 2017, by and between Revitalid, Inc. and OsmoticaPharmaceutical Corp. (incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement onForm S-1/A filed on October 17, 2018, Commission File No. 333-227357) 3.1 Memorandum and Articles of Association Osmotica Pharmaceuticals plc 4.1 Shareholders' Agreement 4.2 Form of Ordinary Share Certificate (incorporated by reference to Exhibit 4.2 to the Company’s RegistrationStatement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.1†License, Supply, Marketing, Distribution and Collaboration Agreement, dated as of November 24, 2003, byand between Upsher-Smith Laboratories, Inc. and Orion Corporation (incorporated by reference to Exhibit10.1 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No.333-227357) 10.2 First Amendment to License, Supply, Marketing, Distribution and Collaboration Agreement, dated as ofMay 20, 2004, by and between Upsher-Smith Laboratories, Inc. and Orion Corporation (incorporated byreference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.3 Second Amendment to License, Supply, Marketing, Distribution and Collaboration Agreement, dated as ofJune 30, 2004, by and between Upsher-Smith Laboratories, Inc. and Orion Corporation (incorporated byreference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.4†Third Amendment to License, Supply, Marketing, Distribution and Collaboration Agreement, dated as ofMay 20, 2010, by and between Upsher-Smith Laboratories, Inc. and Orion Corporation (incorporated byreference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.5†Fourth Amendment to License, Supply, Marketing, Distribution and Collaboration Agreement, dated as ofAugust 1, 2013, by and between Upsher-Smith Laboratories, Inc. and Orion Corporation (incorporated byreference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.6†Fifth Amendment to License, Supply, Marketing, Distribution and Collaboration Agreement, dated as ofJanuary 1, 2018, by and between Upsher-Smith Laboratories, Inc. and Orion Corporation (incorporated byreference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 142 Table of Contents10.7†Distribution and Supply Agreement, dated as of June 28, 2011, by and between Cipher Pharmaceuticals Inc.and Vertical Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.7 to the Company’s RegistrationStatement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.8†First Amendment to Distribution and Supply Agreement, dated as of March 27, 2012, by and between CipherPharmaceuticals Inc. and Vertical Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.8 to theCompany’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.9†Second Amendment to Distribution and Supply Agreement, dated as of November 21, 2013, by and betweenCipher Pharmaceuticals Inc. and Vertical Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.9 tothe Company’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.10†Third Amendment to Distribution and Supply Agreement, dated as of January 1, 2015, by and between CipherPharmaceuticals Inc. and Vertical Pharmaceuticals Inc. (incorporated by reference to Exhibit 10.10 to theCompany’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.11†Methylphenidate Supply Agreement, effective as of March 16, 2017, by and among Mallinckrodt LLC,Osmotica Kereskedelmi es Szolgalato Kft and Osmotica Pharmaceutical Corporation (incorporated byreference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.12†Manufacturing and Supply Agreement, effective as of March 8, 2010, by and between Mikart, Inc. andVertical Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.12 to the Company’s RegistrationStatement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.13†Tablets Marketing Rights Agreement, dated as of March 10, 2010, by and between Argent DevelopmentGroup, LLC and Vertical Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.13 to the Company’sRegistration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.14†Master Manufacturing Services Agreement, dated as of August 21, 2014, by and between PatheonPharmaceuticals Inc. and Osmotica Pharmaceutical Corp. (incorporated by reference to Exhibit 10.14 to theCompany’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1/Afiled on October 17, 2018, Commission File No. 333-227357) 10.15 First Amendment to Master Manufacturing Services Agreement, dated as January 1, 2017, by and betweenPatheon Pharmaceuticals Inc. and Osmotica Pharmaceutical US, LLC (incorporated by reference to Exhibit10.15 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission FileNo. 333-227357) 10.16†Product Agreement, dated as of October 1, 2014, by and between Patheon Pharmaceuticals Inc. and OsmoticaPharmaceutical Corp. (incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement onForm S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.17†License Agreement dated as of August 31, 2011 by and between VOOM, LLC and Revitalid, Inc.(incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1/A filed onOctober 17, 2018, Commission File No. 333-227357) 143 Table of Contents10.18†Exclusive Supply Agreement, dated as of February 7, 2013, by and between Nephron PharmaceuticalsCorporation and Revitalid, Inc. (incorporated by reference to Exhibit 10.18 to the Company’s RegistrationStatement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.19†First Amendment to Exclusive Supply Agreement, dated as October 24, 2017 by and between NephronPharmaceuticals Corporation and Revitalid, Inc. (incorporated by reference to Exhibit 10.19 to the Company’sRegistration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.20 Credit Agreement, dated February 3, 2016, by and among Osmotica Pharmaceutical Corp., Orbit BlockerI LLC, Orbit Blocker II LLC, Valkyrie Group Holdings, Inc., Osmotica Holdings US LLC, the lenders partythereto, and CIT Bank, N.A. as administrative agent and swingline lender (incorporated by reference toExhibit 10.20 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.21 First Amendment to Credit Agreement, dated November 10, 2016, by and among Osmotica PharmaceuticalCorp., Orbit Blocker I LLC, Orbit Blocker II LLC, Valkyrie Group Holdings, Inc., Osmotica Holdings US LLC,the lenders party thereto, and CIT Bank, N.A. as administrative agent and swingline lender (incorporated byreference to Exhibit 10.21 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.22 Second Amendment to Credit Agreement, dated April 28, 2017, by and among Osmotica PharmaceuticalCorp., Orbit Blocker I LLC, Orbit Blocker II LLC, Valkyrie Group Holdings, Inc., Osmotica Holdings US LLC,the lenders party thereto, and CIT Bank, N.A. as administrative agent and swingline lender (incorporated byreference to Exhibit 10.22 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.23 Third Amendment to Credit Agreement, dated December 21, 2017, by and among Osmotica PharmaceuticalCorp., Orbit Blocker I LLC, Orbit Blocker II LLC, Valkyrie Group Holdings, Inc., Osmotica Holdings US LLC,the lenders party thereto, and CIT Bank, N.A. as administrative agent and swingline lender (incorporated byreference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.24 Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.24 to theCompany’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.25 Form of Osmotica Holdings US LLC Director and Corporate Secretary Indemnification Agreement(incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-1/A filed onOctober 17, 2018, Commission File No. 333-227357) 10.26 Form of Nonqualified Option Award Agreement under the Osmotica Pharmaceuticals plc 2018 Incentive Plan(incorporated by reference to Exhibit 10.26 to the Company’s Registration Statement on Form S-1/A filed onOctober 17, 2018, Commission File No. 333-227357) 10.27 Osmotica Pharmaceuticals plc 2018 Employee Share Purchase Plan (incorporated by reference to Exhibit10.27 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission FileNo. 333-227357) 10.28 Form of Nonqualified Option Award Agreement under the Amended and Restated OsmoticaPharmaceuticals plc 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.28 to the Company’sRegistration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 144 Table of Contents10.29 Amended and Restated Osmotica Pharmaceuticals plc 2016 Equity Incentive Plan (incorporated by referenceto Exhibit 10.29 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018,Commission File No. 333-227357) 10.30 Osmotica Pharmaceuticals plc 2018 Incentive Plan (incorporated by reference to Exhibit 10.30 to theCompany’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.31 Osmotica Pharmaceuticals plc 2018 Annual Cash Incentive Plan (incorporated by reference to Exhibit 10.31to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.32+Employment Agreement, dated December 3, 2015, by and between Vertical/Trigen Holdings, LLC and BrianA. Markison (incorporated by reference to Exhibit 10.32 to the Company’s Registration Statement on Form S-1/A filed on October 17, 2018, Commission File No. 333-227357) 10.33+Employment Agreement, dated December 16, 2013, by and between Vertical/Trigen Opco, LLC and JamesSchaub (incorporated by reference to Exhibit 10.33 to the Company’s Registration Statement on Form S-1/Afiled on October 17, 2018, Commission File No. 333-227357) 10.34+Employment Agreement, dated May 2, 2016, by and between Vertical/Trigen Opco, LLC and Tina deVries(incorporated by reference to Exhibit 10.34 to the Company’s Registration Statement on Form S-1/A filed onOctober 17, 2018, Commission File No. 333-227357) 21.1 Subsidiaries of Osmotica Pharmaceuticals plc 23.1 Consent of BDO USA, LLP independent registered public accounting firm 31.1 Principal Executive Officer Certification Pursuant to Securities Exchange Act Rules13a-14 and 15d-14 asAdopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Principal Financial Officer Certification Pursuant to Securities Exchange Act Rules13a-14 and 15d-14 asAdopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002 32.2 Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Exension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document# The Company agrees to furnish supplementally to the SEC a copy of any omitted schedule or exhibit to such agreementupon request by the SEC.145 Table of Contents+ Indicates management contract or compensatory plan.† Portions of this exhibit have been omitted pursuant to a confidential treatment request. SIGNATURESPursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized. Osmotica Pharmaceuticals plc Dated: March 27, 2019By:/s/ Brian Markison Brian Markison Chief Executive Officer Dated: March 27, 2019By:/s/ Andrew Einhorn Andrew Einhorn Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities indicated on March 27, 2019. Signatures Capacity in Which Signed /s/ Brian Markison Chief Executive Officer and Director (Chairman)Brian Markison (Principal Executive Officer) /s/ Andrew Einhorn Chief Financial OfficerAndrew Einhorn (Principal Financial Officer and Accounting Officer) /s/ David Burgstahler DirectorDavid Burgstahler /s/ Gregory L. Cowan DirectorGregory L. Cowan /s/ Carlos Sielecki DirectorCarlos Sielecki /s/ Sriram Venkataraman DirectorSriram Venkataraman /s/ Juan Vergez DirectorJuan Vergez /s/ Fred Weiss DirectorFred Weiss 146Exhibit 3.1 A PUBLIC COMPANY LIMITED BY SHARES CONSTITUTIONOFOSMOTICA PHARMACEUTICALS PUBLIC LIMITED COMPANY(adopted on 17 October 2018)  COMPANIES ACT 2014A PUBLIC COMPANY LIMITED BY SHARES MEMORANDUM OF ASSOCIATIONOFOSMOTICA PHARMACEUTICALS PUBLIC LIMITED COMPANY 1. The name of the Company is Osmotica Pharmaceuticals public limited company.2. The Company is a public limited company for the purposes of Part 17 of the Companies Act 2014.3. The objects for which the Company is established are:3.1. To carry on the business of a holding company and to coordinate the administration, finances and activities ofany subsidiary companies or associated companies, to do all lawful acts and things whatsoever that arenecessary or convenient in carrying on the business of such a holding company and in particular to carry on, inall its branches, the business of a management services company, to act as managers and to direct orcoordinate the management of other companies or of the business, property and estates of any company orperson and to undertake and carry out all such services in connection therewith as may be deemed necessary orappropriate by the Company’s board of directors and to exercise its powers as a shareholder of other companies.3.2. To carry on the business of a pharmaceuticals company and to research, develop, design, manufacture, produce,supply, buy, sell, distribute, import, export, provide, promote and otherwise deal in pharmaceuticals, activepharmaceutical ingredients and dosage pharmaceuticals and other devices or products of a pharmaceutical,medicinal or healthcare character and to hold intellectual property rights and to do all things usually done bypersons carrying on the above mentioned activities or any of them or likely to be required in connection with anysuch activities.3.3. To invest in pharmaceutical and related assets, including, amongst other items, investments in pharmaceuticalcompanies, products, businesses, divisions, technologies, devices, sales force and other marketing capabilities,development projects and related activities, licences, intellectual and similar property rights, premises andequipment, royalty rights and all other assets needed to operate a pharmaceuticals business.3.4. To establish, maintain and operate laboratories for the purposes of carrying on chemical, physical and otherresearch in medicine, chemistry, industry or other unrelated or related fields.3.5. To invest (including long-term investments in, and acquisitions of, the shares or other securities or ownershipinterests in other companies) any monies of the Company in such investments and in such manner as may fromtime to time be determined, and to hold, sell or deal with such investments and generally to purchase, take onlease or in exchange or otherwise acquire any real and personal property and rights or privileges.3.6. To develop and turn to account any land acquired by the Company or in which it is interested and in particular bylaying out and preparing the same for building purposes, constructing, altering, pulling down, decorating,maintaining, fitting up and improving buildings and conveniences, and by planting, paving, draining, farming,cultivating, letting on building lease or building agreement and by advancing money to and entering into contractsand arrangements of all kinds with builders, tenants and others. 1  3.7. To acquire and hold shares and stocks of any class or description, debentures, debenture stocks, bonds, bills,mortgages, obligations, investments, partnership interests, limited partnership interests, trust interests,membership interests and other securities or ownership interests of all descriptions and of any kind issued orguaranteed by any company or undertaking of whatever nature and wheresoever constituted or carrying onbusiness or issued or guaranteed by any government, state, dominion, colony, sovereign ruler, commissioners,trust, public, municipal, local or other authority or body of whatever nature and wheresoever situated andinvestments, securities and property of all descriptions and of any kind, including real and chattel real estates,mortgages, reversions, assurance policies, contingencies and choses in action.3.8. To remunerate by cash payments or allotment of shares or securities or other ownership interests (includingrights to acquire shares or securities or other ownership interests) of the Company credited as fully paid up orotherwise any person or company for services rendered or to be rendered to the Company or any parent orsubsidiary body corporate whether in the conduct or management of its business, or in placing or assisting toplace or guaranteeing the placing of any of the shares of the Company's capital, or any debentures or othersecurities of the Company or in or about the formation or promotion of the Company.3.9. To purchase for investment property of any tenure and any interest therein, and to make advances upon thesecurity of land or other similar property or any interest therein.3.10. To acquire by purchase, exchange, lease, fee, farm grant or otherwise, either for an estate in fee simple or forany less estate or other estate or interest, whether immediate or reversionary and whether vested or contingent,any lands, tenements or hereditaments of any tenure, whether subject or not to any charges or encumbrances,and to hold, farm, work and manage and to let, sublet, mortgage or charge land and buildings of any kind,reversions, interests, annuities, life policies, and any other property real or personal, movable or immovable,either absolutely or conditionally, and either subject or not to any mortgage, charge, ground rent or other rents orencumbrances.3.11. To erect or secure the erection of buildings or other structures of any kind with a view of occupying or lettingthem or otherwise utilising them and to enter into any contracts or leases and to grant any licences necessary toeffect the same.3.12. To maintain and improve any lands, tenements or hereditaments acquired by the Company or in which theCompany is interested, in particular by decorating, maintaining, furnishing, fitting up and improving houses,shops, flats, maisonettes and other buildings and structures and to enter into contracts and arrangements of allkinds with tenants and others.3.13. To sell, exchange, mortgage (with or without power of sale), assign, turn to account or otherwise dispose of andgenerally deal with the whole or any part of the property, shares, stocks, securities, estates, rights orundertakings of the Company, real property, chattels real or personal, movable or immovable, either in whole or inpart.3.14. To take part in the management, supervision, or control of the business or operations of any company orundertaking, and for that purpose to appoint and remunerate any directors, accountants, or other experts oragents to act as consultants, supervisors and agents of other companies or undertakings and to providemanagerial, advisory, technical, design, purchasing and selling services and any other services deemedappropriate by the Company.3.15. To make, draw, accept, endorse, negotiate, issue, execute, discount and otherwise deal with bills of exchange,promissory notes, letters of credit, circular notes, and other negotiable or non-negotiable or transferable or non-transferrable instruments.3.16. To redeem, purchase, or otherwise acquire in any manner permitted by law any shares in the Company's capitalor other securities or ownership interests of any kind issued by the Company. 2  3.17. To guarantee, support or secure whether by personal covenant or by mortgaging or charging all or any part of theundertaking, property and assets (present and future) and uncalled capital of the Company or by both suchmethods, or by any other method whatsoever, the performance of the obligations of, and the repayment orpayment of the principal amounts of and the premiums, interest, dividends and other amounts due on or withrespect to any security of any person, firm or company, including any company which is for the time being theCompany's holding company (as defined by section 8 of the Companies Act 2014) or subsidiary (as defined bysection 7 of the Companies Act 2014) or another subsidiary as defined by the said section of the Company'sholding company (as defined by section 8 of the Companies Act 2014) or otherwise associated with the Companyin business notwithstanding the fact that the Company may not receive any consideration, advantage or benefit,direct or indirect from entering into such guarantee or other arrangement or transaction contemplated herein.3.18. To lend the funds of the Company with or without security and at interest or free of interest.3.19. To raise or borrow or secure the payment of money, including by the issue of bonds, debentures or debenturestock, perpetual or redeemable, or by mortgage, charge, lien or pledge upon the whole or any part of theundertaking, property, assets or rights of the Company, present or future, including its uncalled capital andgenerally in any other manner as the directors shall from time to time determine and to enter into or issue interestand currency hedging and swap agreements, forward rate agreements, interest and currency futures or optionsand other forms of financial instruments, and to purchase, redeem or pay off any of the foregoing and toguarantee any or all of the liabilities of the Company, any other company or any other person, and anydebentures, debenture stock or other securities may be issued at a discount, premium or otherwise, and with anyspecial privileges as to redemption, surrender, transfer, drawings, allotments of shares, attending and voting atgeneral meetings of the Company, appointment of directors and otherwise.3.20. To accumulate capital for any of the purposes of the Company, and to appropriate any of the Company's assetsto specific purposes, either conditionally or unconditionally, and to admit any class or section of those who haveany dealings with the Company to any share in the profits thereof or in the profits of any particular branch of theCompany's business or to any other special rights, privileges, advantages or benefits.3.21. To reduce the share capital of the Company in any manner permitted by law.3.22. To make gifts or grant bonuses to officers or other persons who are or have been in the employment of theCompany and to allow any such persons to have the use and enjoyment of such property, chattels or otherassets belonging to the Company upon such terms as the Company shall think fit.3.23. To establish and maintain or procure the establishment and maintenance of any pension or superannuation fund(whether contributory or otherwise) for the benefit of and to give or procure the giving of donations, gratuities,pensions, annuities, allowances, emoluments or charitable aid to any persons who are or were at any time in theemployment or service of the Company or any of its predecessors in business, or of any company which is asubsidiary of the Company or who may be or have been directors or officers of the Company, or of any suchother company as aforesaid, or any persons in whose welfare the Company or any such other company asaforesaid may be interested and the wives, husbands, widows, widowers, families, relatives or dependants of anysuch persons, and to make payments towards insurance and assurance and to form and contribute to providentand benefit funds for the benefit of any such persons and to remunerate any person, firm or company renderingservices to the Company or of any company which is a subsidiary of the Company, whether by cash payment,gratuities, pensions, annuities, allowances, emoluments or by the allotment of shares or securities of theCompany credited as paid up in full or in part or otherwise.3  3.24. To employ experts to investigate and examine into the conditions, prospects, value, character and circumstancesof any business concerns, undertakings, assets, property or rights.3.25. To insure the life of any person who may, in the opinion of the Company, be of value to the Company, as havingor holding for the Company interests, goodwill, or influence or otherwise and to pay the premiums on suchinsurance.3.26. To distribute either upon a distribution of assets or division of profits among the Members of the Company in kindany property of the Company, and in particular any shares, debentures or securities of other companiesbelonging to the Company or of which the Company may have the power of disposing.3.27. To give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security orotherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or tobe made by any person of or for any shares in the Company, or, where the Company is a subsidiary company, inits holding company.3.28. To do and carry out all or any of the foregoing or following objects in any part of the world and either as principals,agents, contractors, trustees or otherwise, and either by or through agents, trustees or otherwise and either aloneor in partnership or in conjunction with any other company, firm or person, provided that nothing herein containedshall empower the Company to carry on the business of insurance.3.29. To apply for, purchase or otherwise acquire any patents, brevets d'invention, licences, trademarks, trade names,copyrights, industrial designs, know-how, concessions and other forms of intellectual property rights and the likeconferring any exclusive or non-exclusive or limited or contingent rights to use, or any secret or other informationas to any invention or process of the Company, or the acquisition of which may seem calculated directly orindirectly to benefit the Company, and to use, exercise, develop, or grant licences in respect of, or otherwise turnto account the property, rights or information so acquired.3.30. To enter into partnership or into any arrangement for sharing profits, union of interests, co-operation, joint venture,reciprocal concession or otherwise with any person or company.3.31. To acquire and undertake the whole or any part of the undertaking, business, property and liabilities of any personor company.3.32. To adopt such means of making known the Company and its products and services as may seem expedient.3.33. To acquire and carry on any business carried on by a subsidiary or a holding company of the Company or anothersubsidiary of a holding company of the Company.3.34. To promote any company or companies for the purpose of acquiring all or any of the property and liabilities of thisCompany or for any other purpose which may seem directly or indirectly calculated to benefit this Company.3.35. To amalgamate with, merge with or otherwise become part of or associated with any other company orassociation in any manner permitted by law.3.36. To make voluntary dispositions of all or any part of the property and rights of the Company and to make giftsthereof or gratuitous payments either for no consideration or for a consideration less than the market value ofsuch property or rights or the amount of cash payment or by all or any such methods.4 3.37. To receive voluntary dispositions of all or any part of the undertakings, properties, assets or rights of any othercorporation and to receive gifts thereof or gratuitous payments either for noconsideration or for a consideration less than the market value of such property or rights or the amount of cashpayment or by all or any such methods.3.38. To do and carry out all such other things, except the issuing of policies of insurance, as may be deemed by theCompany capable of being carried on in connection with the above objects or any of them or calculated toenhance the value of or render profitable any of the Company's undertakings, properties, assets or rights.And it is hereby declared that (i) the word "company" in this clause, except where used in reference to this Company,shall be deemed to include any person, partnership, limited partnership, limited liability partnership, limited liabilitycompany, other corporate body, trust or other body of persons whether incorporated or not incorporated and whetherdomiciled in Ireland or elsewhere and that the objects of the Company as specified in each of the foregoing paragraphs ofthis clause shall be separate and distinct objects and shall not be in anyway limited or restricted by reference to orinference from the terms of any other paragraph or the name of the Company and (ii) any phrase introduced by the terms"including", "include", "in particular" or any similar expression shall be construed as illustrative and shall not limit thesense of the words preceding those terms.4. The liability of each Member is limited to the amount from time to time unpaid on such Member's Shares.5. The authorised share capital of the Company is €25,000 and US$4,400,000 divided into 25,000 Euro Deferred Shares of€1.00 each, 400,000,000 Ordinary Shares of US$0.01 each and 40,000,000 Preferred Shares of US$0.01 each.6. Notwithstanding any other provision of these Memorandum and Articles of Association, amendments to this paragraph ofthe Memorandum of Association, and amendments to Articles 17, 67.1, 76, 90, 92, 112, 156-159 (inclusive), 194, and196-198 (inclusive) may only be made with the prior approval of the holders of at least 75% in nominal value of the issuedOrdinary Shares of the Company which carry an entitlement to vote at a general meeting of the Company.7. The shares forming the capital, increased or reduced, may be increased or reduced and be divided into such classes andissued with any special rights, privileges and conditions or with such qualifications as regards preference, dividend,capital, voting or other special incidents, and be held upon such terms as may be attached thereto or as may from timeto time be provided by the original or any substituted or amended Articles of Association and regulations of the Companyfor the time being, but so that where shares are issued with any preferential or special rights attached thereto such rightsshall not be alterable otherwise than pursuant to the provisions of the Company's Articles of Association for the timebeing.5  COMPANIES ACT 2014A PUBLIC COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATIONOFOSMOTICA PHARMACEUTICALS PUBLIC LIMITED COMPANY 6  TABLE OF CONTENTSPRELIMINARY9 REGISTERED OFFICE13 SHARE CAPITAL; ISSUE OF SHARES13 ORDINARY SHARES14 EURO DEFERRED SHARES15 PREFERRED SHARES15 ISSUE OF WARRANTS16 CERTIFICATES FOR SHARES16 REGISTER OF MEMBERS17 TRANSFER OF SHARES17 REDEMPTION AND REPURCHASE OF SHARES19 VARIATION OF RIGHTS OF SHARES20 LIEN ON SHARES20 CALLS ON SHARES22 FORFEITURE22 NON-RECOGNITION OF TRUSTS23 TRANSMISSION OF SHARES23 AMENDMENT OF MEMORANDUM OF ASSOCIATION; CHANGE OF LOCATION OF REGISTERED OFFICE; ANDALTERATION OF CAPITAL24 CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE25 GENERAL MEETINGS26 NOTICE OF GENERAL MEETINGS26 PROCEEDINGS AT GENERAL MEETINGS27 VOTES OF MEMBERS32 PROXIES AND CORPORATE REPRESENTATIVES32 DIRECTORS34 DIRECTORS' AND OFFICERS' INTERESTS34 7  6POWERS AND DUTIES OF DIRECTORS36 MINUTES37 DELEGATION OF THE BOARD'S POWERS37 CHAIRPERSON AND EXECUTIVE OFFICERS38 PROCEEDINGS OF DIRECTORS38 RESIGNATION AND DISQUALIFICATION OF DIRECTORS39 APPOINTMENT, ROTATION AND NOMINATION OF DIRECTORS40 SECRETARY42 SEAL42 DIVIDENDS, DISTRIBUTIONS AND RESERVES42 CAPITALISATION43 ACCOUNTS44 AUDIT45 NOTICES45 UNTRACED HOLDERS47 DESTRUCTION OF DOCUMENTS48 WINDING UP48 INDEMNITY49 FINANCIAL YEAR50 SHAREHOLDER RIGHTS PLAN50 BUSINESS COMBINATION50 EXCLUSIVE JURISDICTION57 8  PRELIMINARY1. Sections 43(2), 43(3), 65(2)-(7), 77-81, 83(3), 94(1), 95(1), 96(2)-(11), 124, 125, 126(2) to (8), 144(3)-(4), 148(2), 158-165, 178(2), 180(5), 181(1), 181(6), 182(2), 182(5), 183(3), 186(c)(i), 187, 188, 218(3)-(5), 229, 230, 338(5)-(6), 618(1)(b),620(8), 1090, 1092, and 1113 of the Companies Act shall not apply to the Company. The provisions of the CompaniesAct which are stated therein to apply to a public limited company, save to the extent that its constitution is permitted toprovide or state otherwise, will apply to the Company subject to the alterations contained in these Articles, and will, so faras not inconsistent with these Articles, bind the Company and its Members.2.2.1. In these Articles:"1990 Regulations"The Companies Act 1990 (Uncertificated Securities) Regulations 1996 (S.I.No. 68 of 1996) as may be amended from time to time."address"includes any number or address used for the purposes of communication byway of electronic mail or other electronic communication."Adoption Date"means 17 October 2018."Articles" or "Articles of Association"means these articles of association of the Company, as amended from time totime by Special Resolution or in accordance with paragraph 6 of theMemorandum."Assistant Secretary"means any person appointed by the Board from time to time to assist theSecretary."Auditors"means the persons for the time being performing the duties of the statutoryauditors of the Company."Board"means the board of Directors for the time being of the Company."Chairperson"means the chairperson of the Board from time to time and/or chairperson of ageneral meeting of the Company as the context may require."clear days"means, in relation to a period of notice, that period excluding the day when thenotice is given or deemed to be given and the day for which notice is beinggiven or on which an action or event for which notice is being given is to occuror take effect. 9  "Companies Act"means the Irish Companies Act 2014 and every statutory modification,replacement and re-enactment thereof for the time being in force."Company"means Osmotica Pharmaceuticals plc."Court"means the Irish High Court.“CSD Regulation”means any regulation of the European Parliament and of the Council onimproving securities settlement in the European Union and on centralsecurities depositories and amending Directive 98/26/EC.“Derivative Transaction”means any agreement, arrangement, interest or understanding entered into by,or on behalf or for the benefit of, any Proponent or any of its affiliates orassociates, whether record or beneficial: (A) the value of which is derived inwhole or in part from the value of any class or series of Shares or othersecurities of the Company, (B) which otherwise provides any direct or indirectopportunity to gain or share in any gain derived from a change in the value ofsecurities of the Company, (C) the effect or intent of which is to mitigate loss,manage risk or benefit of security value or price changes with respect to anysecurities of the Company, or (D) which provides the right to vote or increaseor decrease the voting power of such Proponent, or any of its affiliates orassociates, with respect to any securities of the Company, which agreement,arrangement, interest or understanding may include, without limitation, anyoption, warrant, debt position, note, bond, convertible security, swap, stockappreciation right, short position, profit interest, hedge, right to dividends,voting agreement, performance-related fee or arrangement to borrow or lendshares (whether or not subject to payment, settlement, exercise or conversionin any such class or series), and any proportionate interest of such Proponentin the securities of the Company held by any general or limited partnership, orany limited liability company, of which such Proponent is, directly or indirectly,a general partner or managing member."Directors"means the directors for the time being of the Company."dividend"includes dividends, final dividends, interim dividends and bonus dividends."electronic communication"shall have the meaning given to those words in the Electronic Commerce Act2000. 10  "electronic signature" "Enterprise"shall have the meaning given to those words in the Electronic Commerce Act2000.means the Company and any other corporation, limited liability company,partnership, joint venture, trust, employee benefit plan or other enterprise orentity which a person is or was serving at the request of the Company."Exchange"means any securities exchange or other system on which the Shares of theCompany may be listed or otherwise authorised for trading from time to time."Exchange Act"means the Securities Exchange Act of 1934 of the United States of America.“IAS Regulation”means Regulation (EC) No. 1606/2002 of the European Parliament and of theCouncil of 19 July 2002 on the application of internal accounting standards."Member"means a person who has agreed to become a member of the Company andwhose name is entered in the Register of Members as a registered holder ofShares."Memorandum"means the memorandum of association of the Company as amended fromtime to time by Special Resolution or in accordance with paragraph 6 of theMemorandum."month""Official"means a calendar month.means a director, officer, secretary, employee, trustee, agent, partner,managing member, fiduciary or other official of the Company or anotherEnterprise."Ordinary Resolution"means an ordinary resolution of the Company's Members within the meaning ofsection 191 of the Companies Act."paid-up"means paid-up in accordance with the Companies Act as to the nominal valueand any premium payable in respect of the issue of any Shares and includescredited as paid-up."Proponent"shall have the meaning given to that term in Article 90.4."Redeemable Shares"means redeemable shares in accordance with the Companies Act. 11  "Register of Members" or "Register"means the register of Members of the Company maintained by or on behalf ofthe Company, in accordance with the Companies Act."registered office"means the registered office for the time being of the Company."Seal"means the seal of the Company, if any, and includes every duplicate seal."Secretary"means the person appointed by the Board to perform any or all of the duties ofsecretary of the Company and includes an Assistant Secretary and any personappointed by the Board or the Secretary to perform the duties of secretary ofthe Company, in each case, when acting in the capacity of the secretary of theCompany."Share" and "Shares"means a share or shares in the capital of the Company."Special Resolution"means a special resolution of the Company's Members within the meaning ofsection 191 of the Companies Act."Sponsor Holders"means each of Avista Capital Holdings, L.P. and Altchem Limited and theirrespective affiliates, and Sponsor Holder means either of them. 2.2. In these Articles (unless otherwise specified):2.2.1. words importing the singular number include the plural number and vice-versa;2.2.2. words importing the feminine gender include the masculine gender and the neuter and vice-versa;2.2.3. words importing persons include any company, partnership or other body of persons, whether corporateor not, any trust and any government, governmental body or agency or public authority, whether ofIreland or elsewhere and references to a company, except where used in reference to the Company,shall be deemed to include any person, partnership, limited partnership, limited liability partnership,limited liability company, other corporate body, trust or other body of persons whether incorporated ornot incorporated and whether domiciled in Ireland or elsewhere;2.2.4. expressions referring to "written" and "in writing" shall be construed, unless the contrary intentionappears, as including references to printing, lithography, photography and any other modes ofrepresenting or reproducing words in a visible form except as provided in these Articles and/or where itconstitutes writing in electronic form sent to the Company;2.2.5. expressions referring to execution of any document shall include any mode of execution whether underseal or under hand or any mode of electronic signature;12  2.2.6. references to provisions of any law or regulation shall be construed as references to those provisionsas amended, modified, re-enacted or replaced from time to time;2.2.7. any phrase introduced by the terms "including", "include", "in particular" or any similar expression shallbe construed as illustrative and shall not limit the sense of the words preceding those terms;2.2.8. reference to "officer" or "officers" in these Articles means any executive that has been designated bythe Company as an "officer" and, for the avoidance of doubt, shall not have the meaning given to suchterm in the Companies Act and any such officers shall not constitute officers of the Company withinthe meaning of section 2(1) of the Companies Act;2.2.9. headings are inserted for reference only and shall be ignored in construing these Articles; and2.2.10. references to US$, USD, $ or dollars shall mean United States dollars, the lawful currency of theUnited States of America and references to €, euro, or EUR shall mean the euro, the lawful currency ofIreland.REGISTERED OFFICE3. The registered office shall be at such place in Ireland as the Board from time to time shall decide.SHARE CAPITAL; ISSUE OF SHARES4. The authorised share capital of the Company is €25,000 and US$4,400,000 divided into 25,000 Euro Deferred Shares of€1.00 each, 400,000,000 Ordinary Shares of US$0.01 each and 40,000,000 Preferred Shares of US$0.01 each.5. Subject to the provisions of these Articles relating to new Shares, the Shares shall be at the disposal of the Directors,and they may (subject to the provisions of the Companies Act) allot, issue, grant options over or otherwise dispose ofthem to such persons, on such terms and conditions and at such times as they may consider to be in the best interestsof the Company and its Members, but so that no Share shall be issued at a discount save in accordance with sections71(4) and 1026 of the Companies Act, and so that, in the case of Shares offered to the public for subscription, theamount payable on application on each such Share shall not be less than one-quarter of the nominal amount of the Shareand the whole of any premium thereon. To the extent permitted by the Companies Act, Shares may also be allotted by acommittee of the Directors or by any other person where such committee or person is so authorised by the Directors.6. Subject to any requirement to obtain the approval of Members under any laws, regulations or the rules of any Exchange,the Board is authorised, from time to time, to grant such persons, for such periods and upon such terms as the Boarddeems advisable, options or awards to purchase or subscribe for any number of Shares of any class or classes or of anyseries of any class and other securities or ownership interests of the Company as the Board may deem advisable, and tocause warrants or other appropriate instruments evidencing such options or awards to be issued.7.7.1. The Directors are, for the purposes of section 1021 of the Companies Act, generally and unconditionallyauthorised to exercise all powers of the Company to allot and issue relevant securities (as defined by the saidsection 1021) up to the amount of the Company's authorised but unissued share capital and to allot and issueany Shares acquired by or on behalf of the Company pursuant to the provisions of the Companies Act and heldas treasury shares and,13  unless it is renewed or a longer period of time is allowed under applicable law, this authority shall expire fiveyears from the Adoption Date.7.2. The Directors are hereby empowered pursuant to sections 1022 and 1023(3) of the Companies Act to allot equitysecurities (as defined by the said section 1023) for cash pursuant to the authority conferred by Article 7.1 as ifsection 1022 of the Companies Act did not apply to any such allotment.7.3. The Company may before the expiry of the authorities conferred by Articles 7.1 and/or 7.2 make an offer oragreement which would or might require relevant securities (as defined in section 1021 of the Companies Act)and/or equity securities (as defined in section 1023 of the Companies Act), as the case may be, to be allottedafter such expiry and the Board may allot relevant securities and/or equity securities in pursuance of such anoffer or agreement as if the authorities conferred by Articles 7.1 and/or 7.2 had not expired.7.4. The Company may issue permissible letters of allotment (as defined by section 1019 of the Companies Act) tothe extent permitted by the Companies Act.8. The Company may pay commission to any person in consideration of any person subscribing or agreeing to subscribe,whether absolutely or conditionally, for the Shares in the Company or procuring or agreeing to procure subscriptions,whether absolute or conditional, for any Shares in the Company on such terms and, subject to the provisions of theCompanies Act and to such conditions as the Board may determine including by paying cash or allotting and issuing fullyor partly paid Shares or any combination of the two. The Company may also on any issue of Shares pay such brokerageas may be lawful.ORDINARY SHARES9. The rights and restrictions attaching to the Ordinary Shares shall be as follows:9.1. subject to the right of the Company to set record dates for the purposes of determining the identity of Membersentitled to notice of and/or to vote at a general meeting and any rules or regulations applicable to the conduct ofany general meeting of the Company, the right to attend and speak at any general meeting of the Company andto exercise one vote per Ordinary Share held at any general meeting of the Company;9.2. the right to participate pro rata in all dividends declared by the Company with respect to the Ordinary Shares;and9.3. the right, in the event of the Company's winding up, to participate pro rata with all other Ordinary Shares in thetotal assets of the Company.10. The rights attaching to the Ordinary Shares shall be subject to the terms of issue of any series or class of PreferredShares allotted by the Directors from time to time in accordance with Article 17.11. Unless the Board specifically resolves to treat such acquisition as a purchase for the purposes of the Companies Act,an Ordinary Share shall be deemed to be a Redeemable Share on, and from the time of, the existence or creation of anagreement, transaction or trade between the Company (including any agent or broker acting on behalf of the Company)and any third party pursuant to which the Company acquires or will acquire Ordinary Shares, or an interest in OrdinaryShares, from such third party and the Company is hereby authorised to enter into any such agreement, transaction ortrade. In these circumstances, the acquisition of such Shares or interest in Shares by the Company shall constitute theredemption of a Redeemable Share in accordance with the Companies Act. No resolution, whether special or otherwise,shall be required to be passed to deem any Ordinary Share a Redeemable Share, or to authorise the redemption of sucha Redeemable Share and once deemed to be a Redeemable Share such share shall be redeemable at the instance of theCompany.14  12. All Ordinary Shares shall rank pari passu with each other in all respects.EURO DEFERRED SHARES13. The holders of the Euro Deferred Shares shall not be entitled to receive any dividend or distribution and shall not beentitled to receive notice of, nor to attend, speak or vote at, any general meeting of the Company. On a return of assets,whether on liquidation or otherwise, the Euro Deferred Shares shall entitle the holder thereof only to the repayment of theamounts paid up on such shares after repayment of the capital paid up on the Ordinary Shares plus the payment of$5,000,000 on each of the Ordinary Shares and the holders of the Euro Deferred Shares (as such) shall not be entitled toany further participation in the assets or profits of the Company.14. The Company has the irrevocable authority at any time after the Adoption Date to:14.1. acquire all or any of the fully paid Euro Deferred Shares otherwise than for valuable consideration in accordancewith section 102 of the Companies Act and without obtaining the sanction of the holders thereof;14.2. appoint any person to execute on behalf of the holders of the Euro Deferred Shares remaining in issue (if any) atransfer thereof and/or an agreement to transfer the same otherwise than for valuable consideration to theCompany or to such other person as the Company may nominate;14.3. cancel any acquired Euro Deferred Shares; and14.4. pending such acquisition and/or transfer and/or cancellation, retain the certificate (if any) for such Euro DeferredShares.15. In accordance with section 1040(3) of the Companies Act, the Company shall, not later than three (3) years after anyacquisition by it of any Euro Deferred Shares as aforesaid, cancel such shares (except those which, or any interest ofthe Company in which, it shall have previously disposed of) and reduce the amount of the share capital by the nominalvalue of the shares so cancelled and the Board may take such steps as are required to enable the Company to carry outits obligations under that section without complying with sections 84 and 85 of the Companies Act, including passingresolutions in accordance with section 1040(5) of the Companies Act.16. Neither the acquisition by the Company otherwise than for valuable consideration of all or any of the Euro DeferredShares nor the redemption thereof nor the cancellation thereof by the Company in accordance with these Articles shallconstitute a variation or abrogation of the rights or privileges attached to the Euro Deferred Shares, and accordingly theEuro Deferred Shares or any of them may be so acquired, redeemed and cancelled without any such consent or sanctionon the part of the holders thereof. The rights conferred upon the holders of the Euro Deferred Shares shall not be deemedto be varied or abrogated by the creation of further Shares ranking in priority thereto or pari passu therewith.PREFERRED SHARES17.17.1. The Directors are authorised to issue all or any of the authorised but unissued Preferred Shares from time to timein one or more classes or series, and to fix for each such class or series such voting power, full or limited, or novoting power, and such designations, preferences and relative, participating, optional or other special rights andsuch qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution orresolutions adopted by the Directors providing for the issuance of such class or series, including (but not limitedto) the authority to provide that any such class or series may be:15  17.1.1. redeemable at the option of the Company, or the holders, or both, with the manner of the redemption to be setby the Directors, and redeemable at such time or times, including upon a fixed date, and at such price orprices as the Directors may determine;17.1.2. entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditionsand at such times as the Directors may determine, and which may be payable in preference to, or in suchrelation to, the dividends payable on any other class or classes of Shares or any other series as the Directorsmay determine;17.1.3. entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Company as theDirectors may determine; or17.1.4. convertible into, or exchangeable for, Shares of any other class or classes of Shares, or of any other series ofthe same or any other class or classes of Shares, of the Company at such price or prices or at such rates ofexchange and with such adjustments as the Directors may determine.17.2. The Directors may at any time before the allotment of any Preferred Share by further resolution in any wayamend the designations, preferences, rights, qualifications, limitations or restrictions, or vary or revoke thedesignations of such Preferred Shares.18. The rights conferred upon the holder of any pre-existing Shares in the share capital of the Company shall be deemed notto be varied by the creation, issue and allotment of Preferred Shares in accordance with Article 17.ISSUE OF WARRANTS19. The Board may issue warrants to subscribe for any class of Shares or other securities of the Company on such terms asit may from time to time determine.CERTIFICATES FOR SHARES20. Unless otherwise provided for by the Board or the rights attaching to or by the terms of issue of any particular Shares, orto the extent required by any Exchange, depository or any operator of any clearance or settlement system or by law, noperson whose name is entered as a Member in the Register of Members shall be entitled to receive a share certificate forany Shares of any class held by him or her (nor on transferring a part of holding, to a certificate for the balance).21. Any share certificate, if issued, shall specify the number of Shares in respect of which it is issued and the amount paidthereon or the fact that they are fully paid, as the case may be, and may otherwise be in such form as shall bedetermined by the Board. Such certificates may be under Seal. All certificates for Shares shall be consecutivelynumbered or otherwise identified and shall specify the Shares to which they relate. The name and address of the personto whom the Shares represented thereby are issued, with the number of Shares and date of issue, shall be entered in theRegister of Members. All certificates surrendered to the Company for transfer shall be cancelled and no new certificateshall be issued until the former certificate for a like number of Shares shall have been surrendered and cancelled. TheBoard may authorise certificates to be issued with the Seal and authorised signature(s) affixed by some method orsystem of mechanical or electronic process. In respect of a Share or Shares held jointly by several persons, theCompany shall not be bound to issue a certificate or certificates to each such person, and the issue and delivery of acertificate or certificates to one of several joint holders shall be sufficient delivery to all such holders.22. If a share certificate is defaced, worn out, lost or destroyed, it may be renewed on such terms (if any) as to evidenceand indemnity and on the payment of such expenses reasonably incurred by the Company in investigating suchevidence, as the Board may prescribe, and, in the case of defacement or wearing out, upon delivery of the old certificate.16  REGISTER OF MEMBERS23. The Company shall maintain or cause to be maintained a Register of its Members in accordance with the CompaniesAct.24. If the Board considers it necessary or appropriate, the Company may establish and maintain a duplicate Register orRegisters of Members at such location or locations within or outside Ireland as the Board thinks fit. The original Registerof Members shall be treated as the Register of Members for the purposes of these Articles and the Companies Act.25. The Company, or any agent(s) appointed by it to maintain any duplicate Register of Members in accordance with theseArticles shall, as soon as practicable and on a regular basis record, or procure the recording of, in the original Register ofMembers, all transfers of Shares effected on any duplicate Register of Members and shall at all times maintain theoriginal Register of Members in such manner as to show at all times the Members for the time being and the Sharesrespectively held by them, in all respects in accordance with the Companies Act.26. The Company shall not be bound to register more than four (4) persons as joint holders of any Share. If any Share shallstand in the names of two (2) or more persons, the person first named in the Register of Members shall be deemed thesole holder thereof as regards service of notices and, subject to the provisions of these Articles, all or any other mattersconnected with the Company.TRANSFER OF SHARES27. Subject to such of the restrictions of these Articles and to such of the conditions of issue or transfer as may beapplicable, all transfers of Shares shall be effected by an instrument in writing (an "instrument of transfer") in such formas the Board or the Secretary may approve. All such instruments of transfer must be left at the registered office or atsuch other place as the Board or the Secretary may specify and all such instruments of transfer shall be retained by theCompany.28.28.1. In the case of transfers to Cede & Co (or to any successor thereto, or to any other affiliate or nominee of TheDepositary Trust Company or of any successor to The Depositary Trust Company) the instrument of transfershall not be effective until executed by:28.1.1. the Secretary (or such person as may be nominated by the Secretary for this purpose) on behalf ofthe Company; and28.1.2. by the transferor or alternatively by or on behalf of the transferor by the Secretary (or such person asmay be nominated by the Secretary for this purpose) on behalf of the Company, and the Companyshall be deemed to have been irrevocably appointed agent for the transferor of such Share or Shareswith full power to execute, complete and deliver in the name of and on behalf of the transferor of suchShare or Shares all such transfers of Shares held by the Members in the share capital of theCompany.28.2. In the case of transfers other than those to Cede & Co (or to any successor thereto, or to any other affiliate ornominee of The Depositary Trust Company or of any successor to The Depositary Trust Company), theinstrument of transfer of any Share shall be executed by the transferor or alternatively for and on behalf of thetransferor by the Secretary (or such other person as may be nominated by the Secretary for this purpose) onbehalf of the Company, and the Secretary (or relevant nominee), acting on behalf of the Company shall bedeemed to have been irrevocably appointed agent for the transferor of such Share or Shares with full power toexecute, complete and deliver in the name of and on behalf of the transferor of such Share or Shares all suchtransfers of Shares held by the Members in the share capital of the Company.17  28.3. An instrument of transfer need not be executed by the transferee except to the extent required by the CompaniesAct. Any document which records the name of the transferor, the name of the transferee, the class and numberof Shares agreed to be transferred and the date of the agreement to transfer the Shares, shall, once executed inaccordance with this Article, be deemed to be a proper instrument of transfer for the purposes of section 94 ofthe Companies Act.28.4. The transferor shall be deemed to remain the holder of the Share until the name of the transferee is entered onthe Register in respect thereof, and neither the title of the transferee nor the title of the transferor shall beaffected by any irregularity or invalidity in the proceedings in reference to the sale should the Board so determine.28.5. The Company, at its absolute discretion and insofar as the Companies Act or any other applicable law permits,may, or may procure that a subsidiary of the Company shall, pay Irish stamp duty arising on a transfer of Shareson behalf of the transferor or transferee of such Shares of the Company. If stamp duty resulting from the transferof Shares in the Company which would otherwise be payable by the transferor or transferee is paid by theCompany or any subsidiary of the Company on behalf of the transferor or transferee, then in thosecircumstances, the Company shall, on its behalf or on behalf of its subsidiary (as the case may be), be entitled,but not required, to (i) seek reimbursement of the stamp duty from the transferor or transferee, (ii) set-off thestamp duty against any dividends payable to the transferor or transferee of those Shares or (iii) claim a first andpermanent lien on the Shares on which stamp duty has been paid by the Company or its subsidiary for theamount of stamp duty paid. The Company's lien shall extend to all dividends paid on those Shares.28.6. Notwithstanding the provisions of these Articles and subject to any CSD Regulation or any regulations madeunder section 1086 of the Companies Act or the 1990 Regulations (including any modification thereof or anyregulations in substitution therefor made under the Companies Act or otherwise), title to any Shares may also beevidenced and transferred without a written instrument in accordance with any CSD Regulation or section 1086 ofthe Companies Act or any regulations made thereunder or the 1990 Regulations (including any modificationthereof or any regulations in substitution therefor made under the Companies Act or otherwise). The Board shallhave power to permit any class of Shares to be held in uncertificated form and to implement any arrangementsthey think fit for such evidencing and transfer which accord with such regulations and in particular shall, whereappropriate, be entitled to disapply or modify all or part of the provisions in these Articles with respect to therequirement for written instruments of transfer and share certificates (if any), in order to give effect to suchregulations.29. The Board may, without assigning any reason for its decision, decline to register any transfer of any Share which is not afully paid Share. The Board may also, without assigning any reason, refuse to register a transfer of any Share unless:29.1. the instrument of transfer is fully and properly completed and is lodged with the Company at the registered officeor at such other place as the Board or the Secretary may specify, accompanied by the certificate(s) for theShares (if any) to which it relates (which shall upon registration of the transfer be cancelled) and such otherevidence as the Board may reasonably require to show the right of the transferor to make the transfer;29.2. the instrument of transfer is in respect of only one class of Shares;29.3. a registration statement under the Securities Act of 1933 (as amended) of the United States of America is ineffect with respect to such transfer or such transfer is exempt from registration and, if requested by the Board, awritten opinion from counsel reasonably acceptable to the Board is obtained to the effect that such transfer isexempt from registration;29.4. the instrument of transfer is properly stamped (in circumstances where stamping is required);18  29.5. in the case of a transfer to joint holders, the number of joint holders to which the Share is to be transferred doesnot exceed four;29.6. it is satisfied, acting reasonably, that all applicable consents, authorisations, permissions or approvals of anygovernmental body or agency in Ireland or any other applicable jurisdiction required to be obtained under relevantlaw prior to such transfer have been obtained; and29.7. it is satisfied, acting reasonably, that the transfer would not violate the terms of any agreement to which theCompany (or any of its subsidiaries) and the transferor are party or subject.30. If the Board shall refuse to register a transfer of any Share, it shall, within two (2) months after the date on which thetransfer was lodged with the Company, send to each of the transferor and the transferee notice of such refusal.31. The Company shall not be obligated to register any transfer to an individual under 18 years of age or to a person inrespect of whom an order has been made by a competent court or official on the grounds that he or she is or may besuffering from mental disorder or is otherwise incapable of managing his or her affairs or under other legal disability.32. Upon every transfer of Shares, the certificate (if any) held by the transferor shall be given up to be cancelled, and shallforthwith be cancelled accordingly, and subject to Article 20 a new certificate may be issued without charge to thetransferee in respect of the Shares transferred to him or her, and if any of the Shares included in the certificate so givenup shall be retained by the transferor, a new certificate in respect thereof may be issued to him or her without charge.REDEMPTION AND REPURCHASE OF SHARES33. Subject to the provisions of Chapter 6 of Part 3 and Chapter 5 of Part 17 of the Companies Act and the other provisionsof this Article 33, and without prejudice to Article 17, the Company may:33.1. pursuant to section 66(4) of the Companies Act, allot and issue any Shares of the Company which are to beredeemed or are liable to be redeemed at the option of the Company or the Member on such terms and in suchmanner as may be determined by the Board;33.2. redeem Shares of the Company on such terms as may be contained in, or be determined pursuant to theprovisions of, these Articles. Subject as aforesaid, the Company may cancel any Shares so redeemed or mayhold them as treasury shares (as defined in section 106(1) of the Companies Act) and re-issue such treasuryshares as Shares of any class or classes or cancel them;33.3. subject to or in accordance with the provisions of the Companies Act and without prejudice to any relevantspecial rights attached to any class of Shares, pursuant to section 105 and Chapter 5 of Part 17 of theCompanies Act, acquire any of its own Shares (including any Redeemable Shares and without any obligation toacquire on any pro rata basis as between Members or Members of the same class) and may cancel any Sharesso acquired or hold them as treasury shares (as defined in section 106(1) of the Companies Act) and may re-issue any such Shares as Shares of any class or classes or cancel them; or33.4. convert any of its Shares into Redeemable Shares provided that the total number of Shares which shall beredeemable pursuant to this authority shall not exceed the limit in section 1071(b) of the Companies Act. Noresolution of Members, whether special or otherwise, shall be required to be passed to convert any of the Sharesinto Redeemable Shares.34. The Company may make a payment in respect of the redemption or purchase of its own Shares in any manner permittedby the Companies Act.19  35. The holder of the Shares being redeemed or purchased shall be bound to deliver up to the Company, at its registeredoffice or such other place as the Board shall specify, the certificate(s) (if any) thereof for cancellation and thereupon theCompany shall pay to him or her the purchase or redemption monies or consideration in respect thereof.VARIATION OF RIGHTS OF SHARES36. Without prejudice to the authority conferred on the Directors pursuant to Article 17 to issue Preferred Shares in thecapital of the Company, if at any time the share capital of the Company is divided into different classes or series ofShares, the rights attached to any class or series (unless otherwise provided by the terms of issue of the Shares of thatclass or series) may be varied or abrogated with the consent in writing of the holders of a majority of the issued Shares ofthat class or series entitled to vote on such variation or abrogation, or with the sanction of an Ordinary Resolution passedat a general meeting of the holders of the Shares of that class or series.37. The provisions of these Articles relating to general meetings of the Company shall apply mutatis mutandis to every suchgeneral meeting of the holders of one class or series of Shares except that the necessary quorum shall be one or morepersons holding or representing by proxy at least a majority of the issued Shares of the class or series.38. The rights conferred upon the holders of the Shares of any class or series issued with preferred or other rights shall not,unless otherwise expressly provided by the terms of issue of the Shares of that class or series, be deemed to be variedby (i) the creation or issue of further Shares ranking pari passu therewith; (ii) a purchase or redemption by the Companyof its own Shares; or (iii) the creation or issue for value (as determined by the Board) of further Shares ranking as regardsparticipation in the profits or assets of the Company or otherwise in priority to them. For the avoidance of doubt:38.1. the issue, redemption or purchase of any of the 25,000 Euro Deferred Shares of €1.00 each or the 40,000,000Preferred Shares of US$0.01 each shall not constitute a variation of the rights of the holders of Ordinary Shares;and38.2. the issue of Preferred Shares or any class or series of Preferred Shares which rank pari passu with, or junior to,any existing Preferred Shares or class or series of Preferred Shares shall not constitute a variation of theexisting Preferred Shares or class or series of Preferred Shares.LIEN ON SHARES39. The Company shall have a first and paramount lien on every Share (not being a fully paid Share) for all monies (whetherpresently payable or not) payable at a fixed time or called in respect of that Share. The Board, at any time, may declareany Share to be wholly or in part exempt from the provisions of this Article 39. The Company's lien on a Share shallextend to all monies payable in respect of it.40. The Company may sell in such manner as the Board determines any Share on which the Company has a lien if a sum inrespect of which the lien exists is presently payable and is not paid within fourteen (14) clear days after notice demandingpayment, stating that if the notice is not complied with the Share may be sold, has been given to the holder of the Shareor to the person entitled to it by reason of the death, bankruptcy or insolvency of the holder or otherwise by operation oflaw or regulation (whether of Ireland or otherwise).41. To give effect to a sale, the Board may authorise some person to execute an instrument of transfer of the Share(s) soldto, or in accordance with the directions of, the transferee. The transferee shall be entered in the Register as the holder ofthe Share(s) comprised in any such transfer and he or she shall not be bound to see to the application of the purchasemonies nor shall his or her title to the Share(s) be affected by any irregularity in, or invalidity of, the proceedings inreference to the sale, and after the name of the transferee has been entered in the Register, the remedy of any personaggrieved by the sale shall be in damages only and against the Company exclusively.20  42. The net proceeds of the sale, after payment of the costs, shall be applied in payment of so much of the sum for whichthe lien exists as is presently payable and any residue (upon surrender to the Company for cancellation of the certificatefor the Shares sold and subject to a like lien for any monies not presently payable as existed upon the Shares before thesale) shall be paid to the person entitled to the Shares at the date of the sale.43. Whenever any law for the time being of any country, state or place imposes or purports to impose any immediate orfuture or possible liability upon the Company to make any payment or empowers any government or taxing authority orgovernment official to require the Company to make any payment in respect of any Shares registered in the Register asheld either jointly or solely by any Member or in respect of any dividends, bonuses or other monies due or payable oraccruing due or which may become due or payable to such Member by the Company on, or in respect of, any Sharesregistered as mentioned above or for or on account or in respect of any Member and whether in consequence of:(a) the death of such Member;(b) the non-payment of any income tax or other tax by such Member;(c) the non-payment of any estate, probate, succession, death, stamp or other duty by the executor oradministrator of such Member or by or out of his or her estate; or(d) any other act or thing,in every such case (except to the extent that the rights conferred upon holders of any class of Shares renders theCompany liable to make additional payments in respect of sums withheld on account of the foregoing):43.1. the Company shall be fully indemnified by such Member or his or her executor or administrator from all liability;43.2. the Company shall have a lien upon all dividends and other monies payable in respect of the Shares registered inthe Register as held either jointly or solely by such Member for all monies paid or payable by the Company asreferred to above in respect of such Shares or in respect of any dividends or other monies thereon or for or onaccount or in respect of such Member under or in consequence of any such law, together with interest at the rateof fifteen percent (15%) per annum (or such other rate as the Board may determine) thereon from the date ofpayment to the date of repayment, and the Company may deduct or set off against such dividends or othermonies so payable any monies paid or payable by the Company as referred to above together with interest at thesame rate;43.3. the Company may recover as a debt due from such Member or his or her executor or administrator (whereverconstituted) any monies paid by the Company under or in consequence of any such law and interest thereon atthe rate and for the period referred to above in excess of any dividends or other monies then due or payable bythe Company; and43.4. the Company may, if any such money is paid or payable by it under any such law as referred to above, refuse toregister a transfer of any Shares by any such Member or his or her executor or administrator until such moneyand interest is set off or deducted as referred to above or, in the case that it exceeds the amount of any suchdividends or other monies then due or payable by the Company, until such excess is paid to the Company.44. Subject to the rights conferred upon the holders of any class of Shares, nothing in Article 43 will prejudice or affect anyright or remedy which any law may confer or purport to confer on the Company. As between the Company and everysuch Member as referred to above (and, his or her executor, administrator and estate, wherever constituted), any right orremedy which such law shall confer or purport to confer on the Company shall be enforceable by the Company.21  CALLS ON SHARES45. Subject to the terms of allotment, the Board may make calls upon the Members in respect of any monies unpaid on theirShares and each Member (subject to receiving at least fourteen (14) clear days' notice specifying when and wherepayment is to be made) shall pay to the Company as required by the notice the amount called on his or her Shares. Acall may be required or permitted to be paid in instalments. A call may be revoked before receipt by the Company of asum due thereunder, in whole or in part, and payment of a call may be postponed in whole or in part.46. A call shall be deemed to have been made at the time when the resolution of the Board authorising the call was passed.47. A person on whom a call is made shall (in addition to a transferee) remain liable notwithstanding the subsequent transferof the Share in respect of which the call is made.48. The joint holders of a Share shall be jointly and severally liable to pay all calls in respect thereof.49. If a call remains unpaid after it has become due and payable, the person from whom it is due and payable shall payinterest on the amount unpaid from the day it became due until it is paid at the rate fixed by the terms of allotment of theShare or in the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Companies Act), but theBoard may waive payment of the interest wholly or in part.50. An amount payable in respect of a Share on allotment or at any fixed date, whether in respect of nominal value or byway of premium, shall be deemed to be a call and, if it is not paid, the provisions of these Articles shall apply as if thatamount had become due and payable by virtue of a call.51. Subject to the terms of allotment, the Board may make arrangements on the issue of Shares for a difference betweenthe holders in the amounts and times of payment of calls on their Shares.52. The Directors may, if they think fit, receive from any Member willing to advance the same all or any part of the moniesuncalled and unpaid upon any Shares held by him or her, and upon all or any of the monies so advanced may pay (untilthe same would, but for such advance, become payable) interest at such rate as may be agreed upon between theDirectors and the Member paying such sum in advance.FORFEITURE53. If a Member fails to pay any call or instalment of a call on the day appointed for payment thereof, the Directors, at anytime thereafter during such times as any part of the call or instalment remains unpaid, may serve a notice on him or herrequiring payment of so much of the call or instalment as is unpaid together with any interest which may have accrued.54. The notice shall state a further day (not earlier than the expiration of fourteen (14) clear days from the date of service ofthe notice) on or before which the payment required by the notice is to be made, and shall state that in the event of non-payment at or before the time appointed, the Shares in respect of which the call was made will be liable to be forfeited.55. If the requirements of any such notice as aforesaid are not complied with, then at any time thereafter before the paymentrequired by the notice has been made, any Shares in respect of which the notice has been given may be forfeited by aresolution of the Directors to that effect. The forfeiture shall include all dividends or other monies payable in respect ofthe forfeited Shares and not paid before forfeiture. The Board may accept a surrender of any Share liable to be forfeitedhereunder.56. On the trial or hearing of any action for the recovery of any money due for any call, it shall be sufficient to prove that thename of the Member sued is entered in the Register as the holder, or one of the holders, of the Shares in respect ofwhich such debt accrued, that the resolution making the call is duly recorded22 in the minute book and that notice of such call was duly given to the Member sued, in pursuance of these Articles, and itshall not be necessary to prove the appointment of the Directors who made such call nor any other matters whatsoever,but the proof of the matters aforesaid shall be conclusive evidence of the debt.57. A forfeited Share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit and,at any time before a sale or disposition, the forfeiture may be cancelled on such terms as the Directors think fit. Wherefor the purposes of its disposal, such a Share is to be transferred to any person, the Board may authorise some personto execute an instrument of transfer of the Share to that person. The Company may receive the consideration, if any,given for the Share on any sale or disposition thereof and may execute a transfer of the Share in favour of the person towhom the Share is sold or disposed of and thereupon he or she shall be registered as the holder of the Share and shallnot be bound to see to the application of the purchase money, if any, nor shall his or her title to the Share be affected byany irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the Share.58. A person whose Shares have been forfeited shall cease to be a Member in respect of the forfeited Shares, butnevertheless shall remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him orher to the Company in respect of the Shares, without any deduction or allowance for the value of the Shares at the timeof forfeiture but his or her liability shall cease if and when the Company shall have received payment in full of all suchmonies in respect of the Shares.59. A statement in writing that the maker of the statement is a Director or the Secretary of the Company, and that a Share inthe Company has been duly forfeited on the date stated in the statement, shall be conclusive evidence of the factstherein stated as against all persons claiming to be entitled to the Share.60. The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the termsof issue of a Share, becomes payable at a fixed time, whether on account of the nominal value of the Share or by way ofpremium, as if the same had been payable by virtue of a call duly made and notified.61. The Directors may accept the surrender of any Share which the Directors have resolved to have been forfeited uponsuch terms and conditions as may be agreed and, subject to any such terms and conditions, a surrendered Share shallbe treated as if it has been forfeited.NON-RECOGNITION OF TRUSTS62. The Company shall not be obligated to recognise any person as holding any Share upon any trust (except as isotherwise provided in these Articles or to the extent required by law) and the Company shall not be bound by or becompelled in any way to recognise (even when having notice thereof) any equitable, contingent, future, or partial interestin any Share, or any interest in any fractional part of a Share, or (except only as is otherwise provided by these Articlesor the Companies Act) any other rights in respect of any Share except an absolute right to the entirety thereof in theregistered holder. This shall not preclude the Company from requiring the Members or a transferee of Shares to furnishthe Company with information as to the beneficial ownership of any Share when such information is reasonably requiredby the Company.TRANSMISSION OF SHARES63. If a Member dies, the survivor or survivors where the deceased was a joint holder, and the legal personal representativesof the deceased where he or she was a sole holder or the only survivor of joint holders, shall be the only personsrecognised by the Company as having any title to his or her interest in the Shares; but nothing herein contained shallrelease the estate of any deceased holder from any liability in respect of any Share which had been jointly held by him orher solely or jointly with other persons.23  64. A person becoming entitled to a Share in consequence of the death, bankruptcy, liquidation or insolvency of a Member,or otherwise becoming entitled to a Share by operation of any law, directive or regulation (whether of Ireland, theEuropean Union, or any other jurisdiction) may elect, upon such evidence of title being produced as the Directors or theSecretary (or such other person as may be nominated by the Secretary for this purpose) may reasonably require at anytime and from time to time, and subject as further provided in this Article, either to become the holder of the Share or tohave some person nominated by him or her registered as the transferee of such Share. If he or she elects to become theholder of the Share, he or she shall give notice to the Company to that effect and, where the Directors or the Secretary(or such other person as may be nominated by the Secretary for this purpose) are satisfied with the evidence of titleproduced to them, they may register such person as the holder of the Share, subject to the other provisions of theseArticles and of the Companies Act. If he or she elects to have another person registered as the transferee of the relevantShare, he or she shall execute an instrument of transfer of the Share to that person. All of these Articles relating to thetransfer of Shares shall apply to the notice or instrument of transfer as if it were an instrument of transfer executed by therelevant Member and the event giving rise to the entitlement of the relevant person to the Shares had not occurred.65. A person becoming entitled to a Share by transmission shall have the rights to which he or she would be entitled if he orshe were the holder of the Share (including the right to receive and give a valid discharge for any dividends, distributionsor other moneys payable on or in respect of the Share), except that, before being registered as the holder of the Share,he or she shall not be entitled in respect of it to receive notices of, or to attend or vote at, any meeting of the Company orat any separate meeting of holders of any class of Shares in the Company. The Directors or the Secretary (or such otherperson as may be nominated by the Secretary for this purpose), at any time, may give notice requiring any such personto elect either to be registered himself or herself as the holder of the Share or to transfer the Share and, if the notice isnot complied with within ninety (90) days, the Directors or the Secretary (or such other person as may be nominated bythe Secretary for this purpose) thereupon may withhold payment of all dividends, bonuses or other monies payable inrespect of the Share until the requirements of the notice have been complied with.AMENDMENT OF MEMORANDUM OF ASSOCIATION; CHANGE OF LOCATION OF REGISTERED OFFICE; ANDALTERATION OF CAPITAL66. The Company may by Ordinary Resolution (or as otherwise provided in these Articles, or determined by the Board, orotherwise permitted under applicable law):66.1. divide its share capital into several classes and attach to them respectively any preferential, deferred, qualifiedor special rights, privileges or conditions;66.2. increase the authorised share capital by such sum to be divided into Shares of any nominal value;66.3. consolidate and divide all or any of the Shares into Shares of a larger nominal value than the existing Shares;66.4. subdivide the Shares, or any of them, into Shares of a smaller nominal value, so however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall bethe same as it was in the case of the Share from which the reduced Share is derived (and so that the Board maydetermine that, as between the holders of the Shares resulting from such sub-division, one or more of the Sharesmay have, as compared with the others, any such preferred, deferred or other rights or be subject to any suchrestrictions as the Company has power to attach to unissued or new Shares);66.5. cancel any Shares which have not been taken or agreed to be taken by any person and diminish the amount ofthe Company's share capital by the amount of the Shares so cancelled;24  66.6. increase the nominal value of any of the Shares by the addition to them of any undenominated capital;66.7. reduce the nominal value of any of the Shares by the deduction from them of any part of that value, subject tothe crediting of the amount of the deduction to undenominated capital, other than the share premium account;66.8. convert any undenominated capital into Shares for allotment as bonus shares to holders of existing Shares;and/or66.9. subject to applicable law, change the currency denomination of its share capital.67. Subject to the provisions of the Companies Act and to paragraph 6 of the Memorandum, the Company may:67.1. by Special Resolution (or as otherwise required or permitted by applicable law and/or paragraph 6 of theMemorandum) change its name, alter or add to the Memorandum with respect to any objects, powers or othermatters specified therein or alter or add to these Articles;67.2. by Special Resolution (or as otherwise required or permitted by these Articles and applicable law (including,without limitation, section 83 of the Companies Act)) reduce its issued share capital and any capital redemptionreserve fund, share premium account or undenominated capital account. In relation to such reductions, theCompany may by Special Resolution (or as otherwise required or permitted by these Articles and applicable law)determine the terms upon which the reduction is to be effected, including in the case of a reduction of part only ofany class of Shares, those Shares to be affected; and67.3. by resolution of the Directors, change the location of its registered office.68. Where any difficulty arises in regard to any alteration or reorganisation of the share capital of the Company, the Boardmay settle the same as they think expedient and in particular, may arrange to sell any Shares representing fractions forthe best price reasonably obtainable to any person and distribute the proceeds of sale in due proportion among thoseMembers, and the Board may authorise any person to execute an instrument of transfer of the Shares to, or inaccordance with the directions of, the purchaser. The transferee shall not be bound to see to the application of thepurchase money nor shall his or her title to the Shares be affected by any irregularity in or invalidity of the proceedings inreference to the sale.CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE69. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournmentthereof, or Members entitled to receive payment of any dividend, or in order to make a determination of Members for anyother proper purpose, the Board may provide, subject to the requirements of section 174 of the Companies Act, that theRegister of Members shall be closed for transfers at such times and for such periods, not exceeding in the whole thirty(30) days in each year, as it may determine. If the Register of Members shall be so closed for the purpose of determiningMembers entitled to notice of, or to vote at, a meeting of Members, such Register of Members shall be so closed for atleast five (5) days immediately preceding such meeting and the record date for such determination shall be the date ofthe closure of the Register of Members.70. In lieu of, or apart from, closing the Register of Members, the Board may fix in advance a date as the record date (a) forany such determination of Members entitled to notice of or to vote at a meeting of the Members, which record date shallnot be more than sixty (60) days before the date of such meeting, and (b) for the purpose of determining the Membersentitled to receive payment of any dividend or other distribution, or in order to make a determination of Members for anyother proper purpose, which record25 date shall not be more than sixty (60) days prior to the date of payment of such dividend or other distribution or the takingof any action to which such determination of Members is relevant.71. If the Register of Members is not so closed and no record date is fixed for the determination of Members entitled tonotice of or to vote at a meeting of Members, the date immediately preceding the date on which notice of the meeting isdeemed given under these Articles shall be the record date for such determination of Members. Where a determination ofMembers entitled to vote at any meeting of Members has been made as provided in these Articles, such determinationshall apply to any adjournment thereof; provided, however, that the Directors may fix a new record date of the adjournedmeeting, if they think fit.GENERAL MEETINGS72. The Board shall convene and the Company shall hold annual general meetings in accordance with the requirements ofthe Companies Act.73. The Board may, whenever it thinks fit, and shall, on the requisition in writing of Members holding such number of Sharesas is prescribed by, and made in accordance with the Companies Act, convene a general meeting in the manner requiredby the Companies Act. All general meetings other than annual general meetings shall be called extraordinary generalmeetings. Where any provision of the Companies Act confers rights on the members of a company to convene a generalmeeting without first directing the board of directors to convene a general meeting and expresses such rights to applysave where a company's articles of association or constitution provides otherwise, such rights shall not apply to theMembers of the Company.74. The Company shall in each year hold a general meeting as its annual general meeting in addition to any other meeting inthat year, and shall specify the meeting as such in the notice calling it. Not more than fifteen (15) months shall elapsebetween the date of one annual general meeting of the Company and that of the next. Each general meeting shall be heldat such time and place as designated by the Board and as specified in the notice of meeting. Subject to section 176 ofthe Companies Act, all general meetings may be held outside of Ireland.75. The Board may authorise the Secretary to postpone or cancel any general meeting called in accordance with theprovisions of these Articles (other than a meeting requisitioned by the Members in accordance with the Companies Act orthe postponement or cancellation of which would be contrary to the Companies Act, law or a Court order pursuant to theCompanies Act) if the Board considers that, for any reason, it is impractical or unreasonable to hold the general meeting,provided that notice of postponement or cancellation is given to each Member before the time for such meeting. Freshnotice of the date, time and place for any postponed meeting shall be given to each Member in accordance with theprovisions of these Articles.NOTICE OF GENERAL MEETINGS76. Subject to the provisions of the Companies Act allowing a general meeting to be called by shorter notice, an annualgeneral meeting, and an extraordinary general meeting called for the passing of a Special Resolution, shall be called onat least twenty-one (21) clear days' notice and all other extraordinary general meetings shall be called on at least fourteen(14) clear days' notice. Such notice shall state the date, time, place of the meeting and the general nature of thebusiness to be considered. Every notice shall specify such other details as are required by applicable law or the relevantcode, rules and regulations applicable to the listing of the Shares on any Exchange.77. A general meeting of the Company shall, whether or not the notice specified in Article 76 has been given and whether ornot the provisions of the Articles regarding general meetings have been complied with, be deemed to have been dulyconvened if applicable law so permits and it is so agreed by the Auditors and by all the Members entitled to attend andvote thereat or by their proxies.26  78. The notice convening an annual general meeting shall specify the meeting as such, and the notice convening a meetingto pass a Special Resolution shall specify the intention to propose a resolution as a Special Resolution. Notice of everygeneral meeting shall be given in any manner permitted by these Articles to all Members.79. There shall appear with reasonable prominence in every notice of general meeting of the Company a statement that aMember entitled to attend and vote is entitled to appoint one or more proxies to attend and vote instead of him or her andthat a proxy need not be a Member of the Company.80. The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a meeting by, any personentitled to receive notice shall not invalidate the proceedings of that meeting.81. In cases where instruments of proxy are sent out with notices, the accidental omission to send such instrument of proxyto, or the non-receipt of such instrument of proxy by, any person entitled to receive notice shall not invalidate the noticeor any resolution passed or any proceeding at any such meeting. A Member present, either in person or by proxy, at anygeneral meeting of the Company or of the holders of any class of Shares in the Company will be deemed to havereceived notice of that meeting and, where required, of the purpose for which it was called.PROCEEDINGS AT GENERAL MEETINGS82. The business of annual general meetings shall include:82.1. the consideration of the Company’s statutory financial statements and the report of the Directors and the reportof the Auditors on those statements and that report;82.2. the review by the Members of the Company’s affairs;82.3. the appointment or re-appointment of the Auditors;82.4. the authorisation of the Directors to approve the remuneration of the Auditors; and82.5. the election and re-election of Directors.83. No business shall be transacted at any general meeting unless a quorum is present. One or more Members present inperson or by proxy (whether or not such Member actually exercises his voting rights in whole, in part or at all at therelevant general meeting) holding not less than a majority of the issued and outstanding Shares of the Company entitledto vote at the meeting in question shall be a quorum.84. If within 15 minutes (or such longer time not exceeding one hour as the Chairperson of the meeting may decide to wait)after the time appointed for the holding of the meeting a quorum is not present, or if during the meeting a quorum ceasesto be present, the meeting (i) if convened on the requisition of Members, shall be dissolved; and (ii) in any other case,shall stand adjourned to the same day in the next week or to such other day and at such other time and place as theChairperson (or, in default, the Board) may, subject to the provisions of the Companies Act, determine. If at suchadjourned meeting a quorum is not present within 15 minutes after the time appointed for holding it the adjourned meetingshall be dissolved.85. If the Board wishes to make this facility available to Members for any or all general meetings of the Company, a Membermay participate in any general meeting of the Company by means of a telephone, video, electronic or similarcommunication equipment by way of which all persons participating in such meeting can communicate with each othersimultaneously and instantaneously and such participation shall be deemed to constitute presence in person at themeeting.86. Each Director and the Auditors shall be entitled to attend and speak at any general meeting of the Company.27  87. The Chairperson, or in his absence, some other Director nominated by the Directors shall preside at every generalmeeting of the Company, but if at any meeting neither the Chairperson, nor such other Director, is present within fifteenminutes after the time appointed for the holding of the meeting, or if none of them are willing to act as Chairperson, theDirectors present shall choose some Director present to be Chairperson, or if no Director is present, or if all the Directorspresent decline to take the chair, the Members present shall choose some Member present to be Chairperson.88. The Chairperson of the meeting may, and shall if so directed by the meeting (upon the passage of an OrdinaryResolution), adjourn the meeting from time to time and from place to place, but no business shall be transacted at anyadjourned meeting other than the business left unfinished, or which might have been transacted, at the meeting fromwhich the adjournment took place. When a general meeting is adjourned for thirty (30) days or more, notice of theadjourned meeting shall be given as in the case of an original meeting; save as aforesaid it shall not be necessary togive any notice of an adjournment or of the business to be transacted at an adjourned general meeting. Without prejudiceto any other power of adjournment which the Chairperson of the meeting may have under these Articles, at common lawor otherwise, the Chairperson may, without the consent of the meeting, adjourn the meeting from time to time (orindefinitely) and from place to place if he or she decides that it is necessary or appropriate to do so in order to: (a) securethe proper and orderly conduct of the meeting; (b) give all persons entitled to do so an opportunity of attending themeeting; (c) give all persons entitled to do so a reasonable opportunity of speaking and voting at the meeting; or (d)ensure that the business of the meeting is properly concluded or disposed of, including (without limitation) for the purposeof determining the result of a poll.89.89.1. Subject to the Companies Act, a resolution may only be put to a vote at a general meeting of the Company or ofany class of Members if:(a) it is specified in the notice of meeting;(b) it is proposed by or at the direction of the Board;(c) it is proposed at the direction of a court of competent jurisdiction;(d) it is proposed pursuant to, and in accordance with, the procedures and requirements of Article 90 or 155;(e) it is proposed on the requisition in writing of such number of Members as is prescribed by, and is madein accordance with, section 178(3) of the Companies Act;(f) the Chairperson of the meeting decides that the resolution may properly be regarded as within the scopeof the meeting; or(g) it has not been withdrawn by the Chairperson in accordance with Article 89.2.89.2. The Chairperson of the meeting may, at his sole discretion, withdraw any resolution to be put to a vote at ageneral meeting of the Company or of any class of Members and such withdrawal shall not invalidate theproceedings of such meeting and shall be without prejudice to any other resolutions to be put to a vote at suchgeneral meeting of the Company or any class of Members.89.3. No amendment may be made to a resolution, at or before the time when it is put to a vote, unless theChairperson of the meeting decides that the amendment or the amended resolution may properly be put to a voteat that meeting.89.4. If the Chairperson of the meeting rules a resolution or an amendment to a resolution admissible or out of order(as the case may be), the proceedings of the meeting or on the resolution in28 question shall not be invalidated by any error in his or her ruling. Any ruling by the Chairperson of the meeting inrelation to a resolution or an amendment to a resolution shall be final and conclusive.90.90.1. For business to be properly requested by a Member to be brought before a general meeting, (other thannominations of directors, which may only be made in accordance with Article 155.1) the Member must:(a) be a Member of the Company at the time of the giving of the notice for such general meeting;(b) be entitled to vote at such meeting; and(c) have given timely and proper notice in writing to the Secretary in accordance with this Article 90.90.2. To be timely for an annual general meeting, a Member's notice to the Secretary must be delivered to ormailed and received at the registered office of the Company: (i) with respect to the first annual generalmeeting of the Company as a public limited company, not later than the 10 day following the day on whichpublic announcement of the date of such annual general meeting is first made by the Company; and (ii) withrespect to all other annual general meetings, not less than ninety (90) days nor (except for shareholderproposals subject to Rule14a-8(e)(3) of the Exchange Act) more than one hundred and twenty (120) daysprior to the first anniversary of the date of the notice convening the preceding year's annual general meeting;provided, however, that if the date of the annual general meeting is changed by more than thirty (30) daysfrom the first anniversary date of the preceding year's annual general meeting, the Member's notice must beso received not earlier than one hundred and twenty (120) days prior to such annual general meeting and notlater than the close of business on the later of (x) the 90day prior to such annual general meeting or (y) the10day following the day on which a public announcement of the date of the annual general meeting is firstmade. In no event shall the adjournment or postponement of any annual general meeting, or the publicannouncement of such an adjournment or postponement, commence a new time period (or extend any timeperiod) for the giving of a Member’s notice to the Secretary pursuant to this Article 90.2.90.3. To be timely for a general meeting (other than an annual general meeting), a Member's notice to theSecretary must be delivered to or mailed and received at the registered office of the Company not less thanninety (90) days nor (except for shareholder proposals subject to Rule14a-8(e)(3) of the Exchange Act) morethan one hundred and twenty (120) days prior to the date of such meeting or, if the first publicannouncement of the date of such meeting is less than 100 days prior to the date of such meeting, the 10day following the date on which public announcement is first made of the date of the general meeting. In noevent shall the adjournment or postponement of any general meeting, or the public announcement of suchan adjournment or postponement, commence a new time period (or extend any time period) for the giving ofa Member’s notice to the Secretary pursuant to this Article 90.3.90.4. To be in proper written form, a Member's notice shall set forth as of the date of the notice and as to the Membergiving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (each, aProponent and collectively, the Proponents) as to each matter such Member proposes to bring before themeeting:(a) a brief description of the business desired to be brought before the meeting and the reasons forconducting such business at the meeting;29 thth th th(b) the name and address, in the case of a Member as it appears on the Register of Members, of eachProponent;(c) date(s) upon which each Proponent acquired such Shares;(d) the class, series and number of Shares which are beneficially owned by each Proponent and theirrespective affiliates or associates or others acting in concert therewith;(e) any option, warrant, convertible security, share appreciation right, or similar right with an exercise orconversion privilege or a settlement payment or mechanism at a price related to any class or series ofShares or with a value of each Proponent;(f) any proxy, contract, arrangement, understanding, or relationship pursuant to which each Proponenthas a right to vote any class or series of Shares;(g) any rights to dividends on the Shares beneficially owned by each Proponent that are separated orseparable from the underlying Shares;(h) any proportionate interest in the Shares held, directly or indirectly, by a general or limited partnershipin which each Proponent is a general partner or, directly or indirectly, beneficially owns an interest in ageneral partner of such general or limited partnership;(i) any performance-related fees (other than an asset-based fee) that each Proponent is entitled to basedon any increase or decrease in the value of the Shares, including without limitation any such interestsheld by members of each Proponent’s immediate family sharing the same household(j) any significant equity interests, derivative or short interests in any principal competitor of theCompany held by each Proponent;(k) any direct or indirect interest of each Proponent in any contract with the Company, any affiliate of theCompany or any principal competitor of the Company (including, in any such case, any employmentagreement, collective bargaining agreement or consulting agreement);(l) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase orsimilar so-called “stock borrowing” agreement or arrangement, involving each Proponent, directly orindirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownershipor otherwise) of any class or series of the Shares by, manage the risk of share price changes for, orincrease or decrease the voting power of, each Proponent with respect to any class or series of theShares, or which provides, directly or indirectly, the opportunity to profit or share in any profit derivedfrom any decrease in the price or value of any class or series of the Shares;(m) any material interest of each Proponent, or of any other person on whose behalf such business israised, in such business;(n) a description of any agreement, arrangement or understanding (whether oral or in writing) with respectto such nomination or proposal between or among each Proponent and any of its affiliates orassociates, and any others (including their names) acting in concert, or otherwise under theagreement, arrangement or understanding, with any of the foregoing;30  (o) a representation that each Proponent is holders of record or beneficial owners, as the case may be, ofShares entitled to vote at the meeting and intend to appear in person or by proxy at the meeting tonominate the person or persons specified in the notice (with respect to a notice under Article 155) or topropose the business that is specified in the notice (with respect to a notice under Article 90);(p) a representation as to whether each Proponent intends to deliver a proxy statement and form of proxyto holders of a sufficient number of holders of the Company’s voting shares to elect such nominee ornominees (with respect to a notice under Article 155) or to carry such proposal (with respect to anotice under Article 90);(q) to the extent known by any Proponent, the name and address of any other Member supporting theproposal on the date of such Member’s notice;(r) a description of all Derivative Transactions by each Proponent during the previous twelve (12) monthperiod, including the date of the transactions and the class, series and number of securities involvedin, and the material economic terms of, such Derivative Transactions; and(s) any other information relating to each Proponent that would be required to be disclosed in a proxystatement and form of proxy or other filings required to be made in connection with solicitations ofproxies for, as applicable, the proposal and/or for the election of directors in a contested electionpursuant to Regulation 14A of the Exchange Act.90.5. The Chairperson shall, if the facts warrant, determine and declare to the meeting that business was not properlybrought before the meeting and in accordance with the provisions of this Article and, if he should so determine,he shall so declare to the meeting and any such business not properly brought before the meeting shall not betransacted.91. Except where a greater majority is required by the Companies Act or where these Articles provide otherwise, anyquestion proposed for a decision of the Members at any general meeting of the Company or a decision of any class ofMembers at a separate meeting of any class of Shares shall be decided by an Ordinary Resolution.92. At any general meeting, a resolution put to the vote of the meeting shall be decided on a poll. The Board or theChairperson may determine the manner in which the poll is to be taken and the manner in which the votes are to becounted.93. A poll demanded on the election of the Chairperson or on a question of adjournment shall be taken forthwith. A polldemanded on any other question shall be taken at such time as the Chairperson of the meeting directs, and any businessother than that on which a poll has been demanded may be proceeded with pending the taking of the poll.94. No notice need be given of a poll not taken immediately. The result of the poll shall be deemed to be the resolution of thegeneral meeting at which the poll was demanded. On a poll, a Member entitled to more than one vote need not use all hisor her votes or cast all the votes he or she uses in the same way.95. If authorised by the Board, any vote taken by written ballot may be satisfied by a ballot submitted by electronic and/ortelephonic transmission, provided that any such electronic or telephonic submission must either set forth or be submittedwith information from which it can be determined that the electronic or telephonic submission has been authorised by theMember or proxy.96. The Board may adopt such rules, regulations and procedures for the conduct of any meeting of the Members as it deemsappropriate. Except to the extent inconsistent with any applicable rules, regulations or procedures adopted by the Board,the Chairperson of any meeting may adopt such rules, regulations31 and procedures for the meeting, and take such actions with respect to the conduct of the meeting, as the Chairperson ofthe meeting deems appropriate. The rules, regulations and procedures adopted may include, without limitation, ones that(i) establish an agenda or order of business, (ii) are intended to maintain order and safety at the meeting, (iii) containlimitations on attendance at or participation in the meeting to Members of record of the Company, their duly authorisedproxies or such other persons as the Chairperson of the meeting shall determine, (iv) contain restrictions on entry to themeeting after the time fixed for its commencement and (v) limit the time allotted to Member questions or comments.VOTES OF MEMBERS97. Subject to any rights or restrictions for the time being attached to any class or classes of Shares, every Member presentin person or by proxy shall have one vote for each Share registered in his or her name in the Register of Members.98. In the case of joint holders of record the vote of the senior holder who tenders a vote, whether in person or by proxy,shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall bedetermined by the order in which the names stand in the Register of Members.99. A Member of unsound mind, a Member who has made an enduring power of attorney, or in respect of whom an order hasbeen made by any court, having jurisdiction in cases of unsound mind, may vote by his or her committee, donee of anenduring power of attorney, receiver, guardian or other person appointed by the foregoing court, and any such committee,donee of an enduring power of attorney, receiver, guardian or other persons appointed by the foregoing court may vote byproxy.100. No Member shall be entitled to vote at any general meeting unless he or she is registered as a Member on the recorddate for such meeting.101. No objection shall be raised to the qualification of any voter except at the general meeting or adjourned general meetingat which the vote objected to is given or tendered and every vote not disallowed at such general meeting shall be valid forall purposes. Any such objection made in due time shall be referred to the Chairperson of the general meeting whosedecision shall be final and conclusive.102. Unless the Board decides otherwise, no Member shall be entitled to be present or vote at any meeting either personallyor by proxy until such Member has paid all calls due and payable on every Share held by him or her whether alone orjointly with any other person together with interest and expenses (if any) to the Company.103. Resolutions in writing signed by all of the Members may be validly passed only prior to the completion of the initial publicoffering of the Company's ordinary shares on the Nasdaq Stock Exchange. For the avoidance of doubt, upon completionof the initial public offering of the Company's ordinary shares on the Nasdaq Stock Exchange, any resolution or actionrequired or permitted to be passed or taken by the Members may be effected only at a duly convened annual orextraordinary general meeting of Members and may not be effected by any resolution or consent in writing by suchMembers.PROXIES AND CORPORATE REPRESENTATIVES104. Votes may be given either personally or by proxy. A Member may appoint more than one proxy or the same proxy underone or more instruments to attend and vote at a meeting and may appoint a proxy to vote both in favour of and againstthe same resolution in such proportion as specified in the instrument appointing the proxy.105.105.1. Every Member entitled to attend and vote at a general meeting may appoint a proxy to attend, speak and vote onhis or her behalf and may appoint more than one proxy to attend, speak and32 vote at the same meeting. The appointment of a proxy or corporate representative shall be in such form and maybe accepted by the Company at such place and at such time as may be specified in the notice convening themeeting or in any other information sent to the Members by or on behalf of the Board in relation to the meeting, subject to applicable requirements of the United States Securities and Exchange Commission and anyExchange on which the Shares are listed.105.2. Without limiting the foregoing, the Board or the Secretary may from time to time permit appointments of a proxyto be made by means of an electronic or internet communication or facility and may in a similar manner permitsupplements to, or amendments or revocations of, any such electronic or internet communication or facility to bemade. For the avoidance of doubt, such appointments of proxy made by electronic or internet communications(as permitted by the Board or the Secretary) will be deemed to be deposited at the place specified for suchpurpose once received by the Company. The Board or the Secretary may in addition prescribe the method ofdetermining the time at which any such electronic or internet communication or facility is to be treated asdeposited at the place specified for such purpose. The Board may treat any such electronic or internetcommunication or facility which purports to be or is expressed to be sent on behalf of a Member as sufficientevidence of the authority of the person sending that instruction to send it on behalf of that Member.106. Any body corporate which is a Member of the Company may authorise such person or persons as it thinks fit to act asits representative at any meeting of the Company or of any class of Members of the Company and the person or personsso authorised shall be entitled to exercise the same powers on behalf of the body corporate which he or she representsas that body corporate could exercise if it were an individual Member of the Company. The Company may requireevidence from the body corporate of the due authorisation of such person or persons to act as the representative of therelevant body corporate.107. An appointment of proxy relating to more than one meeting (including any adjournment thereof) having once beenreceived by the Company for the purposes of any meeting shall not require to be delivered, deposited or received againby the Company for the purposes of any subsequent meeting to which it relates.108. Receipt by the Company of an appointment of proxy in respect of a meeting shall not preclude a Member from attendingand voting at the meeting or at any adjournment thereof which attendance and voting will automatically cancel any proxypreviously submitted.109. An appointment of proxy shall be valid, unless the contrary is stated therein, for any adjournment of the meeting as wellas for the meeting to which it relates.110. A vote given in accordance with the terms of an appointment of proxy or a resolution authorising a representative to acton behalf of a body corporate shall be valid notwithstanding the death or insanity of the principal, or the revocation of theappointment of proxy or of the authority under which the proxy was appointed or of the resolution authorising therepresentative to act or transfer of the Share in respect of which the proxy was appointed or the authorisation of therepresentative to act was given, provided that no notice in writing (whether in electronic form or otherwise) of such death,insanity, revocation or transfer shall have been received by the Company at the registered office before thecommencement of the meeting or adjourned meeting at which the appointment of proxy is used or at which therepresentative acts.111. The Board may send, at the expense of the Company and subject to applicable law (including the rules and regulations ofthe United States Securities and Exchange Commission), by post, electronic mail or otherwise, to the Members forms forthe appointment of a proxy (with or without stamped envelopes for their return) for use at any general meeting or at anyclass meeting, either in blank or nominating any one or more of the Directors or any other persons in the alternative.33 DIRECTORS112. The number of Directors on the Board shall be not less than three (3) nor more than fifteen (15). The authorised numberof Directors (within such fixed maximum and fixed minimum numbers) shall be determined solely by the Board and, forthe avoidance of doubt, shall not require approval or ratification by the Company in general meeting.113. The remuneration to be paid to the Directors shall be such remuneration as the Directors in their sole discretion shalldetermine. The Directors shall also be entitled to be paid their travelling, hotel and other expenses properly incurred bythem in going to, attending and returning from meetings of the Directors, or any committee of the Directors, or generalmeetings of the Company, or otherwise in connection with the business of the Company, or to receive a fixed allowancein respect thereof as may be determined by the Board from time to time, or a combination partly of one such method andpartly the other. The amount, rate or basis of the remuneration or expenses to be paid to the Directors shall not requireapproval or ratification by the Company in general meeting. A Director is expressly permitted (for the purposes of section228(1)(d) of the Companies Act) to use the Company's property pursuant to or in connection with: the exercise orperformance of his duties, functions and powers as Director or employee; the terms of any contract of service oremployment or letter of appointment; and, or in the alternative, any other usage authorised by the Directors (or a personauthorised by the Directors) from time to time; and including in each case for a Director's own benefit or for the benefit ofanother person.114. The Board may approve additional remuneration to any Director undertaking any special work or services for, orundertaking any special mission on behalf of, the Company other than his or her ordinary routine work as a Director. Anyfees paid to a Director who is also counsel or solicitor to the Company, or otherwise serves it in a professional capacity,shall be in addition to his or her remuneration as a Director.115. The salary or remuneration of a Director appointed to hold employment or executive office may be a fixed sum of money,or wholly or in part governed by business done or profits made, or as otherwise decided by the Board (including, for theavoidance of doubt, by the Board acting through a duly authorised Board committee), and may be in addition to or insteadof a fee payable to such Director for his or her services as Director pursuant to these Articles.116. Members of special or standing committees may be allowed like compensation for service on any such committees orfor attending committee meetings, or both.DIRECTORS' AND OFFICERS' INTERESTS117. A Director or an officer of the Company who is in any way, whether directly or indirectly, interested in a contract,transaction or arrangement or proposed contract, transaction or arrangement with the Company shall, in accordance withsection 231 of the Companies Act, declare the nature of his or her interest at the first opportunity either (a) at a meetingof the Board at which the question of entering into the contract, transaction or arrangement is first taken intoconsideration, if the Director or officer of the Company knows this interest then exists, or in any other case, at the firstmeeting of the Board after learning that he or she is or has become so interested or (b) by providing a general notice tothe Directors declaring that he or she is a Director or an officer of, or has an interest in, a person and is to be regarded asinterested in any transaction or arrangement made with that person, and after giving such general notice it shall not benecessary to give special notice relating to any particular transaction.118. A Director may hold any other office or place of profit with the Company (other than the office of its Auditors) inconjunction with his or her office of Director for such period and on such terms as to remuneration and otherwise as theBoard may determine.119. Nothing in section 228(1)(e) of the Companies Act shall restrict a Director from entering into any commitment which hasbeen approved by the Board or has been approved pursuant to such authority as may be delegated by the Board inaccordance with these Articles. It shall be the duty of each Director to34 obtain the prior approval of the Board, before entering into any commitment permitted by sections 228(1)(e)(ii) and 228(2)of the Companies Act.120. A Director may act by himself or herself or by his or her firm in a professional capacity for the Company (other than as itsAuditors) and he or she or his or her firm shall be entitled to remuneration for professional services as if he or she werenot a Director.121. A Director may be or become a director, managing director, joint managing director, deputy managing director, executivedirector, manager or other officer or member of any other entity or otherwise interested in any entity promoted by theCompany or in which the Company may be interested as member or otherwise, and no such Director shall beaccountable to the Company for any remuneration or other benefits received by him or her as a Director, managingdirector, joint managing director, deputy managing director, executive director, manager or other officer or member ofsuch other entity; provided that he or she has declared the nature of his or her position with, or interest in, such entity tothe Board in accordance with Article 117 and this has been approved by a majority of the disinterested Directors,notwithstanding the fact that the disinterested Directors may represent less than a quorum.122. Nothing in section 228(1)(d) or section 228(1)(f) of the Companies Act shall restrict a Director from engaging directly orindirectly in the same or similar business activities or lines of business as the Company or any of its subsidiaries. To thefullest extent permitted by applicable law, the Company renounces any interest or expectancy of the Company and itssubsidiaries in, or in being offered an opportunity to participate in, business opportunities that may from time to time bepresented to Directors other than in their role as directors of the Company, even if the opportunity is one that theCompany or its subsidiaries might reasonably be expected to have pursued or had the ability or desire to pursue ifgranted the opportunity to do so. The Directors shall have no duty to communicate or offer such business opportunity tothe Company and, to the fullest extent permitted by applicable law, shall not be deemed to have breached any fiduciaryor other duty solely by reason of the fact that such Director pursues or acquires such business opportunity, directs suchbusiness opportunity to another person or fails to present such business opportunity, or information regarding suchbusiness opportunity, to the Company or any of its subsidiaries. A business opportunity shall not be deemed to be anopportunity of the Company if it is an opportunity that the Company is not financially able or contractually permitted orlegally able to undertake, or that is, by its nature, not in line with the Company’s business or is of no advantage to it or isone in which the Company has no interest or reasonable prospect.123. No person shall be disqualified from the office of Director or from being an officer of the Company or prevented by suchoffice from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or anycontract or transaction entered into by or on behalf of the Company in which any Director or officer of the Company shallbe in any way interested be or be liable to be avoided, nor shall any Director or officer of the Company so contracting orbeing so interested be liable to account to the Company for any profit realised by any such contract or transaction byreason of such Director or officer of the Company holding office or of the fiduciary relation thereby established; providedthat:123.1. he or she has declared the nature of his or her interest in such contract or transaction to the Board in accordancewith Article 117; and123.2. the contract or transaction is approved by a majority of the disinterested Directors, notwithstanding the fact thatthe disinterested Directors may represent less than a quorum.124. A Director may be counted in determining the presence of a quorum at a meeting of the Board which authorises orapproves the contract, transaction or arrangement in which he or she is interested and he or she shall be at liberty to votein respect of any contract, transaction or arrangement in which he or she is interested, provided that the nature of theinterest of any Director in any such contract or transaction shall be disclosed by him or her in accordance with Article117, at or prior to its consideration and any vote thereon.125. For the purposes of Article 117:35  125.1. a general notice given to the Directors that a Director is to be regarded as having an interest of the nature andextent specified in the notice in any transaction or arrangement in which a specified person or class of persons isinterested shall be deemed to be a disclosure that the Director has an interest in any such transaction of thenature and extent so specified;125.2. an interest of which a Director has no knowledge and of which it is unreasonable to expect him or her to haveknowledge shall not be treated as an interest of his or hers; and125.3. a copy of every declaration made and notice given under Article 117 shall be entered within three (3) days afterthe making or giving thereof in a book kept for this purpose. Such book shall be open for inspection withoutcharge by any Director, Secretary, the Auditors or Member of the Company at the registered office and shall beproduced at every general meeting of the Company and at any meeting of the Directors if any Director sorequests in sufficient time to enable the book to be available at the meeting.POWERS AND DUTIES OF DIRECTORS126. The business of the Company shall be managed by the Directors, who may pay all expenses incurred in promoting andregistering the Company and may exercise all such powers of the Company as are not, by the Companies Act or bythese Articles, required to be exercised by the Company in general meeting, subject, nevertheless, to any of theseArticles and to the provisions of the Companies Act. No resolution made by the Company in general meeting shallinvalidate any prior act of the Directors that would have been valid if that resolution had not been made.127. The Board shall have the power to appoint and remove officers and executives on such terms as the Board sees fit andto give such titles and delegate such responsibilities to those officers and executives as it sees fit.128. The Company may exercise the powers conferred by section 44 of the Companies Act with regard to having an officialseal for use abroad and such powers shall be vested in the Directors.129. Unless otherwise ordered by the Board, the chief executive officer shall have the authority to exercise the voting powersconferred by shares of any other company held or owned by the Company in such manner in all respects as he or shethinks fit and in particular they may exercise their voting powers in favour of any resolution appointing the Directors orany of them as director or officers of such other company or providing for the payment of remuneration or pensions to thedirectors or officers of such other company. The Board may from time to time confer like powers upon any other personor persons.130. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for money paidto the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, by such personor persons and in such manner as the Directors shall from time to time by resolution determine.131. The Directors may from time to time authorise such person or persons as they see fit to perform all acts, including,without prejudice to the foregoing, to effect a transfer of any shares, bonds, or other evidences of indebtedness orobligations, subscription rights, warrants, and other securities in another company in which the Company holds aninterest and to issue the necessary powers of attorney for the same; and each such person is authorised on behalf of theCompany to vote such securities, to appoint proxies with respect thereto, and to execute consents, waivers and releaseswith respect thereto, or to cause any such action to be taken.132. The Board may exercise all powers of the Company to borrow money and to mortgage or charge its undertaking, propertyand uncalled capital or any part thereof and to issue debentures, debenture stock, mortgages, bonds or such othersecurities whether outright or as security for any debt, liability or obligation of the Company or of any third party.36  133. The Directors may procure the establishment and maintenance of or participate in, or contribute to, any non-contributoryor contributory pension or superannuation fund, scheme or arrangement or life assurance scheme or arrangement for thebenefit of, and pay, provide for or procure the grant of donations, gratuities, pensions, allowances, benefits oremoluments to any persons (including Directors or officers) who are or shall have been at any time in the employment orservice of the Company or of any company which is or was a subsidiary or holding company of the Company or of anypredecessor in business of the Company or any such subsidiary or holding company and the wives, husbands, widows,widowers, families, relatives or dependants of any such persons. The Directors may also procure the establishment andsubsidy of or subscription to and support of any institutions, associations, clubs, funds or trusts calculated to be for thebenefit of any such persons as aforesaid or otherwise to advance the interests and well-being of the Company or of anysuch other company as aforesaid or its Members, and payments for or towards the issuance of any such persons asaforesaid and subscriptions or guarantees of money for charitable or benevolent objects or for any exhibition or for anypublic, general or useful object; provided that any Director shall be entitled to retain any benefit received by him or herunder this Article 133, subject only, where the Companies Act requires, to disclosure to the Members and the approval ofthe Company in general meeting.134. The Board may from time to time provide for the management of the affairs of the Company in such manner as it shallthink fit and the specific delegation provisions contained in the Articles shall not limit the general powers conferred bythese Articles.MINUTES135. The Board shall cause minutes to be made in books kept for the purpose of all (i) appointments of officers andcommittees made by the Board; and (ii) resolutions and proceedings at meetings of (a) the Company or of the holders ofany class of Shares and (b) the Board and of committees of the Board, including in each case the names of the Directorsand others present at each meeting. Any such minutes, if signed by the Chairperson of the meeting at which theproceedings were held or by the Chairperson of the next succeeding meeting or the Secretary, shall be prima facieevidence of the matters stated in them.DELEGATION OF THE BOARD'S POWERS136. The Board may delegate any of its powers (with power to sub-delegate) to any committee consisting of one or moreDirectors and/or (if thought fit) one or more other persons. The Board may also delegate to any Director, officer ormember of the management of the Company or any of its subsidiaries such of its powers as it considers desirable to beexercised by him or her. The Board may also designate one or more persons as alternate members of any committee,who may replace any absent or disqualified member at any meeting of any such committee. Any such delegation maybe made subject to any conditions the Board may impose, and either collaterally with or to the exclusion of its ownpowers, and may be revoked or altered. Subject to any such conditions, the proceedings of a committee shall begoverned by the Articles regulating the proceedings of Directors, so far as they are capable of applying. Each committeeshall keep regular minutes and report to the Board when required. Unless otherwise determined by the Board, the quorumnecessary for the transaction of any business at any committee meeting shall be a majority of the members of suchcommittee. Where a provision of the Articles refers to the exercise of a power, authority or discretion by the Board andthat power, authority or discretion has been delegated by the Board to a committee, the provision shall be construed aspermitting the exercise of the power, authority or discretion by the committee.137. The Board may, by power of attorney or otherwise, appoint any person to be the agent of the Company on suchconditions as the Board may determine, provided that the delegation is not to the exclusion of its own powers and maybe revoked by the Board at any time.138. The Board may, by power of attorney or otherwise, appoint any company, firm, person or body of persons, whethernominated directly or indirectly by the Board, to be the attorney or authorised signatory of the Company for such purposeand with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under theseArticles) and for such period and subject to such conditions37 as they may think fit, and any such powers of attorney or other appointment may contain such provisions for theprotection and convenience of persons dealing with any such attorneys or authorised signatories as the Board may thinkfit and may also authorise any such attorney or authorised signatory to delegate all or any of the powers, authorities anddiscretions vested in him or her.CHAIRPERSON AND EXECUTIVE OFFICERS139. The Board may elect any Director as Chairperson of the Board and determine the period for which he or she is to holdoffice.140. In addition to the Chairperson, the Directors and the Secretary, the Company may appoint such other officers, includingexecutive officers, as the Board may from time to time determine and, without limitation to the foregoing, the Board mayappoint any person (whether or not a Director) to fill the following positions: chief executive officer, chief financial officer,general counsel, president, treasurer and controller. Any person may hold more than one of the foregoing positions.141. Any person elected or appointed pursuant to Articles 139 and 140 shall hold his or her office or other position for suchperiod and on such terms as the Board may determine and the Board may revoke or vary any such election orappointment at any time by resolution of the Board. Any such revocation or variation shall be without prejudice to anyclaim for damages that such person may have against the Company or the Company may have against such person forany breach of any contract of service between him or her and the Company which may be involved in such revocation orvariation. If any such office or other position becomes vacant for any reason, the vacancy may be filled by the Board.142. Except as provided in the Companies Act or these Articles, the powers and duties of any person elected or appointed toany office or executive or official position pursuant to Articles 139 and 140 shall be such as are determined from time totime by the Board.143. Any officer may resign at any time by giving written notice to the Company. The resignation is effective withoutacceptance when the notice is given to the Company, unless a later effective date is specified in the notice.144. The use of the word "officer", "director" (save where the relevant person is a Director for the purposes of these Articles)(or similar words) in the title of any executive or other position shall not be deemed to imply that the person holding suchexecutive or other position is an "officer" or "director" of the Company within the meaning of the Companies Act.PROCEEDINGS OF DIRECTORS145. Except as otherwise provided by these Articles, the Directors shall meet together for the despatch of business,convening, adjourning and otherwise regulating their meetings and procedures as they think fit. Questions arising at anymeeting shall be decided by a majority of votes of the Directors present at a meeting at which there is a quorum. EachDirector shall have one vote.146. Regular meetings of the Board may be held at such times and places as may be provided for in resolutions adopted bythe Board. No additional notice of a regularly scheduled meeting of the Board shall be required.147. A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Directorsby at least 24 hours' notice (or, if notice is mailed, at least four calendar days' notice) in writing to every Director, unlessnotice is waived by all the Directors either at, before or after the meeting is held and, provided further, if notice is given inperson, by telephone, cable, telex, telecopy or email, the same shall be deemed to have been given on the day it isdelivered to the Directors or transmitting organisation, as the case may be. The accidental omission to give notice of ameeting of the Directors to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall notinvalidate the proceedings of that meeting. The presence of a Director at a meeting of the Directors shall be deemed38 to be a waiver of any failure to give due notice of such meeting unless such Director states that he or she is not waivingany such failure promptly following the calling to order of such meeting. Notice of a Board meeting shall be deemed to beduly given to a Director if it is given to such Director personally or by word of mouth or sent in writing to his or her lastknown address or any other address given to the Company by such Director for such purpose or given by electroniccommunications to an address for the time being notified to the Company by the Director. In this Article “address,” inrelation to documents in electronic form, includes any number or address used for the supply of documents in electronicform.148. The quorum necessary for the transaction of the business of the Board shall be a majority of the Directors in office. If aquorum shall not be present at any meeting of the Board, the Directors present thereat may adjourn the meeting fromtime to time, without notice other than announcement at the meeting, until a quorum shall be present.149. The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number isreduced below the number fixed by or pursuant to these Articles as the minimum number of Directors, the continuingDirectors or Director may act for the purpose of increasing the number of Directors to that number, or of summoning ageneral meeting of the Company, but for no other purpose. If there is/are no Director or Directors able or willing to act,any two Members may summon a general meeting for the purpose of appointing Directors. Any Director so appointedshall hold office (subject to these Articles) only until the dissolution of the annual general meeting next following suchappointment unless such Director is re-elected during such meeting.150. If no Chairperson is elected, or if at any meeting the Chairperson is not present within five (5) minutes after the timeappointed for holding the same, the Directors present may choose one of their number to be the Chairperson of themeeting or proceed without a Chairperson of the meeting.151. All acts done by any meeting of the Directors or of a committee of Directors shall, notwithstanding that it be afterwardsdiscovered that there was some defect in the appointment of any Director, or that they or any of them were disqualified,be as valid as if every such person had been duly appointed and qualified to be a Director.152. Members of the Board or of any committee thereof may participate in a meeting of the Board or of such committee bymeans of conference telephone or similar communications equipment by means of which all persons participating in themeeting can hear each other and participation in a meeting pursuant to this provision shall constitute presence in personat such meeting. Unless otherwise determined by the Directors, the meeting shall be deemed to be held at the placewhere the telephone call or similar communication was initiated.153. A resolution or other document in writing (in electronic form or otherwise), signed (whether by electronic signature,advanced electronic signature or otherwise as approved by the Directors) by all the Directors entitled to receive notice ofa meeting of Directors or of a committee of Directors, and to vote on the relevant resolution or matter, shall be as validand effectual as if it had been passed at a meeting of Directors or (as the case may be) a committee of Directors dulyconvened and held and may consist of several documents in the like form each signed by one or more Directors, andsuch resolution or other document or documents when duly signed may be delivered or transmitted (unless the Directorsshall otherwise determine either generally or in any specific case) by facsimile transmission, electronic mail or someother similar means of transmitting the content of documents.RESIGNATION AND DISQUALIFICATION OF DIRECTORS154. The office of a Director shall be vacated ipso facto:154.1. on the death of a Director;39  154.2. if he or she resigns his or her office, on the date on which notice of his or her resignation is delivered to theregistered office or tendered at a meeting of the Board or on such later date as may be specified in such notice;154.3. if he or she ceases to be a Director by virtue of any provision of the Companies Act, is removed from officepursuant to these Articles or the Companies Act or becomes prohibited by law from being a Director;154.4. if he or she becomes bankrupt, has an interim receiving order made against him or her, makes any arrangementor compounds with his or her creditors generally or applies to the court for an interim order in connection with avoluntary arrangement under any legislation relating to insolvency;154.5. if the health of the Director is such that, in the opinion of a majority of the other Directors, he or she can nolonger be reasonably regarded as possessing adequate decision making capacity;154.6. in the case of a Director who holds executive office, his or her appointment to such office is terminated orexpires and the Board resolves that such Director’s office be vacated;154.7. if he or she is absent, without permission of the Board, from Board meetings for six consecutive months and theBoard resolves that his or her office be vacated; or154.8. if the Director is requested to resign in writing by not less than a majority of the other Directors provided alwaysthat this Article 154.8 shall only apply if neither of the Sponsor Holders holds 10% or more of the entire issuedshare capital of the Company.155. A resolution of the Board declaring a Director to have vacated office pursuant to this Article shall be conclusive as to thefact and grounds of vacation stated in the resolution.APPOINTMENT, ROTATION AND NOMINATION OF DIRECTORS156.156.1. No person shall be appointed a Director unless nominated in accordance with the provisions of this Article 156.Nominations of persons for election to the Board at a general meeting may be made:(a) by or at the direction of the Board or a committee thereof;(b) with respect to election at a general meeting, by any Member who holds Shares carrying the generalright to vote at general meetings of the Company, who is a Member at the time of the giving of therequired notice of the relevant general meeting provided for in these Articles and at the time of therelevant general meeting, and who has given timely and proper notice in writing to the Secretary inaccordance with Article 156.2 and 156.3;(c) with respect to election at an extraordinary general meeting requisitioned in accordance with section178(3) of the Companies Act, by a Member or Members who hold Shares carrying the general right tovote at general meetings of the Company and who make such nomination in the written requisition of theextraordinary general meeting in accordance with these Articles, including Article 156.3, and theprovisions of the Companies Act relating to nominations of Directors and the proper bringing of specialbusiness before an extraordinary general meeting,(sub-clauses (b) and (c) being the exclusive means for a Member to make nominations of persons for election tothe Board).40  156.2. For nominations of persons for election as Directors at a general meeting to be timely, a Member's notice mustcomply with the requirements of Article 90.2 or 90.3 (as applicable).156.3. To be in proper written form, a Member's notice for nomination(s) of person(s) for election pursuant to Article156.1(b), or in the case of nomination(s) of person(s) for election pursuant to Article 156.1(c), a Member’s writtenrequisition of the extraordinary general meeting, must, in addition to any other applicable requirements, set forth:(d) as to each person whom the Member proposes to nominate for election or re−election as a Director, allinformation relating to such person that is required to be disclosed in solicitations for proxies for electionof directors, or is otherwise required, in each case pursuant to Section 14 of the Exchange Act and therules and regulations promulgated thereunder (including such person's written consent to being named inthe proxy statement as a nominee and to serving as a director if elected); and(e) as to the Member giving the notice and each Proponent, the information required in Article 90.4.156.4. The Chairperson of the meeting shall determine whether a nomination was made in accordance with theprocedures prescribed by these Articles, and if he or she should determine that such nomination was not made inaccordance with such procedures, he or she shall declare to the meeting that the nomination was defective andsuch defective nomination shall be disregarded. Any such ruling by the Chairperson of the meeting shall be finaland conclusive.156.5. The Company may require any proposed nominee to furnish such other information as it may reasonably require,including the completion of any questionnaires, to determine the eligibility of such proposed nominee to serve asa Director and the impact that such service would have on the ability of the Company to satisfy the requirementsof laws, rules, regulations and listing standards applicable to the Company or its Directors.157. At every annual general meeting of the Company, all of the Directors shall retire from office unless re-elected inaccordance with Article 156.5. A Director retiring at a meeting shall retain office until the close of that meeting (includingany adjournment thereof). Each Director shall be eligible to stand for re-election at an annual general meeting.158. Directors will be elected by way of Ordinary Resolution of the Company in general meeting, provided that if the number ofDirector nominees exceeds the number of Directors (as determined by the Board) to be elected at such meeting (a“contested election”), each of those nominees shall be voted upon as a separate resolution and the Directors shall beelected by a plurality of the votes of the Shares present in person or represented by proxy at any such meeting andentitled to vote on the election of Directors. For the purposes of this Article 158, "elected by a plurality" means theelection of those Director nominees, equal in number to the number of positions to be filled at the relevant generalmeeting (as determined by the Board), that received the highest number of votes in the contested election. Cumulativevoting is prohibited in the election of Directors.159. Notwithstanding any other provision of these Articles, the Directors may appoint a person who is willing to act to be aDirector, either to fill a casual vacancy or as an additional Director, provided that the appointment does not cause thenumber of Directors to exceed the number prescribed by the Board in accordance with Article 112. A casual vacancyshall include, without limitation, a vacancy that results from the death, resignation, retirement, disqualification or removalof a Director.160. The Company may, by Ordinary Resolution, of which notice has been given in accordance with section 146 of theCompanies Act, remove any Director before the expiration of his or her period of office notwithstanding anything in theseArticles or in any agreement between the Company and such Director. Such removal shall be without prejudice to anyclaim such Director may have for damages for breach of any contract of service between him or her and the Company.41  SECRETARY161. The Board shall appoint the Secretary and may appoint one or more persons to be a joint, deputy or Assistant Secretaryat such remuneration (if any) and on such terms as the Board sees fit and any person so appointed may be removed bythe Board at any time.162. The duties of the Secretary shall be those prescribed by the Companies Act, together with such other duties as shallfrom time to time be prescribed by the Board, and in any case, shall include the making and keeping of records of thevotes, doings and proceedings of all meetings of the Members and the Board of the Company, and committees, and theauthentication of records of the Company.163. A provision of the Companies Act or these Articles requiring or authorising a thing to be done by or to a Director and theSecretary shall not be satisfied by its being done by or to the same person acting both as Director and as, or in the placeof, the Secretary.SEAL164. The Company may, if the Board so determines, have a Seal (including any official seals kept pursuant to the CompaniesAct) which shall only be used by the authority of the Board or by a duly authorised committee of the Board and everyinstrument to which the Seal has been affixed shall be signed by any person who shall be either a Director or theSecretary or some other person authorised by the Board, either generally or specifically, for that purpose.165. The Company may have for use in any place or places outside Ireland a duplicate Seal or Seals, each of which shall bea duplicate of the Seal of the Company, except, in the case of a seal for use in sealing documents creating or evidencingsecurities issued by the Company, for the addition on its face of the word "Securities" and, if the Board so determines,with the addition on its face of the name of every place where it is to be used.DIVIDENDS, DISTRIBUTIONS AND RESERVES166. The Company in general meeting may by Ordinary Resolution declare dividends, but no dividends shall exceed theamount recommended by the Board. Subject to the Companies Act, the Board may, from time to time, pay such interimdividends as appear to it to be justified by the profits of the Company available for distribution. The Board may direct thatany dividend declared by the Company in general meeting or by the Board in accordance with these Articles, may be paidwholly or partly by the distribution of specific assets and in particular of paid up shares, debentures or debenture stocksof any other company or in any one or more of such ways. Where any difficulty arises in regard to such distribution, theBoard may settle the same as they think expedient, and in particular may issue fractional certificates or ignore fractions,fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall bemade to any Members upon the footing of the value so fixed, in order to adjust the rights of all the parties, and may vestany such specific assets in trustees as may seem expedient to the Board.167. Subject to the Companies Act, the Board may from time to time declare dividends (including interim dividends) anddistributions on Shares outstanding and authorise payment of the same out of the funds of the Company lawfullyavailable therefore and in any currency chosen at its discretion.168. The Board may, before recommending or declaring any dividends or distributions, set aside such sums as it thinksproper as a reserve or reserves which shall, as directed by the Board, be applicable for any purpose of the Company andpending such application may, as directed by the Board, be employed in the business of the Company or be invested insuch investments as the Directors may lawfully determine. The Directors may also, without placing the same to reserve,carry forward any profits which they may think it prudent not to dividend or distribute.42  169. No dividend, interim dividend or distribution shall be paid otherwise than in accordance with the provisions of section 117of the Companies Act.170. Subject to the rights of persons, if any, entitled to Shares with special rights as to dividends or distributions, if dividendsor distributions are to be declared on a class of Shares, they shall be declared and paid according to the amounts paid orcredited as paid on the Shares of such class outstanding on the record date for such dividend or distribution asdetermined in accordance with these Articles.171. The Directors may deduct from any dividend payable to any Member all sums of money (if any) immediately payable byhim or her to the Company in relation to his or her Shares.172. Any dividend, distribution, interest or other monies payable in cash in respect of Shares may be paid by cheque orwarrant sent through the post, or sent by any electronic or other means of payment, directed to the registered address ofthe holder or, in the case of joint holders, to the holder who is first named on the Register of Members or to such personand to such address as such holder or joint holders may in writing direct. Every such cheque or warrant, electronic orother payment shall be made payable to the order of the person to whom it is sent and payment of the cheque or warrantshall be a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for anydividends, bonuses, or other monies payable in respect of the Share held by them as joint holders. Any such dividend orother distribution may also be paid by any other method (including payment in a currency other than US$, electronicfunds transfer, direct debit, bank transfer or by means of a relevant system) which the Directors consider appropriate andany Member who elects for such method of payment shall be deemed to have accepted all of the risks inherent therein.The debiting of the Company's account in respect of the relevant amount shall be evidence of good discharge of theCompany's obligations in respect of any payment made by any such methods.173. No dividend or distribution shall bear interest against the Company.174. All unclaimed dividends or other monies payable by the Company in respect of a Share may be invested or otherwisemade use of by the Board for the benefit of the Company until claimed. If the Directors so resolve, subject to applicablelaw, any dividend which has remained unclaimed for twelve (12) years from the date of its declaration shall be forfeitedand cease to remain owing by the Company. The payment by the Directors of any unclaimed dividend or other moniespayable in respect of a Share into a separate account shall not constitute the Company a trustee in respect thereof.175. If, in respect of a dividend or other amount payable in respect of a Share (i) a cheque, warrant or money order is returnedundelivered or left uncashed or (ii) a transfer made by or through a bank transfer system and/or other funds transfersystem(s) fails or is not accepted, on two consecutive occasions, or one occasion and reasonable enquiries have failedto establish another address or account of the person entitled to the payment, the Company shall not be obliged to sendor transfer a dividend or other amount payable in respect of such Share to such person until he or she notifies theCompany of an address or account to be used for such purpose.CAPITALISATION176. Without prejudice to any powers conferred on the Directors as aforesaid, and subject to the Board's authority to issue andallot Shares under Article 7, the Board may:176.1. resolve to capitalise an amount standing to the credit of reserves (including, without limitation, a share premiumaccount, undenominated capital account, capital redemption reserve and profit and loss account), whether or notavailable for distribution;176.2. appropriate the sum resolved to be capitalised to the Members in proportion to the nominal amount of Sharesheld by them respectively and apply that sum on their behalf in or towards paying up in full unissued Shares ordebentures of a nominal amount equal to that sum, and allot the Shares or debentures, credited as fully paid, tothe Members (or as the Board may direct) in43 those proportions, or partly in one way and partly in the other, but the share premium account, undenominatedcapital account, capital redemption reserve and profits that are not available for distribution may, for thepurposes of this Article 176, only be applied in paying up unissued Shares to be allotted to Members credited asfully paid;176.3. make any arrangements it thinks fit to resolve a difficulty arising in the distribution of a capitalised reserve,including that where Shares or debentures become distributable in fractions, the Board may deal with thefractions as it thinks fit;176.4. authorise a person to enter (on behalf of all the Members concerned) into an agreement with the Companyproviding for the allotment to the Members respectively, credited as fully paid, of Shares or debentures to whichthey may be entitled on the capitalisation and any such agreement made under this authority being effective andbinding on all those Members; and176.5. generally do all acts and things required to give effect to the resolution of the Board.177. Any such capitalisation will not require approval or ratification by the Members of the Company.ACCOUNTS178. The Board shall, in accordance with Chapter 2 of Part 6 of the Companies Act, cause to be kept adequate accountingrecords, whether in the form of documents, electronic form or otherwise, that:178.1. correctly record and explain the transactions of the Company;178.2. will at any time enable the financial position of the Company to be determined with reasonable accuracy;178.3. will enable the Board to ensure that any financial statements of the Company comply with the requirements ofthe Companies Act and any directors’ report, required to be prepared under the Acts, comply with therequirements of the Companies Act and, where applicable, Article 4 of the IAS Regulation;178.4. will record all sums of money received and expended by the Company and the matters in respect of which thereceipt or expenditure takes place, all sales and purchases of goods by the Company and the assets andliabilities of the Company; and178.5. will enable the financial statements of the Company to be readily and properly audited.179. Accounting records shall be kept on a continuous and consistent basis and entries therein shall be made in a timelymanner and be consistent from year to year. The Company may send by post, electronic mail or any other means ofelectronic communication a summary financial statement to its Members or persons nominated by any Member. TheCompany may meet, but shall be under no obligation to meet, any request from any of its Members to be sent additionalcopies of its full report and accounts or summary financial statement or other communications with its Members.180. The accounting records shall be kept at the registered office of the Company or, subject to the provisions of theCompanies Act, at such other place as the Directors think fit and shall be open at all reasonable times to the inspectionof the Directors.181. Accounting records shall not be deemed to be kept as required by Articles 178 to 180 if there are not kept suchaccounting records as are necessary to give a true and fair view of the state of the Company's affairs and to explain itstransactions.44  182. In accordance with the provisions of the Companies Act, the Board may from time to time cause to be prepared and tobe laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) andsuch other reports and accounts as may be required by law.183. A copy of every balance sheet (including every document required by law to be annexed thereto) which is to be laidbefore the annual general meeting of the Company together with a copy of the Directors' report and Auditors' report shallbe sent by post, electronic mail or any other means of communication (electronic or otherwise), not less than twenty-one(21) clear days before the date of the annual general meeting, to every person entitled under the provisions of theCompanies Act to receive them; provided that in the case of those documents sent by electronic mail or any othermeans of electronic communication, such documents shall be sent with the consent of the recipient, to the address ofthe recipient notified to the Company by the recipient for such purposes.AUDIT184. Auditors shall be appointed and their duties regulated in accordance with Part 6, Chapter 18 of the Companies Act or anystatutory amendment thereof, any other applicable law and such requirements not inconsistent with the Companies Actas the Board may from time to time determine.NOTICES185. Any notice to be given, served, sent or delivered pursuant to these Articles shall be in writing (whether in electronic formor otherwise).185.1. A notice or document to be given, served, sent or delivered in pursuance of these Articles, and the annual reportof the Company, may be given to, served on or delivered to any Director, Member or committee member by theCompany:(a) by handing same to their authorised agent;(b) by delivering same to their registered address;(c) by sending same by the post in a pre-paid cover addressed to their registered address; or(d) by sending, with the consent of the Director, Member or committee member to the extent required bylaw, same by means of electronic mail or other means of electronic communication approved by theDirectors or the Secretary (or such other person as may be nominated by the Secretary for thispurpose), to the address of the Director, Member or committee member notified to the Company by theDirector, Member or committee member for such purpose (or if not so notified, then to the address of theDirector, Member or committee member last known to the Company). A notice or document may be sentby electronic means to the fullest extent permitted by the Companies Act.185.2. For the purposes of these Articles and the Companies Act, a document, including the Company's financialstatements and the directors' and auditor's reports thereon, shall be deemed to have been sent to a Director,Member or committee member if a notice is given, served, sent or delivered to the Director, Member orcommittee member and the notice specifies the website or hotlink or other electronic link at or through which theDirector, Member or committee member may obtain a copy of the relevant document.185.3. Where a notice or document is given, served or delivered pursuant to sub-paragraph 184.1(a) or 184.1(b) of thisArticle, the giving, service or delivery thereof shall be deemed to have been effected at the time the same washanded to the Director, Member or committee member or his or her authorised agent, or left at his or herregistered address (as the case may be).45  185.4. Where a notice or document is given, served or delivered pursuant to sub-paragraph 184.1(c) of this Article, thegiving, service or delivery thereof shall be deemed to have been effected at the expiration of twenty-four (24)hours after the cover containing it was posted. In proving service or delivery it shall be sufficient to prove thatsuch cover was properly addressed, stamped and posted.185.5. Where a notice or document is given, served or delivered pursuant to sub-paragraph 184.1(d) of this Article, thegiving, service or delivery thereof shall be deemed to have been effected at the expiration of forty-eight (48) hoursafter despatch.185.6. Every legal personal representative, committee, receiver, curator bonis or other legal curator, assignee inbankruptcy, examiner or liquidator of a Member shall be bound by a notice given as aforesaid if sent to the lastregistered address of such Member, or, in the event of notice given or delivered pursuant to sub-paragraph 184.1(d), if sent to the address notified to the Company by the Member for such purpose notwithstanding that theCompany may have notice of the death, lunacy, bankruptcy, liquidation or disability of such Member.185.7. Notwithstanding anything contained in this Article to the contrary, the Company shall not be obliged to takeaccount of or make any investigations as to the existence of any suspension or curtailment of postal serviceswithin or in relation to all or any part of any jurisdiction.185.8. Any requirement in these Articles for the consent of a Member in regard to the receipt by such Member ofelectronic mail or other means of electronic communications approved by the Directors, including the receipt ofthe Company's annual report, statutory financial statements and the Directors' and auditor's reports thereon, shallbe deemed to have been satisfied where the Company has written to the Member informing him or her of itsintention to use electronic communications for such purposes and the Member has not, within four (4) weeks ofthe issue of such notice, served an objection in writing on the Company to such proposal. Where a Member hasgiven, or is deemed to have given, his/her consent to the receipt by such Member of electronic mail or othermeans of electronic communications approved by the Directors, she/he may revoke such consent at any time byrequesting the Company to communicate with him or her in documented form; provided, however, that suchrevocation shall not take effect until five (5) days after written notice of the revocation is received by theCompany. No such consent shall be necessary, and to the extent it is necessary, such consent shall be deemedto have been given, if electronic communications are permitted to be used under the rules and regulations of theUnited States Securities and Exchange Commission or any Exchange on which the Shares or other securities ofthe Company are listed.185.9. Without prejudice to the provisions of sub-paragraphs 185.1 (a) and 185.1(b) of this Article, if at any time byreason of the suspension or curtailment of postal services in any territory, the Company is unable effectively toconvene a general meeting by notices sent through the post, a general meeting may be convened by a publicannouncement (as defined below) and such notice shall be deemed to have been duly served on all Membersentitled thereto at noon (New York time) on the day on which the said public announcement is made. In any suchcase the Company shall put a full copy of the notice of the general meeting on its website. A "publicannouncement" shall mean disclosure in a press release reported by a financial news service or in a documentpublicly filed by the Company with the United States Securities and Exchange Commission pursuant to sections13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.186. Notice may be given by the Company to the joint holders of a Share by giving the notice to the joint holder whose namestands first in the Register in respect of the Share and notice so given shall be sufficient notice to all the joint holders.187.46  187.1. Every person who becomes entitled to a Share shall, before his or her name is entered in the Register in respectof the Share, be bound by any notice in respect of that Share which has been duly given to a person from whomhe or she derives his or her title.187.2. A notice may be given by the Company to the persons entitled to a Share in consequence of the death orbankruptcy of a Member by sending or delivering it, in any manner authorised by these Articles for the giving ofnotice to a Member, addressed to them at the address, if any, supplied by them for that purpose. Until such anaddress has been supplied, a notice may be given in any manner in which it might have been given if the deathor bankruptcy had not occurred.188. The signature (whether electronic signature, an advanced electronic signature or otherwise) to any notice to be given bythe Company may be written (in electronic form or otherwise) or printed.189. A Member present, either in person or by proxy, at any meeting of the Company or the holders of any class of Shares inthe Company shall be deemed to have received notice of the meeting and, where requisite, of the purposes for which itwas called.UNTRACED HOLDERS190.190.1. Subject to applicable law, the Company shall be entitled to sell, at the best price reasonably obtainable, anyShare or stock of a Member or any Share or stock to which a person is entitled by transmission if and providedthat:(a) for a period of twelve (12) years (not less than three (3) dividends having been declared and paid) nocheque or warrant sent by the Company through the post in a prepaid letter addressed to the Member orto the person entitled by transmission to the Share or stock at his or her address on the Register or otherthan the last known address given by the Member or the person entitled by transmission to whichcheques and warrants are to be sent has been cashed and no communication has been received by theCompany from the Member or the person entitled by transmission; and(b) at the expiration of the said period of twelve (12) years, the Company has given notice by advertisementin a leading newspaper circulating in the area in which the address referred to in paragraph (a) of thisArticle is located of its intention to sell such Share or stock; and(c) the Company has not during the further period of three (3) months after the date of the advertisementand prior to the exercise of the power of sale received any communication from the Member or personentitled by transmission.190.2. To give effect to any such sale, the Company may appoint any person to execute as transferor an instrument oftransfer of such Share or stock and such instrument of transfer shall be as effective as if it had been executedby the Member or person entitled by transmission to such Share or stock. The Company shall account to theMember or other person entitled to such Share or stock for the net proceeds of such sale by carrying all moniesin respect thereof to a separate account which shall be a permanent debt of the Company and the Company shallbe deemed to be a debtor and not a trustee in respect thereof for such Member or other person. Monies carried tosuch separate account may either be employed in the business of the Company or invested in such investments(other than shares of the Company or its holding company if any) as the Directors may from time to time think fit.190.3. To the extent necessary in order to comply with any laws or regulations to which the Company is subject inrelation to escheatment, abandonment of property or other similar or analogous laws or regulations (“ApplicableEscheatment Laws”), the Company may deal with any Share of any47 Member and any unclaimed cash payments relating to such Share in any manner which it sees fit, includingtransferring or selling such Share and transferring to third parties any unclaimed cash payments relating to suchShare.190.4. The Company may only exercise the powers granted to it in paragraph 190.1 above in circumstances where ithas complied with, or procured compliance with, the required procedures (as set out in the ApplicableEscheatment Laws) with respect to attempting to identify and locate the relevant member of the Company.190.5. Any stock transfer form to be executed by the Company in order to sell or transfer a Share pursuant to Article190.1 may be executed in accordance with Article 28.1.DESTRUCTION OF DOCUMENTS191. Subject to applicable law, the Company may destroy:191.1. any dividend mandate or any variation or cancellation thereof or any notification of change of name or address, atany time after the expiry of two (2) years from the date such mandate variation, cancellation or notification wasrecorded by the Company;191.2. any instrument of transfer of Shares which has been registered, at any time after the expiry of six (6) years fromthe date of registration; and191.3. any other document on the basis of which any entry in the Register was made, at any time after the expiry of six(6) years from the date an entry in the Register was first made in respect of it,and it shall be presumed conclusively in favour of the Company that every share certificate (if any) so destroyedwas a valid certificate duly and properly sealed and that every instrument of transfer so destroyed was a validand effective instrument duly and properly registered and that every other document destroyed hereunder was avalid and effective document in accordance with the recorded particulars thereof in the books or records of theCompany provided always that:(a) the foregoing provisions of this Article shall apply only to the destruction of a document in good faithand without express notice to the Company (by a Member or a court) that the preservation of suchdocument was relevant to a claim;(b) nothing contained in this Article shall be construed as imposing upon the Company any liability inrespect of the destruction of any such document earlier than as aforesaid or in any case where theconditions of proviso (a) above are not fulfilled; and(c) references in this Article to the destruction of any document include references to its disposal in anymanner.WINDING UP192. If the Company shall be wound up and the assets available for distribution among the Members as such shall beinsufficient to repay the whole of the paid up or credited as paid up share capital, such assets shall be distributed so that,as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up or credited as paid upat the commencement of the winding up on the Shares held by them respectively. If in a winding up the assets availablefor distribution among the Members shall be more than sufficient to repay the whole of the share capital paid up orcredited as paid up at the commencement of the winding up, the excess shall be distributed among the Members inproportion to the capital at the commencement of the winding up paid up or credited as paid up on the said Shares heldby them respectively. Notwithstanding the foregoing, this Article shall not affect the rights of the Members holding Sharesissued upon special terms and conditions.48  192.1. In case of a sale by the liquidator under section 601 of the Companies Act, the liquidator may by the contract ofsale agree so as to bind all the Members, for the allotment to the Members directly, of the proceeds ofsale in proportion to their respective interests in the Company and may further, by the contract, limit a time at theexpiration of which obligations or Shares not accepted or required to be sold shall be deemed to have beenirrevocably refused and be at the disposal of the Company, but so that nothing herein contained shall be taken todiminish, prejudice or affect the rights of dissenting Members conferred by the said section.192.2. The power of sale of the liquidator shall include a power to sell wholly or partially for debentures, debenturestock, or other obligations of another company, either then already constituted or about to be constituted for thepurpose of carrying out the sale.193. If the Company is wound up, the liquidator, with the sanction of a Special Resolution and any other sanction required bythe Companies Act, may divide amongst the Members in specie or kind the whole or any part of the assets of theCompany (whether they shall consist of property of the same kind or not), and, for such purpose, may value any assetsand determine how the division shall be carried out as between the Members or different classes of Members. Theliquidator, with the like sanction, may vest the whole or any part of such assets in trustees upon such trusts for thebenefit of the contributories as, with the like sanction, he or she determines, but so that no Member shall be compelled toaccept any assets upon which there is a liability.INDEMNITY194.194.1. Subject to the provisions of, and so far as may be permitted by, the Companies Act, every Director andSecretary shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses andliabilities incurred by him or her in the execution and discharge of his or her duties or in relation thereto, or in hisor her capacity as an officer, including any liability incurred by him in defending any proceedings, civil or criminal,which relate to anything done or omitted or alleged to have been done or omitted by him as a director, officer oremployee of the Company and in which judgement is given in his or her favour (or the proceedings are otherwisedisposed of without any finding or admission of any material breach of duty on his or her part) or in which he orshe is acquitted or in connection with any application under any statute for relief from liability in respect of anysuch act or omission in which relief is granted to him by the Court.194.2. As far as permissible under the Companies Act, the Company shall indemnify any current or former Official(excluding any Director or Secretary in respect only of their role as Director or Secretary of the Company) againstexpenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonablyincurred by him or her in connection with any threatened, pending, or completed action, suit or proceeding,whether civil, criminal, administrative or investigative, other than an action by or in the right of the Enterprise inrespect of which the Official serves or has served as an Official, to which he or she was, is or is threatened tobe, made a party by reason of the fact that he or she is or was such an Official, provided always that theindemnity contained in this Article 194.2 shall not extend to any matter which would render it void pursuant to theCompanies Act.194.3. In the case of any threatened, pending or completed action, suit or proceeding by or in the right of an Enterprisein respect of which a current or former Official serves or has served, the Company shall indemnify, to the fullestextent permitted by the Companies Act, each person indicated in Article 194.2 against expenses, includingattorneys’ fees actually and reasonably incurred in connection with the defence or the settlement thereof, exceptno indemnification shall be made in respect of any claim, issue or matter as to which such person shall havebeen adjudged to be liable for fraud or dishonesty in the performance of his or her duty to the relevant Enterpriseunless and only to the extent that the Court or the court in which such action or suit was brought shall determineupon application that despite the adjudication of liability, but in view49 of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for suchexpenses as the Court shall deem proper.194.4. As far as permissible under the Companies Act, expenses, including attorneys’ fees, incurred in defending anyaction, suit or proceeding referred to in this Article shall be paid by the Company in advance of the finaldisposition of such action, suit or proceeding upon receipt of a written affirmation by or on behalf of the Director,Secretary, Official or other indemnitee of a good faith belief that the criteria for indemnification have beensatisfied and a written undertaking to repay such amount if it shall ultimately be determined that he or she is notentitled to be indemnified by the Company as authorised by these Articles.194.5. It being the policy of the Company that indemnification of the persons specified in this Article shall be made tothe fullest extent permitted by law, the indemnification provided by this Article shall not be deemed exclusive (a)of any other rights to which those seeking indemnification or advancement of expenses may be entitled under theMemorandum, Articles, any agreement, any insurance purchased by the Company, any vote of Members ordisinterested Directors, or pursuant to the direction (however embodied) of any court of competent jurisdiction, orotherwise, both as to action in his or her official capacity and as to action in another capacity while holding suchoffice, (b) of the power of any Enterprise to indemnify any Official, to the same extent and in the same situationsand subject to the same determinations as are hereinabove set forth with respect to a Director, Secretary orOfficial or (c) of any amendments or replacements of the Companies Act which permit for greater indemnificationof the persons specified in this Article and any such amendment or replacement of the Companies Act shallhereby be incorporated into these Articles. As used in this Article 194.5, references to the “Company” include allconstituent companies in a consolidation or merger in which the Company or any predecessor to the Company byconsolidation or merger was involved. The indemnification provided by this Article shall continue as to a personwho has ceased to be a Director, executive, officer or trustee and shall inure to the benefit of the heirs,executors, and administrators of such a person.194.6. The Directors shall have power to purchase and maintain for any Director, the Secretary or other officers oremployees of the Company insurance against any such liability as referred to in section 235 of the CompaniesAct and such insurance in respect of Officials as the Directors deem to be appropriate.194.7. The Company may additionally indemnify any employee or agent of the Company or any director, executive,officer, employee or agent of any of its subsidiaries to the fullest extent permitted by law.FINANCIAL YEAR195. The financial year of the Company shall be as prescribed by the Board from time to time.SHAREHOLDER RIGHTS PLAN196. The Board is hereby expressly authorised to adopt any shareholder rights plan, or similar plan, agreement or arrangementpursuant to which, under circumstances provided therein, some or all Members will have rights to acquire Shares orinterests in Shares, upon such terms and conditions as the Board deems expedient and in the best interests of theCompany.BUSINESS COMBINATION197.197.1. The Company may not engage in any business combination, or vote, consent, or otherwise act to authorisea subsidiary of the Company to engage in any business combination, with, with respect to, proposed by oron behalf of, or pursuant to any written or oral agreement,50 arrangement, relationship, understanding, or otherwise with, any interested Member of the Company or anyaffiliate or associate of the interested Member for a period of three (3) years following the date that theMember became an interested Member unless:(a) prior to the date that the Member became an interested Member, the business combination wasapproved by a committee of the Board formed in accordance with Article 197.3; or(b) at or following the date that the Member became an interested Member, the business combination isapproved by a committee of the Board formed in accordance with Article 197.3 and is authorized by aSpecial Resolution of the Members. In determining whether the Special Resolution has been adoptedby the general meeting, votes cast with respect to Shares of interested Members and their affiliatesand associates shall not be taken into account.197.2. If a good faith definitive proposal regarding a business combination is made in writing to the Board, acommittee of the Board formed in accordance with Article 197.3 shall consider and take action on theproposal and respond in writing within thirty (30) days after receipt of the proposal by the Company, settingforth its decision regarding the proposal.197.3. When a business combination is proposed pursuant to this Article 197, the Board shall promptly form acommittee composed solely of one or more disinterested Directors. The committee shall take action on theproposal by the affirmative vote of a majority of committee members. No larger proportion or number ofvotes shall be required. Notwithstanding anything in these Articles to the contrary, subject to applicable law,the committee shall not be subject to any direction or control by the Board with respect to the committee’sconsideration of, or any action concerning, a business combination pursuant to this Article 197. If the Boardhas no disinterested Directors, the Board shall select three or more disinterested persons to be committeemembers. Committee members shall act in accordance with the standard of conduct applicable to theDirectors and shall be indemnified in accordance with Article 194. For purposes of this Article 197.3, aDirector or person is “disinterested” if the Director or person is neither an officer nor an employee, nor hasbeen an officer or employee within five (5) years preceding the formation of the committee pursuant to thisArticle 197.3, of the Company or of a related company.197.4. This Article 197 may only be amended in accordance with paragraph 6 of the Memorandum. In determiningwhether the relevant resolution has been approved by the requisite majority, votes cast with respect toShares of interested Members and their affiliates and associates shall not be taken into account.Notwithstanding any such amendment, unless determined otherwise by the Board, this Article 197 (as itsstands prior to any such amendment) shall apply to any business combination of the Company with aninterested Member who became an interested Member before the effective date of the amendment of thisArticle 197.197.5. As used in this Article 197 only, the term:(i) “affiliate” means a person that directly or indirectly controls, is controlled by, or is under common controlwith, a specified person;(ii) “associate”, when used to indicate a relationship with any person, means any of the following:(a) any company of which the person is an officer or partner or is, directly or indirectly, the beneficialowner of fifteen percent (15%) or more of any class or series of shares entitled to vote or other equityinterest;51  (b) any trust or estate in which the person has a substantial beneficial interest or as to which the personserves as trustee or executor or in a similar fiduciary capacity; or(c) any relative or spouse of the person, or any relative of the spouse, residing in the home of the person;(iii) “beneficial owner”, when used with respect to shares or other securities, includes, but is not limited to, anyperson who, directly or indirectly through any written or oral agreement, arrangement, relationship,understanding, or otherwise, has or shares the power to vote, or direct the voting of, the shares orsecurities or has or shares the power to dispose of, or direct the disposition of, the shares or securities,except that:(a) a person shall not be deemed the beneficial owner of shares or securities tendered pursuant to atender or exchange offer made by the person or any of the person’s affiliates or associates until thetendered shares or securities are accepted for purchase or exchange; and(b) a person shall not be deemed the beneficial owner of shares or securities with respect to which theperson has the power to vote or direct the voting arising solely from a revocable proxy given inresponse to a proxy solicitation required to be made and made in accordance with the applicable rulesand regulations under the Exchange Act and is not then reportable under that act on a Schedule 13Dor comparable report, or, if the company is not subject to the rules and regulations under theExchange Act, would have been required to be made and would not have been reportable if thecompany had been subject to the rules and regulations;(iv) “beneficial ownership” includes, but is not limited to, the right to acquire shares or securities through theexercise of options, warrants, or rights, or the conversion of convertible securities, or otherwise. Theshares or securities subject to the options, warrants, rights, or conversion privileges held by a person shallbe deemed to be outstanding for the purpose of computing the percentage of outstanding shares orsecurities of the class or series owned by the person, but shall not be deemed to be outstanding for thepurpose of computing the percentage of the class or series owned by any other person. A person shall bedeemed the beneficial owner of shares and securities beneficially owned by any relative or spouse of theperson or any relative of the spouse, residing in the home of the person, any trust or estate in which theperson owns fifteen percent (15%) or more of the total beneficial interest or serves as trustee or executoror in a similar fiduciary capacity, any company in which the person owns fifteen percent (15%) or more ofthe equity, and any affiliate of the person.When two or more persons act or agree to act as a partnership, limited partnership, syndicate, or other groupfor the purposes of acquiring, owning, or voting shares or other securities of a company, all members of thepartnership, syndicate, or other group are deemed to constitute a “person” and to have acquired beneficialownership, as of the date they first so act or agree to act together, of all shares or securities of the companybeneficially owned by the person;(v) “business combination” means any of the following:(a) any merger, acquisition, scheme of arrangement or amalgamation of the Company or any subsidiaryof the Company with (1) the interested Member or (2) any other company (whether or not itself aninterested Member of the Company) that is, or after the merger would be, an affiliate or associate ofthe interested Member, but excluding (x) the merger of a wholly owned subsidiary of the Companyinto the Company, (y) the merger of two or more wholly owned subsidiaries of the Company, or (z) themerger of a company, other than an interested Member or an affiliate or associate of an interestedMember, with a wholly owned subsidiary of the Company pursuant to52 which the surviving company, immediately after the merger, becomes a wholly owned subsidiary ofthe Company;(b) any exchange of Shares or other securities of the Company or any subsidiary of the Company ormoney, or other property, for shares, other securities, money, or property of (1) the interested Memberor (2) any other company (whether or not itself an interested Member of the Company) that is, or afterthe exchange would be, an affiliate or associate of the interested Member, but excluding theexchange of shares of a company, other than an interested Member or an affiliate or associate of aninterested Member, pursuant to which the company, immediately after the exchange, becomes awholly owned subsidiary of the Company;(c) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in a single transaction or aseries of transactions), other than sales of goods or services in the ordinary course of business, to orwith the interested Member or any affiliate or associate of the interested Member, other than to or withthe Company or a wholly owned subsidiary of the Company, of assets of the Company or anysubsidiary of theCompany (1) having an aggregate market value equal to ten percent (10%) or more of the aggregatemarket value of all the assets, determined on a consolidated basis, of the Company, (2) having anaggregate market value equal to ten percent (10%) or more of the aggregate market value of all theoutstanding Shares of the Company, or (3) representing ten percent (10%) or more of the earningpower or net income, determined on a consolidated basis, of the Company, except a cash dividend ordistribution paid or made pro rata to all Members of the Company;(d) the issuance or transfer by the Company or any subsidiary of the Company (in a single transaction ora series of transactions) of any shares of, or other ownership interests in, the Company or anysubsidiary of the Company that have an aggregate market value equal to five percent (5%) or more ofthe aggregate market value of all the outstanding Shares of the Company to the interested Member orany affiliate or associate of the interested Member, except pursuant to the exercise of warrants orrights to purchase shares offered, or a dividend or distribution paid or made, pro rata to all Membersof the Company other than for the purpose, directly or indirectly, of facilitating or effecting asubsequent transaction that would have been a business combination if the dividend or distributionhad not been made;(e) the adoption of any plan or proposal for the liquidation or dissolution of the Company, or anyreincorporation of the Company in another jurisdiction, proposed by or on behalf of, or pursuant to anywritten or oral agreement, arrangement, relationship, understanding, or otherwise with, the interestedMember or any affiliate or associate of the interested Member;(f) any reclassification of securities (including, without limitation, any bonus shares or share split,reverse share split, or other distribution of shares in respect of shares), recapitalisation of theCompany, merger of the Company with any subsidiary of the Company, exchange of Shares of theCompany with any subsidiary of the Company, or other transaction (whether or not with or into orotherwise involving the interested Member), proposed by or on behalf of, or pursuant to any written ororal agreement, arrangement, relationship, understanding, or otherwise with, the interested Member orany affiliate or associate of the interested Member, that has the effect, directly or indirectly, ofincreasing the proportionate share of the outstanding shares of any class or series of shares entitledto vote, or securities that are exchangeable for, convertible into, or carry a right to acquire sharesentitled to vote, of the Company or any subsidiary of the Company that is, directly or indirectly,owned by the interested Member or any affiliate or associate of the interested Member, except as aresult of immaterial changes due to fractional share adjustments; or53  (g) any receipt by the interested Member or any affiliate or associate of the interested Member of thebenefit, directly or indirectly (except proportionately as a Member of the Company), of any loans,advances, guarantees, pledges, or other financial assistance, or any tax credits or other taxadvantages provided by or through the Company or any subsidiary of the Company;(vi) “company” means a corporation, limited liability company, partnership, limited partnership, joint venture,association, business trust, estate, trust, enterprise, and any other legal or commercial entity;(vii) “control”, including the terms “controlling”, “controlled by”, and “under common control with”, means thepossession, directly or indirectly, of the power to direct or cause the direction of the management andpolicies of a person, whether through the ownership of voting securities, by contract, or otherwise. Aperson’s beneficial ownership of fifteen percent (15%) or more of the voting power of a company’soutstanding shares entitled to vote in the election of directors creates a presumption that the person hascontrol of the company. Notwithstanding the foregoing, a person is not considered to have control of acompany if the person holds voting power, in good faith, as an agent, bank, broker, nominee, custodian,or trustee for one or more beneficial owners who do not individually or as a group have control of thecompany;(viii) “governing body” means the body of a company selected by its owners that has the ultimate power todetermine the company’s policies and control its activities; and(ix) “interested Member” means any person (including for this purpose any persons acting in concert withthat person (as that term is defined in the Takeover Rules issued pursuant to the Irish Takeover PanelAct 1997)) that is (1) the beneficial owner, directly or indirectly, of fifteen percent (15%) or more of thevoting power of the outstanding Shares entitled to vote of the Company or (2) an affiliate or associate ofthe Company that, at any time within the three (3) year period immediately before the date on which it issought to be determined whether such person is an interested Member, was the beneficial owner,directly or indirectly, of fifteen percent (15%) or more of the voting power of the then outstanding Sharesentitled to vote of the Company.If a person who has not been a beneficial owner of fifteen percent (15%) or more of the voting power of theoutstanding Shares entitled to vote of the Company immediately prior to an acquisition of Shares by, orrecapitalisation of, the Company or similar action shall become a beneficial owner of fifteen percent (15%) ormore of the voting power solely as a result of the share acquisition, recapitalisation, or similar action, theperson shall not be deemed to be the beneficial owner of fifteen percent (15%) or more of the voting power forpurposes of (1) or (2) above, unless:(a) the share acquisition, recapitalisation, conversion, or similar action was proposed by or on behalf of,or pursuant to any agreement, arrangement, relationship, understanding, or otherwise (whether or notin writing) with, the person or any affiliate or associate of the person; or(b) the person thereafter acquires beneficial ownership, directly or indirectly, of outstanding Sharesentitled to vote of the Company and, immediately after the acquisition, is the beneficial owner, directlyor indirectly, of fifteen percent (15%) or more of the voting power of the outstanding Shares entitled tovote of the Company.(x) an “interested Member” does not include:(a) the Company or any of its subsidiaries;54 (b) either of the Sponsor Holders;(c) a savings, employee stock ownership, or other employee benefit plan of the Company or itssubsidiary, or a fiduciary of the plan when acting in a fiduciary capacity pursuant to the plan; or(d) a licensed broker/dealer or licensed underwriter who (1) purchases Shares of the Companysolely for purposes of resale to the public and (2) is not acting in concert with an interestedMember.Shares beneficially owned by a plan described in clause (b) or by a fiduciary of a plan described in clause(b), pursuant to the plan, are not deemed to be beneficially owned by a person who is a fiduciary of the plan;(xi) "market value", when used in reference to shares or other property of any company, means thefollowing:(a) in the case of shares, the average closing sale price of a share during the thirty (30) tradingdays immediately preceding the date in question:(1) on the composite tape for Nasdaq Stock Market listed shares; or(2) if the shares are not quoted on the composite tape or not listed on the Nasdaq StockMarket, on the principal United States securities exchange registered under ExchangeAct on which the shares are listed; or(3) if the shares are not listed on any such exchange, on any system then in use.If no quotation under clauses (1) through (3) is available, then the market value is the fair marketvalue on the date in question of the shares as determined in good faith by the governing body ofthe company.(b) in the case of property other than cash or shares, the fair market value of the property on thedate in question as determined in good faith by the governing body of the company.(xii) “parent” of a specified company means a company that directly, or indirectly through related companies,owns more than fifty percent (50%) of the voting power of the shares or other ownership interestsentitled to vote for directors or other members of the governing body of the specified company;(xiii) “person” includes a natural person and a company;(xiv) “related company” of a specified company means:(a) a parent or subsidiary of the specified company;(b) another subsidiary of a parent of the specified company;(c) a limited liability company owning, directly or indirectly, more than fifty percent (50%) of thevoting power of the shares entitled to vote for directors of the specified company;55  (d) a limited liability company having more than fifty percent (50%) of the voting power of itsmembership interests entitled to vote for members of its governing body owned directly orindirectly by the specified company;(e) a limited liability company having more than fifty percent (50%) of the voting power of itsmembership interests entitled to vote for members of its governing body owned directly orindirectly either (1) by a parent of the specified company or (2) a limited liability companyowning, directly or indirectly, more than fifty percent (50%) of the voting power of the sharesentitled to vote for directors of the specified company; or(f) a company having more than fifty percent (50%) of the voting power of its shares entitled tovote for directors owned directly or indirectly by a limited liability company owning, directly orindirectly, more than fifty percent (50%) of the voting power of the shares entitled to vote fordirectors of the specified company;(xv) “security” means a note, stock, treasury stock, security future, bond, debenture, evidence ofindebtedness, certificate of interest or participation in a profit-sharing agreement, collateral trustcertificate, preorganization certificate or subscription, transferable share, investment contract, votingtrust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or othermineral rights, put, call, straddle, option, or privilege on a security, certificate of deposit, or group orindex of securities, including an interest therein or based on the value thereof, put, call, straddle, option,or privilege entered into on a national securities exchange relating to foreign currency, or, in general, aninterest or instrument commonly known as a “security”; or a certificate of interest or participation in,temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to orpurchase, any of the foregoing. The term:(a) includes both a certificated and an uncertificated security;(b) does not include an insurance or endowment policy or annuity contract under which an insurancecompany promises to pay a fixed or variable sum of money either in a lump sum or periodicallyfor life or other specified period;(c) does not include an interest in a contributory or non-contributory pension or welfare plan subjectto the United States Employee Retirement Income Security Act of 1974, as amended;(d) includes as an “investment contract,” among other contracts, an interest in a limited partnershipand a limited liability company and an investment in a viatical settlement or similar agreement;and(e) does not include any equity interest of a closely held corporation or other entity with not morethan thirty-five (35) holders of the equity interest of such entity offered or sold pursuant to atransaction in which one hundred percent (100%) of the equity interest of such entity is sold as ameans to effect the sale of the business of the entity if the transaction has been negotiated onbehalf of all purchasers and if all purchasers have access to inside information regarding theentity before consummating the transaction; and(xvi) “subsidiary” of a specified company means a company having more than fifty percent (50%) of the votingpower of its shares or other ownership interests entitled to vote for directors or other members of thegoverning body of the company owned directly, or indirectly through related companies, by the specifiedcompany.56 EXCLUSIVE JURISDICTION198.198.1. Save in the case of any actions brought by, or on behalf of, or against, the Company relating to US securitieslaw, unless the Board or one of its duly authorised committees approves the selection of an alternate forum,the courts of Ireland shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for(i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim ofbreach of a fiduciary duty owed by any Director, officer or other employee of the Company to the Company orthe Members, (iii) any action asserting a claim against the Company arising pursuant to any provision of Irishlaw or this Constitution and (iv) any action to interpret, apply, enforce or determine the validity of thisConstitution (each an “Irish Proceeding”).198.2. If any action the subject matter of an Irish Proceeding is filed in a court outside the jurisdiction of Ireland (a“Foreign Action”), in the name of any person or entity (a “Claiming Party”) without the prior approval of theBoard or one of its duly authorised committees in the manner described above in Article 198.1, such ClaimingParty shall be deemed to have consented to (i) the jurisdiction of the courts of Ireland in connection with anyaction brought by the Company in any such courts to enforce Article 198.1 above (an “Enforcement Action”)and (ii) having service of process made upon such Claiming Party in any such Enforcement Action by serviceupon such Claiming Party’s counsel in the Foreign Action as agent for such Claiming Party.198.3. Any person or entity purchasing or otherwise acquiring any interest in Share(s) of the Company shall bedeemed to have notice of and consented to the provisions of this Article 198 and waived any argument relatingto the inconvenience of the forums referenced above in connection with any Irish Proceeding.57  We, the corporate body whose name and address is subscribed, wish to be formed into a company in pursuance of thismemorandum of association, and we agree to take the number of shares in the capital of the Company set opposite ourrespective names. Name, Address and Description Number of shares of the Subscriber taken by the Subscriber For and on behalf of Dated Witness to the above signature: Name: Address: Occupation: 58Exhibit 4.1Execution VersionSHAREHOLDERS AGREEMENTDATED AS OFOCTOBER 17, 2018AMONGOSMOTICA PHARMACEUTICALS PLCACP HOLDCO (OFFSHORE), L.P.ACP III AIV, L.P.ALTCHEM LIMITEDORBIT CO-INVEST A-I LLCORBIT CO-INVEST 1 LLCORBIT CO-INVEST II LLCORBIT CO-INVEST III LLCANDTHE MANAGEMENT SHAREHOLDERS IDENTIFIED HEREIN  TABLE OF CONTENTS ARTICLE 1 DEFINITIONS1 Section 1.01.Definitions1ARTICLE 2 CORPORATE GOVERNANCE8 Section 2.01.Composition of the Board8 Section 2.02.Additional Provisions9 Section 2.03.Exculpation9 Section 2.04.Indemnification10 Section 2.05.Primary Obligation11ARTICLE 3 TRANSFERS AND RESTRICTIONS ON TRANSFER12 Section 3.01.Co-Invest Vehicle Participation; Aggregation of Interests12 Section 3.02.General Restrictions on Transfer13 Section 3.03.Restrictions on Transfer by Management Shareholders13 Section 3.04.Management Permitted Transferees14ARTICLE 4 REGISTRATION RIGHTS15 Section 4.01.Demand Registration15 Section 4.02.Piggyback Registration17 Section 4.03.Shelf Registration18 Section 4.04.Lock-Up Agreements20 Section 4.05.Registration Procedures21 Section 4.06.Indemnification by the Company25 Section 4.07.Indemnification by the Participating Shareholders25 Section 4.08.Conduct of Indemnification Proceedings26 Section 4.09.Contribution26 Section 4.10.Cooperation by the Company27 Section 4.11.Restriction on Company Grants of Subsequent Registration Rights28 Section 4.12.Assignment of Registration Rights28ARTICLE 5 ACCOUNTING AND TAX MATTERS28 Section 5.01.Books and Records; Financial Reports28 Section 5.02.Tax Returns28 Section 5.03.Accounting Methods; Elections29 Section 5.04.United States Federal Income Tax Classification29ARTICLE 6 CERTAIN COVENANTS AND AGREEMENTS29 Section 6.01.Confidentiality29-i-  Section 6.02.Directors’ and Officers’ Insurance30 Section 6.03.No Exclusive Duty to Company31ARTICLE 7 MISCELLANEOUS32 Section 7.01.Binding Effect; Assignability; Benefit32 Section 7.02.Notices32 Section 7.03.Waiver; Amendment; Termination34 Section 7.04.Non-Recourse34 Section 7.05.Governing Law; Venue34 Section 7.06.WAIVER OF JURY TRIAL35 Section 7.07.Specific Enforcement; Cumulative Remedies35 Section 7.08.Entire Agreement35 Section 7.09.Severability35 Section 7.10.Counterparts; Effectiveness36 -ii- THIS SHAREHOLDERS AGREEMENT (this “Agreement”), dated as of October 17, 2018, is entered intoby and among Osmotica Pharmaceuticals plc, a public limited company incorporated under the laws of Ireland withregistration number 607944 and registered office at 25-28 North Wall Quay, Dublin 1, Ireland (together with itssuccessors, the “Company”), ACP Holdco (Offshore), L.P., a Bermuda exempted limited partnership (“ACPOffshore”), ACP III AIV, L.P., a Bermuda exempted limited partnership (the “VCOC”, and together with ACPOffshore, the “Avista Shareholder”), Altchem Limited (the “Altchem Shareholder”), and each of Altchem, on the onehand, and the Avista Shareholder, collectively, on the other hand, a “Sponsor”), Orbit Co-Invest A-I LLC, a DelawareLLC (“Orbit A-1”), Orbit Co-Invest I LLC, a Delaware LLC (“Orbit 1”) and Orbit Co-Invest III, LLC (“Orbit 3”, andtogether with Orbit A-1 and Orbit 1, the “Co-Invest Vehicles”), the shareholders listed on Annex A hereto asManagement Shareholders, and the Persons who on becoming shareholders of the Company execute and deliver aJoinder Agreement, substantially as set forth on Annex A hereto (a “Joinder Agreement”) (each of the foregoing a“Shareholder” and collectively, the “Shareholders”).WHEREAS, the Company was formed pursuant to the Irish Companies Act 2014 on July 13, 2017;WHEREAS, in connection with the contemplated initial public offering (the “Offering”) of the Company’sOrdinary Shares (as defined below), the board of directors of the Company (the “Board”) has approved thisAgreement at a meeting of the Board on August 14, 2018;WHEREAS, this Agreement shall be effective upon the consummation of the IPO (as defined below) (the“Effective Time”);WHEREAS, Schedule A hereto sets forth the names of and the number of Equity Securities owned by eachShareholder as of the date hereof, and the Company shall update Schedule A from time to time to reflect any issuancesor Transfers of Equity Securities;WHEREAS, the parties believe that it is in the best interests of the Company and the Shareholders to set forthherein their agreements on certain matters relating to the governance of the Company and the rights and obligations ofthe Shareholders; andNOW, THEREFORE, in consideration of the promises and mutual agreements contained herein and for othergood and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties herebyagree as follows:ARTICLE 1DEFINITIONSSection 1.01. Definitions.(a) The following terms, as used herein, have the following meanings:“Affiliate” means, with respect to any Person, any other Person who, directly or indirectly, Controls such firstPerson or is Controlled by said Person or is under common Control with said  Person; provided, that no Shareholder shall be deemed an Affiliate of any other Shareholder solely by reason of aninvestment in, or holding Equity Securities of, the Company.“Altchem Co-Invest Vehicles” means Orbit A-I LLC (to the extent that it remains Controlled by the AltchemShareholder or one of its Controlled Affiliates) or any other co-investment vehicle controlled by the AltchemShareholder or one of its Controlled Affiliates and that holds Equity Securities from and after the Effective Date,collectively referred to as “Altchem Co-Invest Vehicles”; provided, that the Altchem Shareholder and its PermittedTransferees shall in no event be deemed to be an Altchem Co-Invest Vehicle.“Avista Co-Invest Vehicle” means any of Orbit 1, Orbit 3 and any other co-investment vehicle controlled bythe Avista Shareholder or one of its controlled Affiliates and that holds Equity Securities from or after the EffectiveDate, collectively referred to as “Avista Co-Invest Vehicles”; provided, that the Avista Shareholder and their PermittedTransferees shall in no event be deemed to be an Avista Co-Invest Vehicle.“Business” means, from time to time, the marketing, distribution, manufacturing or sale of branded and genericpharmaceutical products of the Company and/or of Subsidiaries of the Company at such time or which products havebeen presented to the Board or board of directors of the Subsidiaries of the Company for future marketing, distribution,manufacturing or sale at prior to such time; provided, that “Business” includes any business that develops orcommercializes osmotic-based drug delivery technology in the United States or Canada.“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in NewYork City, New York and Dublin, Ireland are authorized or required by applicable law to close.“Company Competitor” means (a) any Person that is reasonably determined by the Board to be a competitorof the Company or any of its Subsidiaries in any material respect and (b) any Affiliate of any such Person specified inclause (a). For purposes hereof, without limiting the foregoing, any Person with, or whose Affiliate has, substantialoperations in the Business shall be presumed to be a Company Competitor unless the Board otherwise determines;provided, however, that for purposes of this Agreement, no private equity fund, including the Sponsors (or any of theirrespective Affiliates), shall be deemed a Company Competitor solely due to its direct or indirect investment in aportfolio company of such Person where such portfolio company would be deemed a Company Competitor.“Constitution” means the constitution of the Company, as the same may be amended from time to time, a copyof which is attached as Exhibit B hereto, as the same may be amended from time to time as permitted hereunder.“Control,” “Controlled” and “Controlling” mean the possession, directly or indirectly, of the power to direct orcause the direction of the management and policies of a Person, whether through the ownership of voting securities, bycontract or otherwise.“Equity Securities’’ means, without duplication, (i) the Ordinary Shares, and (ii) any other securitiesconvertible into or exchangeable or exercisable for, or options, warrants or other rights to acquire, Ordinary Shares, orany other equity or equity-linked security issued by the Company.-2-  “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulationspromulgated thereunder.“Family Member” means, with respect to any Person who is an individual, any spouse (or partner by civilunion or registered domestic partnership), lineal descendants (including adoptive relationships), or siblings.“FINRA” means the Financial Industry Regulatory Authority, Inc.“Governmental Authority” means any federal, state, local or foreign governmental authority, department,commission, board, bureau, agency, court, instrumentality or judicial or regulatory body or entity.“Incentive Plan” means the Company’s 2018 Equity Incentive Plan, as the same may be amended, modified orsupplemented.“IPO” means the initial Public Offering registered on Form S-1 (or any successor form under the SecuritiesAct).“Management Affiliated Entity” means, as to any Management Person, (i) any vehicle or entity (excluding aCo-Invest Vehicle) that holds Equity Securities on behalf or for the direct or indirect benefit of such ManagementPerson or their Permitted Transferee, and (ii) any Shareholder that would be or qualify as a Permitted Transferee ofsuch Person if such Person was a Shareholder.“Management Person” means any current or former employee, officer, director or consultant of the Companyor any of its Subsidiaries that holds Equity Securities of the Company, either directly or indirectly through aManagement Affiliated Entity or a Co-Invest Vehicle.“Management Shareholders” means (a) the shareholders listed on Annex A hereto and (b) any Shareholder inits capacity as (i) a Management Person, (ii) a Management Affiliated Entity, or (iii) any Permitted Transferee of (i) or(ii).“Option” means an option to purchase Ordinary Shares granted pursuant to the Incentive Plan.“Ordinary Shares” means the ordinary shares of $0.01 each in the capital of the Company, with such rightsand preferences as set forth in the Constitution.“Permitted Transferee” means, (a) with respect to any Management Person, (i) any executor, administrator ortestamentary trustee of such Management Person’s estate if such Management Person dies, (ii) any Family Memberreceiving Equity Securities of such Management Person by will, intestacy laws or the laws of descent or survivorship,(iii) any trustee of a trust (including an inter vivos trust) of which there are no principal beneficiaries other than suchManagement Person or one or more Family Members of such Management Person or (iv) any investment vehiclewhich is 100% wholly owned by a Management Person, one or more Family Members of such Management Person,or a trust described in clause (iii) above, (b) with respect to any Management Affiliated Entity, the employee, officer,director or consultant of the Company or any of its Subsidiaries that qualifies such Shareholder as a ManagementAffiliated-3-  Entity, (c) with respect to the Altchem Shareholder or its Permitted Transferees, (i) as to any individual owner of theAltchem Shareholder or such Permitted Transferee, the Persons described in clause (a)(i) through (iv) of this definition,mutatis mutandis; provided, that, any such Permitted Transferee of the Altchem Shareholder pursuant to thissubsection (i) shall hold Equity Securities in the Company indirectly through the Altchem Shareholder or through avehicle Controlled by the Altchem Shareholder; and (ii) any Affiliate of the Altchem Shareholder or such PermittedTransferees, (d) with respect to the Avista Shareholder or its Permitted Transferees, an investment fund that is a parallelfund (but not a successor fund) or alternative investment vehicle of the Avista Shareholder with the same or Affiliatedgeneral partner as the Avista Shareholder or a direct or indirect wholly-owned Subsidiary of the Avista Shareholder orsuch parallel fund or alternate investment vehicle, (e) with respect to the Avista Co-Invest Vehicles, the AvistaShareholder, its Permitted Transferees and any other Avista Co-Invest Vehicle, (f) with respect to the members of theAvista Co-Invest Vehicles, (i) any Affiliate of such member other than a Company Competitor; (ii) the AvistaShareholder; and (iii) any current or prospective limited partners of the Avista Shareholder or of other investment fundsmanaged by the Avista Shareholder or any of its Affiliates; provided, that, any such Permitted Transferee of themembers of the Avista Co-Invest Vehicles pursuant to this clause (f) shall hold Equity Securities in the Companyindirectly through the Avista Shareholder or through a vehicle Controlled by the Avista Shareholder (except in the casethat the Avista Shareholder is the Permitted Transferee, in which case it shall be permitted to hold Equity Securities inthe Company directly), and (g) with respect to the Altchem Co- Invest Vehicle, the Altchem Shareholder and itsPermitted Transferees and any other Altchem Co-Invest Vehicle; provided, however, that no “portfolio company” (assuch term is customarily used among institutional investors) of the Avista Shareholder or any entity Controlled by anyportfolio company of the Avista Shareholder shall constitute a Permitted Transferee of the Avista Shareholder, anAvista Co-Invest Vehicle, or the members of an Avista Co-Invest Vehicle; provided, further, however, that in noevent shall (A) the Company or any of its Subsidiaries, or (B) any Company Competitor (whether or not an Affiliate ofthe transferring Shareholder), constitute a “Permitted Transferee”.“Person” means any individual, corporation, limited liability company, partnership, association, trust or otherentity or organization, including a Governmental Authority and, where the context so permits, the legal representatives,successors in interest and permitted assigns of such Person.“Proceeding” means an investigation, action, suit, arbitration or other proceeding, whether civil or criminal.“Proportion” means the percentage derived by dividing the amount of Ordinary Shares to be transferred by anySponsor or its Affiliates, by the total amount of Ordinary Shares held by all of the Sponsors and their Affiliates beforesuch proposed Transfer.“Public Offering” means an underwritten public offering of Ordinary Shares pursuant to an effectiveregistration statement under the Securities Act, other than pursuant to a registration statement on Form S-4 or Form S-8or any similar or successor form.“Registrable Securities” means at any time, any equity securities (other than non-participating, non-convertiblepreferred share) of the Company held by any other Shareholders;-4-  provided, that Registrable Securities shall not include any shares (i) the sale of which has been registered pursuant tothe Securities Act and which shares have been sold pursuant to such registration, (ii) which have been sold or areeligible to be sold or distributed pursuant to Rule 144 or Rule 145 without limitation, (iii) which have been registeredfor resale pursuant to an effective Registration Statement on a Form S-8 (or any successor or similar form), or (iv)which represent less than 1% of the outstanding Ordinary Shares of the Company.“Registration Expenses” means any and all expenses incident to the performance of or compliance with anyregistration or marketing of securities, including all (i) registration and filing fees, and all other fees and expensespayable in connection with the listing of securities on any securities exchange or automated interdealer quotationsystem, (ii) fees and expenses of compliance with any securities or “blue sky” laws (including reasonable fees anddisbursements of counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses inconnection with the preparation, printing, mailing and delivery of any Registration Statements, prospectuses and otherdocuments in connection therewith and any amendments or supplements thereto, (iv) security engraving and printingexpenses, (v) internal expenses of the Company (including all salaries and expenses of its officers and employeesperforming legal or accounting duties), (vi) fees and disbursements of counsel for the Company and customary feesand expenses for independent certified public accountants retained by the Company (including the expenses relating toany comfort letters or costs associated with the delivery by independent certified public accountants of any comfortletters to be provided pursuant to Section 4.05(h) hereof), (vii) fees and expenses of any special experts retained by theCompany in connection with such registration, (viii) fees and out-of-pocket expenses of one counsel for each of theSponsors (including the reasonable fees and expenses of one counsel collectively for the Avista Co-Invest Vehiclesand one counsel for the Altchem Co-Invest Vehicle), and any other “local” counsel required to render legal opinionson behalf of any such Sponsor, (ix) fees and expenses in connection with any review of the underwriting arrangementsor other terms of the offering, and all fees and expenses of any “qualified independent underwriter” required toparticipate in any offering, including reasonable fees and expenses of any counsel thereto, (x) fees and disbursementsof underwriters customarily paid by issuers or sellers of securities, but excluding any underwriting fees, discounts andcommissions attributable to the sale of Registrable Securities, (xi) costs of printing and producing underwritingagreements, any “blue sky” or legal investment memoranda and any selling agreements and other documents inconnection with the offering, sale or delivery of the Registrable Securities, (xii) transfer agents’ and registrars’ fees andexpenses and the fees and expenses of any other agent or trustee appointed in connection with such offering, (xiii)expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with theregistration, marketing or selling of the Registrable Securities, (xiv) fees and expenses payable in connection with anyratings of the Registrable Securities, including expenses relating to any presentations to rating agencies, and (xv) allother reasonable costs and expenses incurred by the Company or its officers in connection with their compliance withSection 4.01 and Section 4.12 hereof.“Registration Statement” shall mean any registration statement of the Company, under the Securities Actwhich permits the public offering of any of the Registrable Securities pursuant to the provisions of this Agreement,including the prospectus, amendments and supplements to such registration statement, including post-effectiveamendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in suchregistration statement.-5-  “Requisite Consent” means the prior written consent of each of the Sponsors, for so long as such Sponsorholds at least ten (10%) of the shares of Ordinary Shares then outstanding.“Rule 144” means Rule 144 (or any successor provision) under the Securities Act.“Rule 145” means Rule 145 (or any successor provision) under the Securities Act.“SEC” means the Securities and Exchange Commission.“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgatedthereunder.“Subsidiary” means, with respect to any specified Person, any other Person in which such specified Person,directly or indirectly through one or more Affiliates or otherwise, beneficially owns at least fifty percent (50%) of theownership interest (determined by equity or economic interests) in, or the voting control of, such other Person.“Transfer” means, with respect to any Equity Securities, (i) when used as a verb, to sell, assign, dispose of,exchange, pledge, encumber, hypothecate or otherwise transfer such Equity Securities or any participation or interesttherein, whether directly or indirectly, or agree or commit to do any of the foregoing, and (ii) when used as a noun, adirect or indirect sale, assignment, disposition, exchange, pledge, encumbrance, hypothecation, or other transfer of suchEquity Securities or any participation or interest therein or any agreement or commitment to do any of the foregoing.(b) Each of the following terms is defined in the Section set forth opposite such term: TERMSECTIONAgreementPreambleAltchem ShareholderPreambleAltchem DesigneesSection 2.01(a)Altchem DIKSection 3.01(b)AvistaPreambleAvista DesigneesSection 2.01(a)Avista DIKSection 3.01(a)Avista ShareholderPreambleBoardRecitalsCompanyPreambleConfidential InformationSection 6.01Confidentiality AffiliatesSection 6.01Coordination CommitteeSection 3.02(a)DamagesSection 4.06Demand Maximum Offering SizeSection 4.01(d)Demand RegistrationSection 4.01(a)Determination TimeSection 3.03(a)Effective TimeRecitalsIndemnified PartySection 4.08 -6-  TERMSECTIONIndemnifying PartySection 4.08Indemnity ObligationsSection 2.05InspectorsSection 4.05(g)IPO Lock-Up PeriodSection 4.04(a)Joinder AgreementPreambleLuxCoSection 5.02OfferingRecitalsPiggyback Maximum Offering SizeSection 4.02(b)Piggyback RegistrationSection 4.02(a)RecordsSection 4.05(g)Registering ShareholdersSection 4.01(a)(i)Relative Ownership PercentageSection 3.03(a)Requesting ShareholdersSection 4.01(a)Shelf RegistrationSection 4.03(a)Shelf RequestSection 4.03(a)ShareholderPreambleShareholdersPreambleSponsor DesigneesSection 2.01(a)(ii)Sponsor PartiesSection 2.05SponsorsPreambleUnderwritten Shelf Take-downSection 4.03(b)Unrestricted SecuritiesSection 3.03(a)Unwinding EventSection 3.04(b)Withdrawing HoldersSection 4.04(c) (c) Other Definitional and Interpretive Matters. Unless otherwise expressly provided, for purposesof this Agreement, the following rules of interpretation shall apply:Calculation of Time. When calculating the period before which, within which or after which any act is to bedone or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall beexcluded. If the last day of such period is a non- Business Day, the period in question shall end on the next succeedingBusiness Day.Dollars. Any reference in this Agreement to “$” means U.S. dollars.Annexes/Exhibits/Schedules. The Annexes, Exhibits and Schedules to this Agreement are hereby incorporatedand made a part hereof and are an integral part of this Agreement. Any capitalized terms used in any Annex, Exhibitor Schedule but not otherwise defined therein shall be defined as set forth in this Agreement.Gender and Number. Any reference in this Agreement to gender shall include all genders, and wordsimparting the singular number only shall include the plural and vice versa.Headings. The provision of a Table of Contents, the division of this Agreement into Articles, Sections andother subdivisions and the insertion of headings are for convenience of-7-  reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in thisAgreement to any “Article” or “Section” are to the corresponding Article or Section of this Agreement unlessotherwise specified.Herein. The words such as “herein” “hereinafter” hereof” and “hereunder” refer to this Agreement as awhole and not merely to a subdivision in which such words appear unless the context otherwise requires.Other. The words “include” “includes” and “including” when used herein shall be deemed in each case to befollowed by the words “without limitation.” The phrases “provided to” “furnished to” and phrases of similar importwhen used herein, unless the context otherwise requires, shall mean that a true, correct and complete copy of theinformation or material referred to has been provided to the party to whom such information or material is to beprovided. The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends,and such phrase does not mean simply “if.”ARTICLE 2CORPORATE GOVERNANCESection 2.01. Composition of the Board.(a) Subject to the applicable law, the Avista Shareholder, shall have the right to nominate twodirectors to the Board of the Company (the “Avista Designees”).(b) Subject to the applicable law, the Altchem Shareholder shall have the right to nominate twodirectors for appointment to the Board of the Company (the “Altchem Designees” and, together with the AvistaDesignees, the “Sponsor Designees”).(c) (i) In the event that any Sponsor (and its Affiliates) ceases to beneficially own Ordinary Sharesthat equal at least twenty percent (20%) of the Ordinary Shares then outstanding, such Sponsor shall no longer have theright to nominate for appointment two Sponsor Designees and shall have the right to nominate for appointment onlyone Sponsor Designee, and (ii) in the event that any Sponsor (and its Affiliates) cease to beneficially own OrdinaryShares that equal at least ten percent (10%) of the Ordinary Shares then outstanding, such Sponsor shall no longer havethe right to nominate any Sponsor Designees.(d) The Company shall use all reasonable efforts to facilitate the appointment of the SponsorDesignees pursuant to this Section 2.01 to be elected as members of the Board, and to permit the Sponsors to remove,replace or change their Sponsor Designees from time to time and fill vacancies created by reason of death, removal orresignation of such Sponsor Designees, including by calling a general or special meeting of shareholders of theCompany for the purpose of voting on any appointment, removal, replacement or change.(e) Until such time as any of the Sponsors (together with its Affiliates) individually ceasesbeneficially to own Ordinary Shares that equal at least ten percent (10%) of the Ordinary Shares then outstanding, eachSponsor and each Co-Invest Vehicle shall, at any time it is then entitled to vote for the election of directors to theBoard, vote all of its Equity Securities-8-  that are entitled to vote or execute proxies or written consents, as the case may be, and take all other necessary action(including causing the Company to call a special meeting of Shareholders) in order to ensure that the composition ofthe Board is as set forth in this Section 2.01.(f) The Company shall reimburse each Sponsor Designee for all reasonable out-of-pocket expensesincurred in connection with the attendance by such Sponsor Designee at meetings of the Board or any committeethereof, including, without limitation, travel, lodging and meal expenses.Section 2.02. Additional Provisions.(a) Subject to the confidentiality obligations of Shareholders pursuant to Section 6.01 of thisAgreement and to the fiduciary duties of each of the Sponsor Designees, the Company agrees and acknowledges thatthe Sponsor Designees may share confidential, non-public information about the Company with the Sponsors.(b) (i) The Company covenants and agrees to, until such time as such Sponsor ceases tobeneficially own Ordinary Shares that equal less than ten percent (10%) of the outstanding Ordinary Shares, (i) deliverto each of the Sponsors with reasonable promptness, such information and data, including, but not limited to, anyinformation necessary to assist each of the Sponsors in preserving its qualification as a “venture capital operatingcompany” as defined in the regulations promulgated under the Employment Retirement Income Security Act of 1974by the United States Department of Labor, with respect of the Company and each of its subsidiaries from time to timemay be reasonably requested by such Sponsor and (ii) cause its and its Subsidiaries’ officers, directors, employees,auditors and other agents to (a) afford the officers, employees, auditors and other agents of such Sponsor, duringnormal business hours and upon reasonable notice, reasonable access and consultation rights at all reasonable times toits officers, employees, auditors, legal counsel, properties, offices, plants and other facilities and to all books andrecords, and (b) afford such Sponsor the opportunity to discuss the Company’s affairs, finances and accounts with theCompany’s officers from time to time as each such Sponsor may reasonably request.(c) At the Effective Time, the limited partnership agreement of LuxCo, as in effect immediatelyprior to the Effective Time, shall be amended and restated to reflect a wholly-owned subsidiary of the Company andsubstantially in the form attached hereto as Exhibit C.Section 2.03. Exculpation.(a) Without limiting the scope or application of Section 2.04 and to the full extent permitted byapplicable law, no Indemnified Party (as defined below) shall be liable, in damages or otherwise, to the Company, theShareholders or any of their Affiliates for any act or omission performed or omitted by any of them in good faith(including any act or omission performed or omitted by any of them in reliance upon and in accordance with theopinion or advice of experts, including of legal counsel as to matters of law, of accountants as to matters of accounting,or of investment bankers or appraisers as to matters of valuation), except with respect to (i) any act taken by suchIndemnified Party purporting to bind the Company that such Indemnified Party did not reasonably believe to have beentaken in accordance with this-9-  Agreement (or authorized by the Board), or (ii) any act or omission with respect to which such Indemnified Party wasgrossly negligent or engaged in intentional misconduct.(b) The provisions of this Agreement, to the extent that they restrict, modify or eliminate the dutiesand liabilities of an Indemnified Party otherwise existing at law or in equity, are agreed by the parties hereto to replacesuch other duties and liabilities of such Indemnified Party, to the maximum extent permitted by applicable law.Section 2.04. Indemnification.(a) To the fullest extent permitted by applicable law, the Company shall and does hereby agree toindemnify and hold harmless and pay all judgments and claims against (i) each director of the Company and (ii) eachofficer of the Company, and their respective Affiliates, officers, directors, employees, shareholders, partners, managersand members (each, an “Indemnified Party”), each of which shall be a third-party beneficiary of this Agreement solelyfor purposes of this Section 2.04 and Section 2.05), from and against any loss or damage incurred by such IndemnifiedParty, for any act or omission taken or suffered by such Indemnified Party in good faith (including any act or omissiontaken or suffered by any of them in reliance upon and in accordance with the opinion or advice of experts, including oflegal counsel as to matters of law, of accountants as to matters of accounting, or of investment bankers or appraisers asto matters of valuation) in connection with the Board or the Company’s business, including costs and reasonableattorneys’ fees and any amount expended in the settlement of any claims or loss or damage, except with respect to (i)any act taken by such Indemnified Party purporting to bind the Company that has not been authorized pursuant to thisAgreement or (ii) any act or omission with respect to which such Indemnified Party was grossly negligent or engagedin intentional misconduct.(b) The satisfaction of any indemnification obligation pursuant to Section 2.04(a) shall be from andlimited to Company assets (including insurance and any agreements pursuant to which the Company, the Board andtheir respective officers or employees are entitled to indemnification) and no Shareholder, in such capacity, shall besubject to personal liability therefor.(c) Expenses reasonably incurred by an Indemnified Party in defense or settlement of any claim thatmay be subject to a right of indemnification hereunder shall be advanced by the Company prior to the final dispositionthereof upon receipt of an undertaking by or on behalf of such Indemnified Party to repay such amount to the extentthat it shall be determined upon final adjudication after all possible appeals have been exhausted that such IndemnifiedParty is not entitled to be indemnified hereunder.(d) The Company may purchase and maintain insurance, on behalf of all Indemnified Parties andother Persons against any liability which may be asserted against, or expense which may be incurred by, any suchPerson in connection with the Company’s activities, whether or not the Company would have the power to indemnifysuch Person against such liabilities under the provisions of this Agreement.(e) Promptly after receipt by an Indemnified Party of notice of the commencement of anyProceeding, such Indemnified Party shall, if a claim for indemnification in-10-  respect thereof is to be made against the Company, give written notice to the Company of the commencement of suchProceeding; provided, however, that the failure of any Indemnified Party to give notice as provided herein shall notrelieve the Company of its obligations under this Section 2.04, except to the extent that the Company is actuallyprejudiced by such failure to give notice. In case any such Proceeding is brought against an Indemnified Party (otherthan a derivative suit in right of the Company or the Board), the Company will be entitled to participate in and toassume the defense thereof to the extent that the Company may wish, with counsel reasonably satisfactory to suchIndemnified Party. After notice from the Company to such Indemnified Party of the Company’s election to assume thedefense of such Proceeding, the Company will not be liable for expenses subsequently incurred by such IndemnifiedParty in connection with the defense thereof. The Company will not consent to entry of any judgment or enter into anysettlement of such Proceeding that does not include as an unconditional term thereof the giving by the claimant orplaintiff to such Indemnified Party a release from all liability in respect of such Proceeding and the related claim.(f) The right to indemnification and the advancement of expenses conferred in this Section 2.04shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, agreement,bylaw, vote of the Board or otherwise. The rights conferred upon any Indemnified Party in Section 2.03 and Section2.04 shall be contract rights that vest upon the occurrence or alleged occurrence of any act or omission giving rise toany Proceeding or threatened Proceeding and such rights shall continue as to any Indemnified Party who has ceased tobe a director or officer and shall inure to the benefit of such Indemnified Party’s heirs, executors andadministrators. Any amendment, alteration or repeal of Section 2.03 and Section 2.04 that adversely affects any rightof any Indemnified Party or its successors shall be prospective only and shall not limit or eliminate any such right withrespect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that tookplace prior to such amendment, alteration or repeal.Section 2.05. Primary Obligation. With respect to any Indemnified Party who is employed, retained orotherwise associated with, or appointed or nominated by, the Board, any Sponsor or any of their respective Affiliatesand who acts or serves as a director, officer, manager, fiduciary, employee, consultant, advisor or agent of, for or to theBoard, the Company or any of its Subsidiaries, the Company or its Subsidiaries shall be primarily liable for allindemnification, reimbursements, advancements or similar payments (the “Indemnity Obligations”) afforded to suchIndemnified Party acting in such capacity or capacities on behalf or at the request of the Board, the Company or any oftheir respective Subsidiaries, in such capacity, whether the Indemnity Obligations are created by law, organizational orconstituent documents, contract (including this Agreement) or otherwise. Notwithstanding the fact that such Sponsorsor any of its Affiliates, other than the Company (such Persons, together with its and their heirs, successors and assigns,the “Sponsor Parties”), may have concurrent liability to an Indemnified Party with respect to the IndemnityObligations, the Company hereby agrees that in no event shall the Company or any of their respective Subsidiarieshave any right or claim against any of the Sponsor Parties for contribution or have rights of subrogation against anySponsor Parties through an Indemnified Party for any payment made by the Company or any of its Subsidiaries withrespect to any Indemnity Obligation. In addition, the Company hereby agrees that in the event that any Sponsor Partiespay or advance to an Indemnified Party any amount with respect to an Indemnity-11-  Obligation, the Company will, or will cause its Subsidiaries to, as applicable, promptly reimburse such Sponsor Partiesfor such payment or advance upon request. ARTICLE 3TRANSFERS AND RESTRICTIONS ON TRANSFERSection 3.01. Co-Invest Vehicle Participation; Aggregation of Interests.(a) Notwithstanding anything in this Agreement to the contrary, in connection with any Transfer ofEquity Securities by the Avista Shareholder or its Permitted Transferees (including under Section 4.01, Section 4.02 orSection 4.03), such Transfers shall (and the Avista Shareholder shall cause such Transfer to) include a number ofEquity Securities held by each of the Avista Co-Invest Vehicles equal to Avista’s Proportion multiplied by the numberof Equity Securities held by such Avista Co-Invest Vehicle as of immediately prior to such Transfer, and any and allreferences to Transfers by the Avista Shareholder or Sponsor (as such term relates to or refers to the AvistaShareholder) shall be deemed to refer to both the Avista Shareholder and the Avista Co-Invest Vehicles; provided, thatthis Section 3.01(a) shall not apply to Transfers by the Avista Shareholder to its Permitted Transferees or a“distribution-in-kind” made by an Avista Shareholder or its partners or members (an “Avista DIK”).(b) Notwithstanding anything in this Agreement to the contrary, in connection with any Transfer ofEquity Securities by the Altchem Shareholder or its Permitted Transferees (including under Section 4.01, Section 4.02or Section 4.03), such Transfers shall (and the Altchem Shareholder shall cause such Transfer to) include a number ofEquity Securities held by each of the Altchem Co-Invest Vehicles equal to Altchem’s Proportion multiplied by thenumber of Equity Securities held by such Altchem Co-Invest Vehicle as of immediately prior to such Transfer, and anyand all references to Transfers by the Altchem Shareholder or Sponsor (as such term relates to or refers to the AltchemShareholder) shall be deemed to refer to both the Altchem Shareholder and the Altchem Co-Invest Vehicles; provided,that this Section 3.01(b) shall not apply to Transfers by the Altchem Shareholder to its Permitted Transferees or a“distribution-in-kind” made by an Altchem Shareholder or its partners or members (an “Altchem DIK”).(c) All Equity Securities held by a Shareholder and its Permitted Transferees shall be aggregatedtogether for purposes of determining the availability of any rights under this Agreement (and for the avoidance ofdoubt, Permitted Transferees will be subject to the restrictions and obligations under this Agreement, and the applicableShareholder shall (without limiting any liability a Permitted Transferee may have) be responsible for its PermittedTransferees’ compliance therewith). In addition, other than for purposes of Section 3.01, (i) Equity Securities held bythe Avista Co-Invest Vehicles shall be attributed or aggregated together for purposes of determining the rights andobligations of the Avista Shareholders and any such Equity Securities held by the Avista Co-Invest Vehicles shall beincluded in the numerator or denominator for purposes of determining the rights or obligations of the AvistaShareholder, and (ii) Equity Securities held by the Altchem Co-Invest Vehicles shall be attributed or aggregatedtogether for purposes of determining the rights and obligations of the Altchem Shareholder and any such EquitySecurities held by the Altchem Co-Invest Vehicles shall be included in the numerator or denominator for purposes ofdetermining the rights or obligations of the Altchem Shareholder.-12-  Section 3.02. General Restrictions on Transfer.(a) Each Shareholder understands and agrees that the Equity Securities held by it have not beenregistered under the Securities Act and are restricted securities under the Securities Act. No Shareholder shall Transferany Equity Securities (or solicit any offers in respect of any Transfer of any Equity Securities), except in compliancewith the Securities Act, any other applicable securities or “blue sky” laws and any restrictions on Transfer contained inthis Agreement or any other provisions set forth in any other agreements or instruments pursuant to which such EquitySecurities were issued.(b) Following the IPO, the Sponsors shall create a coordination committee (the “CoordinationCommittee”), which shall not be a committee of the Board, and will maintain such committee until the earlier of (i) thefirst anniversary of the IPO or (ii) until such time as the Sponsors have consummated a first registered secondary saleafter the IPO of any of their respective Registrable Securities. During the one (1) year period following the IPO, theCoordination Committee shall facilitate coordination of dispositions by the Sponsors of any Equity Securities held bythe Sponsors, and any Sponsor wishing to Transfer any Equity Securities during such period shall consult with andobtain the approval of the Coordination Committee prior to taking such action or entering into any definitive agreementwith respect to such action; provided, however, that the foregoing shall not apply to an Avista DIK or an AltchemDIK. Each Sponsor shall be permitted to designate one representative (who may, but need not, be a director of theCompany) to participate on the Coordination Committee, and shall be permitted to remove and replace such designeefrom time to time. The procedures governing the conduct of the Coordination Committee shall be established fromtime to time by consent of the Sponsors; provided, that such procedures shall not discriminate against any particulardesignee or designees in any material way. For the avoidance of doubt, for the purposes of this Section 3.02(b),references to Sponsors shall include their respective Permitted Transferees.Section 3.03. Restrictions on Transfer by Management Shareholders. Notwithstanding anything in thisAgreement to the contrary:(a) Following the IPO, until such time as the Sponsors have Transferred at least 50% of the EquitySecurities owned by the Sponsors immediately prior to the IPO, no Management Shareholder shall Transfer any EquitySecurities (other than to Permitted Transferees pursuant to Section 3.04 or with the Requisite Consent) to the extentthat such Transfer would result in the Relative Ownership Percentage (as defined below) of such ManagementShareholder immediately following the effective time of such Transfer (the “Determination Time”) being less than theRelative Ownership Percentage of the Sponsors immediately following the Determination Time. For purposes of thisSection 3.03(a), “Relative Ownership Percentage” means:with respect to a Management Shareholder, a fraction (expressed as a percentage), (A) thenumerator of which is the number of Equity Securities other than unvested options to purchase OrdinaryShares (“Unrestricted Securities”) owned by such Management Shareholder immediately following theDetermination Time, and (B) the denominator of which is the sum of (x) the number of Unrestricted Securitiesowned by such Management Shareholder immediately following the IPO and (y) the number of EquitySecurities owned by such Management Shareholder that were not Unrestricted-13-  Securities immediately following the IPO but that have subsequently become Unrestricted Securities; andwith respect to the Sponsors and each of their respective Co-Invest Vehicles, a fraction(expressed as a percentage), (A) the numerator of which is the aggregate number of Equity Securities ownedby the Sponsors and the Co-Invest Vehicles immediately following the Determination Time and (B) thedenominator of which is the aggregate number of Equity Securities owned by the Sponsors and the Co-InvestVehicles immediately following the IPO.(b) Any attempt by a Management Shareholder to Transfer any Equity Securities not in compliancewith this Section 3.03 shall be null and void and have no force or effect, and the Company shall not, and shall causeany transfer agent not to, give any effect in the Company’s share records to such attempted Transfer. The partieshereto acknowledge that the transfer restrictions contained herein are reasonable and in the best interests of theCompany.Section 3.04. Management Permitted Transferees.(a) Subject to Section 3.01, any Management Shareholder may at any time Transfer any or all of itsEquity Securities to a Permitted Transferee without the consent of any Person and without compliance with Section3.03, so long as such Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement byexecuting a Joinder Agreement. Such Management Shareholder must give prior written notice to the Company of anyproposed Transfer to a Permitted Transferee, including the identity of such proposed Permitted Transferee and suchother documentation reasonably requested by the Company, to ensure compliance with the terms of this Agreement.(b) If, while a Permitted Transferee holds any Equity Securities, a Permitted Transferee ceases toqualify as a Permitted Transferee in relation to the initial transferring Management Shareholder from whom or whichsuch Permitted Transferee or any previous Permitted Transferee of such initial transferring Management Shareholderreceived such shares (an “Unwinding Event”), then:(i) The relevant initial transferor Management Shareholder shall forthwith notify the otherShareholders and the Company of the pending occurrence of such Unwinding Event; and(ii) immediately following such Unwinding Event, without limiting any other rights orremedies, such initial transferor Management Shareholder shall take all actions necessary to effect a Transfer of all theEquity Securities held by the relevant Affiliate either back to such Management Shareholder or, pursuant to thisSection 3.04, to another Person that qualifies as an Affiliate of such initial transferring Management Shareholder.-14-  ARTICLE 4REGISTRATION RIGHTSSection 4.01. Demand Registration.(a) At any time after the six month anniversary of the consummation by the Company of the IPO, ifthe Company shall receive a written request from either or both Sponsors holding outstanding Registrable Securities foritself and its respective Co-Invest Vehicles (such requesting Persons, the “Requesting Shareholders”) that theCompany effect the registration under the Securities Act of all or any portion of such Requesting Shareholders’Registrable Securities, and specifying the intended method of disposition thereof, then the Company shall promptlygive notice of such requested registration (each such request shall be referred to herein as a “Demand Registration”) atleast ten (10) days prior to the anticipated filing date of the Registration Statement relating to such Demand Registrationto the other Sponsor, if applicable, and any other Shareholder that holds Registrable Securities, and thereupon shall useits reasonable best efforts to effect, as expeditiously as possible, the registration under the Securities Act of:(i) all Registrable Securities for which the Requesting Shareholders have requested registrationunder this Section 4.01, and(ii) subject to the restrictions set forth in Section 4.01(d), all other Registrable Securities thatany other Shareholders that hold Registrable Securities (all such Shareholders, together with the RequestingShareholders, the “Registering Shareholders”) have requested the Company to register by request received by theCompany within five (5) Business Days after any non-initiating Sponsor received the Company’s notice of theDemand Registration, or any other Shareholder pursuant to and in accordance with Section 4.02, all to the extentnecessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the RegistrableSecurities so to be registered; provided that no Person may participate in any Registration Statement pursuant to thisSection 4.01(a) unless such Person agrees to sell their Registrable Securities to the underwriters selected as provided inSection 4.05(f) on the same terms and conditions as apply to the Requesting Shareholders; provided, further, that nosuch Registering Shareholders shall be required to make any representations or warranties, or provide any indemnity,in connection with any such registration other than representations and warranties (or indemnities with respect thereto)as to (i) such Person’s ownership of his, her or its Registrable Securities to be transferred free and clear of all liens,claims, and encumbrances, (ii) such Person’s power and authority to effect such transfer, and (iii) such matterspertaining to compliance with securities laws by such Registering Shareholders as may be reasonably requested;provided, further, that the obligation of such Person to indemnify pursuant to any such underwriting arrangementsshall be several, not joint and several, among such Persons selling Registrable Securities, and the liability of each suchPerson will be in proportion thereto; provided, further, that such liability will be limited to the net proceeds received bysuch Person from the sale of his, her or its Registrable Securities pursuant to such registration; provided, further, that,notwithstanding anything to the contrary herein, the number of Registrable Securities that a Shareholder may request toinclude in a Demand Registration (including pursuant to Section 4.02) cannot exceed the number of RegistrableSecurities, determined by multiplying the aggregate number of Registrable Securities held by such Shareholder by afraction, the numerator of which is the number of Registrable Securities that the Requesting Shareholder proposes tosell in such Demand Registration and the denominator of which is the total number of Registrable Securities held bysuch Requesting Shareholder prior to such Demand Registration, and provided, further, that the Company shall not beobligated to effect a Demand Registration unless the aggregate gross proceeds expected to be received from the sale ofthe Registrable Securities requested to be included by all Registering Shareholders in such Demand Registration are atleast $25,000,000.-15-  (b) At any time prior to the effective date of the Registration Statement relating to such registration,a majority of the Requesting Shareholders (measured by the number of Registrable Securities proposed to be sold byall Requesting Shareholders and not by the number of Requesting Shareholders) may revoke such request withoutliability to any of the other Registering Shareholders, by providing a notice to the Company revoking suchrequest. The decision as to whether to consummate and as to the terms of any Demand Registration shall be made by amajority of the Requesting Shareholders (measured by the number of Registrable Securities proposed to be sold by allRequesting Shareholders and not by the number of Requesting Shareholders) in their sole and absolute discretion.(c) The Company shall be liable for and pay all Registration Expenses in connection with eachDemand Registration, regardless of whether such Registration is effected; provided that holders of RegistrableSecurities shall pay all underwriting discounts, selling commissions and share transfer taxes applicable to the sale oftheir respective Registrable Securities, but fees and disbursements of their respective counsel shall be borne and paid bythe Company as a Registration Expense.(d) If a Demand Registration involves a Public Offering and the managing underwriter advises theCompany and the Requesting Shareholders that, in its view, the number of Registrable Securities that the RegisteringShareholders and the Company propose to include in such registration exceeds the largest number of RegistrableSecurities that can be sold without having an adverse effect on such offering, including the price at which suchRegistrable Securities can be sold (the “Demand Maximum Offering Size”), the Company shall include in suchregistration, in the priority listed below, up to the Demand Maximum Offering Size:(i) first, all Registrable Securities requested to be registered by the Registering Shareholders(the Registrable Securities in this clause (i) allocated, if necessary for the offering not to exceed the Demand MaximumOffering Size, pro rata among the Requesting Shareholders and the other holders of Registrable Securities on the basisof the relative number of Registrable Securities so requested to be included in such registration by each); and(ii) second, all Registrable Securities proposed to be registered by the Company.(e) The Company may defer the filing (but not the preparation) of a Registration Statement, orsuspend the continued use of a Registration Statement, required by Section 4.01 for a period of up to sixty (60) daysafter the request to file a Registration Statement if at the time the Company receives the request to register RegistrableSecurities, the Company or any of its Subsidiaries are engaged in confidential negotiations or other confidentialbusiness activities, disclosure of which would be required in such Registration Statement (but would not be required ifsuch Registration Statement were not filed), and the Board determines in good faith, after consultation with externallegal counsel, that such disclosure would have a material adverse effect on the Company or its business or on theCompany’s ability to effect a proposed material acquisition, disposition, financing, reorganization, recapitalization orsimilar transaction. A deferral of the filing of a Registration Statement, or the suspension of the continued use of aRegistration Statement, pursuant to this Section 4.01(e), shall be promptly lifted, and the requested RegistrationStatement shall be filed as expeditiously as possible, in the case of a deferral, if the-16-  negotiations or other activities are disclosed or terminated. In order to defer the filing of a Registration Statement, orsuspend the continued use of a Registration Statement, pursuant to this Section 4.01(e), the Company shall promptly(but in any event within five (5) days), upon determining to seek such deferral or suspension, deliver to eachRequesting Shareholder a certificate signed by Board stating that the Company is deferring such filing, or suspendingthe continued use of a Registration Statement, pursuant to this Section 4.01(e) and a general statement of the reason forsuch deferral or suspension, as the case may be, and an approximation of the anticipated delay. The Company maydefer the filing, or suspend the continued use of, a particular Registration Statement pursuant to this Section 4.01(e) nomore than twice in any twelve month period; provided, that there must be an interim period of at least sixty (60) daysbetween the end of one deferral or suspension period and the beginning of a subsequent deferral or suspensionperiod. In the event the Company exercises its rights under this Section 4.01(e), the Company shall, within ten (10)days following receipt by the holders of Registrable Securities of the notice of deferral or suspension, as the case maybe, update the deferred or suspended Registration Statement as may be necessary to permit the holders of RegistrableSecurities to resume use thereof in connection with the offer and sale of their Registrable Securities in accordance withapplicable law.Section 4.02. Piggyback Registration.(a) If the Company proposes to register any Equity Securities under the Securities Act (whether foritself or otherwise in connection with a sale of securities by another Person (including a Demand Registration by aSponsor), but other than (i) in connection with a Shelf Registration and any resale of Registrable Securities by aSponsor pursuant to a Shelf Registration, which shall be governed by the terms of Section 4.03, (ii) a registration on aForm S-4 in connection with a direct or indirect acquisition by the Company of another Person, (iii) a registration on aForm S-8, or (iv) the IPO (unless the Sponsors are participating therein as selling equityholders), the Company shall ateach such time give prompt written notice at least ten (10) days prior to the anticipated filing date of the RegistrationStatement relating to such registration to each Shareholder holding Registrable Securities hereunder, which notice shallset forth such Shareholder’s rights under this Section 4.02 and shall offer such Shareholder the opportunity to includein such Registration Statement all or any portion of the Registrable Securities held by such Shareholder (a “PiggybackRegistration”), subject to the restrictions set forth herein, including the second to last proviso in Section 4.01(a)(ii)above. Upon the request of any such Shareholder made within ten (10) days after the receipt of notice from theCompany (which request shall specify the number of Registrable Securities intended to be registered by suchShareholder), the Company shall use its reasonable best efforts to effect the registration under the Securities Act of allRegistrable Securities that the Company has been so requested to register by all such Shareholders (subject to the lastproviso of Section 4.01(a)(ii) above) with rights to require registration of Registrable Securities hereunder, to the extentrequired to permit the disposition of the Registrable Securities so to be registered; provided, that if such registrationinvolves a Public Offering, all such Shareholders requesting to be included in the Company’s registration must selltheir Registrable Securities to the underwriters selected as provided in Section 4.05(f) on the same terms and conditionsas apply to the Company or any other selling equityholders; provided, however, that no such Person shall be requiredto make any representations or warranties, or provide any indemnity, in connection with any such registration otherthan representations and warranties (or indemnities with respect thereto) as to (i) such Person’s ownership of his, her orits Registrable-17-  Securities to be transferred free and clear of all liens, claims, and encumbrances, (i) such Person’s power and authorityto effect such transfer, and (ii) such matters pertaining to compliance with securities laws by such Person as may bereasonably requested; provided, further, that the obligation of such Person to indemnify pursuant to any suchunderwriting arrangements shall be several, not joint and several, among such Persons selling Registrable Securities,and the liability of each such Person will be in proportion thereto, and provided, further, that such liability will belimited to, the net proceeds received by such Person from the sale of his, her or its Registrable Securities pursuant tosuch registration. If, at any time after giving notice of its intention to register any Registrable Securities pursuant to thisSection 4.02(a) and prior to the effective date of the Registration Statement filed in connection with such registration,the Company or the initiating holders, as applicable, shall decide for any reason and in its sole and absolute discretionnot to register such securities, the Company shall give notice to all such Shareholders and, thereupon, shall be relievedof its obligation to register any Registrable Securities in connection with such registration. No registration effectedunder this Section 4.02 shall relieve the Company of its obligations to effect a Demand Registration to the extentrequired by Section 4.01. The Company shall be liable for and pay all Registration Expenses in connection with eachPiggyback Registration, regardless of whether such registration is effected.(b) If a Piggyback Registration involves a Public Offering (other than any Demand Registration, inwhich case the provisions with respect to priority of inclusion in such offering set forth in Section 4.01(d) shall apply)and the managing underwriter advises the Company that, in its view, the number of Registrable Securities that theCompany and all selling equityholders propose to include in such registration exceeds the largest number ofRegistrable Securities that can be sold without having an adverse effect on such offering, including the price at whichsuch Registrable Securities can be sold (the “Piggyback Maximum Offering Size”), the Company shall include in suchregistration, in the following priority, up to the Piggyback Maximum Offering Size:(i) first, such number of Registrable Securities proposed to be registered for the account of theCompany, if any, as would not cause the offering to exceed the Piggyback Maximum Offering Size; and(ii) second, all Registrable Securities requested to be included in such registration by anyShareholders pursuant to this Section 4.02 (the Registrable Securities in this clause (ii) allocated, if necessary for theoffering not to exceed the Piggyback Maximum Offering Size, pro rata among such Shareholders based on theirrelative number of Registrable Securities requested to be included in the Piggyback Registration).Section 4.03. Shelf Registration.(a) At any time after the 12 month anniversary of the consummation by the Company of the IPO,upon receipt of a written request (the “Shelf Request”) from either or both Sponsors (for themselves and theirrespective Co-Invest Vehicles) that the Company file a “shelf” Registration Statement pursuant to Rule 415 under theSecurities Act (the “Shelf Registration”) on Form S-3 (or any successor form to Form S-3, or any similar short-formregistration statement), covering the resale of Registrable Securities, the reasonably anticipated gross proceeds from allresales covered thereunder of which would exceed $25,000,000, the Company shall (i) within five-18-  (5) days of the receipt by the Company of such notice, give written notice of such proposed registration to any non-requesting Sponsor, and (ii) use its reasonable best efforts, consistent with the terms of this Agreement, to cause theShelf Registration to be filed with the SEC as soon as practicable (but in no event later than thirty (30) days followingits receipt of the Shelf Request) and to include all Registrable Securities held by such requesting Sponsor to beregistered on such form for the offering together with all or such portion of the Registrable Securities of any non-requesting Sponsor joining in such request as are specified in a written request received by the Company within ten(10) days after receipt of such written notice from the Company and (iii) use its reasonable best efforts, consistent withthe terms of this Agreement, to cause such Shelf Registration to be declared effective by the SEC as soon aspossible. As soon as reasonably practicable after the IPO, the Company will use its reasonable best efforts, consistentwith the terms of this Agreement, to qualify for and remain eligible to use Form S-3 registration or a similar short-formregistration. The provisions of Section 4.05 shall be applicable to each sale of Registrable Securities from a ShelfRegistration initiated under this Section 4.03 and any subsequent resale of Registrable Securities pursuant thereto;provided, that the gross proceeds from such sales equal at least $25,000,000.(b) In connection with any proposed firmly underwritten resale of Registrable Securities, includingby underwritten “block trade”, which is not pursuant to a Demand Registration under Section 4.01 and with respect towhich such Shelf Registration is expressly being utilized to effect such resale (an “Underwritten Shelf Take-down”)pursuant to a Shelf Registration, each Sponsor agrees, in an effort to conduct any such Underwritten Shelf Take-Downin the most efficient and organized manner, to coordinate with the other Sponsor participating in such Shelf Take-Down prior to initiating any sales efforts and cooperate with such other Sponsor as to the terms of such UnderwrittenShelf Take-Down, including the aggregate amount of securities to be sold and the number of Registrable Securities tobe sold by each participating Sponsor. In furtherance of the foregoing, the Company shall give prompt notice to thenon-initiating Sponsor (if such Sponsor’s Registrable Securities are included in the Shelf Registration) of the receipt ofa request from the initiating Sponsor (whose Registrable Securities are included in the Shelf Registration) of a proposedUnderwritten Shelf Take-Down under and pursuant to the Shelf Registration and, notwithstanding anything to thecontrary contained herein, will provide such non-initiating Sponsor a period of two (2) Business Days to participate insuch Underwritten Shelf Take-Down, subject to the terms negotiated by and applicable to the initiating Sponsor andsubject to “cutback” limitations set forth in Section 4.01(d) as if the subject Underwritten Shelf Take-Down was beingeffected pursuant to a Demand Registration. All such Sponsors electing to be included in an Underwritten Shelf Take-down must sell their Registrable Securities to the underwriters selected as provided in Section 4.05(f) on the sameterms and conditions as apply to any other selling equityholders; provided, however, that no such Person shall berequired to make any representations or warranties, or provide any indemnity, in connection with any such registrationother than representations and warranties (or indemnities with respect thereto) as to (i) such Person’s ownership of his,her or its Registrable Securities to be transferred free and clear of all liens, claims, and encumbrances, (ii) such Person’spower and authority to effect such transfer, and (iii) such matters pertaining to compliance with securities laws by suchPerson as may be reasonably requested; provided, further, however, that the obligation of such Person to indemnifypursuant to any such underwriting arrangements shall be several, not joint and several, among such Persons sellingRegistrable Securities, and the liability of each such Person will be in proportion-19-  thereto, and provided, further, that such liability will be limited to the net proceeds received by such Person from thesale of his, her or its Registrable Securities pursuant to such registration.(c) The Company shall be liable for and pay all Registration Expenses in connection with eachShelf Registration, regardless of whether such Shelf Registration is effected, and any Underwritten Shelf Take-Down;provided, that holders of Registrable Securities shall each pay their pro rata portion of all underwriting discounts,selling commissions, and share transfer taxes applicable to the sale of Registrable Securities, but fees and disbursementsof their respective counsel shall be borne and paid by the Company as a Registration Expense.(d) Notwithstanding anything to the contrary contained herein, no Management Shareholder will beentitled to participate with respect to any shelf registration effected pursuant to this Section 4.03 or with respect to anyresales of securities pursuant to any shelf registration. For the avoidance of doubt, this Section 4.03(d) shall not applyto any Management Shareholder to the extent of any such Person’s interests held in a Co-Invest Vehicle.Section 4.04. Lock-Up Agreements.(a) In connection with each underwritten Public Offering, including any Underwitten Shelf Take-down, and if reasonably requested by the applicable managing underwriter, each of the Company and the Shareholdersagree not to effect any public sale or private offer or distribution (other than a distribution-in-kind pro rata to allshareholders, limited partners or members, as the case may be, of such Shareholder) of any Registrable Securitiesduring the ten (10) days prior to the consummation of such Public Offering and during such time period after theconsummation of such Public Offering, not to exceed ninety (90) days (one-hundred and eighty (180) days in the caseof the IPO (the “IPO Lock-Up Period”)) as may be requested by the managing underwriter; provided, that such lock-up agreements are also required from all directors and executive officers and from all Shareholders who hold at leastfive percent (5%) of the Registrable Securities; provided, further, that each such director, executive officer orShareholder referenced in the foregoing proviso, shall enter into such lock-up agreements if sorequired. Notwithstanding the foregoing, this Section 4.04 shall not apply to any sale by a Shareholder or a director orofficer of a Shareholder of Equity Securities acquired in open market transactions or block purchases by suchShareholder or its Affiliates subsequent to the IPO or with respect to any Rule 10b5-1 sale program approved by theBoard for the benefit of any director or officer of the Company. Any discretionary waiver or reduction of therequirements under the foregoing provisions made by the Company or the applicable lead managing underwriters shallapply to each Shareholder on a pro rata basis.(b) Notwithstanding anything herein to the contrary, if the Company shall, at any time, registerunder the Securities Act an offering and sale of Registrable Securities held by the Shareholders for sale to the publicpursuant to an underwritten Public Offering, the Company shall not, without the prior written consent of the leadunderwriters for such offering, effect any public sale or distribution of securities similar to those being registered, orany securities convertible into or exercisable or exchangeable for such securities, for such period as shall be determinedby the lead underwriters and that is for the same period and on substantially similar terms as agreed to by the Sponsors.-20-  (c) At any time following the IPO, either Sponsor that, together with its Affiliates, holds less thanfive percent (5%) of the then outstanding vested Equity Securities may elect (on behalf of itself and its Affiliates(collectively, the “Withdrawing Holders”), by written notice to the Company, to withdraw from the provisions of thisARTICLE 4 and as a result of such withdrawal, such Withdrawing Holders shall no longer be entitled to the rights, norbe subject to the obligations, of Section 4.01 through Section 4.12 and the Equity Securities held by the WithdrawingHolders shall conclusively be deemed thereafter not to be “Registrable Securities” under this Agreement. Nowithdrawal pursuant to this Section 4.04(c) shall release or limit any Withdrawing Holder from its indemnification andcontribution rights and obligations, if any, pursuant to Section 4.06, Section 4.07,Section 4.08 and Section 4.09herein.Section 4.05. Registration Procedures. Whenever any Shareholders request that any Registrable Securitiesbe registered pursuant to Section 4.01, Section 4.02 or Section 4.03 hereof, subject to the provisions of such Sections,the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities inaccordance with the intended method of disposition thereof as quickly as practicable, and, in connection with any suchrequest:(a) The Company shall, as expeditiously as possible, and, if the Company is not qualified for theuse of Form S-3, no later than thirty (30) days from the date of receipt by the Company of the written request, prepareand file with the SEC a Registration Statement on any form for which the Company then qualifies and the managingunderwriter, if any, and the holders of a majority of the Registrable Securities to be registered thereunder shall deemappropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder inaccordance with the intended method of distribution thereof, and use its reasonable best efforts to cause such filedRegistration Statement to become and remain effective for a period of not less than one-hundred and eighty (180) daysor in the case of a Shelf Registration, not less than two years (or such shorter period in which all of the RegistrableSecurities of the Registering Shareholders included in such registration statement shall have actually been soldthereunder); provided, however, that such one-hundred and eighty (180) day period or two year period, as applicable,shall be extended for a period of time equal to the period any Shareholder refrains from selling any securities includedin such registration at the request of an underwriter and in the case of any Shelf Registration, subject to compliancewith applicable SEC rules, such two year period shall be extended, if necessary, to keep the Registration Statementeffective until all such Registrable Securities are sold.(b) Prior to filing a Registration Statement or prospectus or any amendment or supplement thereto,the Company shall furnish to each participating Shareholder and each underwriter, if any, of the Registrable Securitiescovered by such Registration Statement copies of such Registration Statement as proposed to be filed, and thereafterthe Company shall furnish to such Shareholder and underwriter, if any, such number of copies of such RegistrationStatement, each amendment and supplement thereto (in each case including all exhibits thereto and documentsincorporated by reference therein), the prospectus included in such registration statement (including each preliminaryprospectus and any summary prospectus) and any other prospectus filed under Rule 424 or Rule 430A under theSecurities Act and such other documents as such Shareholder or underwriter may reasonably request in order tofacilitate the disposition of the Registrable Securities owned by such Shareholder.-21-  (c) After the filing of the Registration Statement, the Company shall (i) promptly notify eachShareholder holding Registrable Equity Securities covered by such Registration Statement of the time when suchRegistration Statement has been declared effective or a supplement or amendment to any prospectus forming a part ofsuch Registration Statement has been filed, (ii) cause the related prospectus to be supplemented by any requiredprospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act and shallincorporate such information as the managing underwriter or underwriters and each of the Sponsors agree should beincluded therein relating to the plan of distribution; provided, that in the event the Registrable Securities being sold foreither of the Sponsors are less than 50% of the Registrable Securities of the other Sponsor, then the agreement of theSponsor who holds such lesser amount of Registrable Securities being sold, shall not be required under this Section4.05(c), (ii) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securitiescovered by such registration statement during the applicable period in accordance with the intended methods ofdisposition by the Registering Shareholders thereof set forth in such Registration Statement or supplement to suchprospectus and (iii) promptly notify each Registering Shareholder holding Registrable Securities covered by suchRegistration Statement of any stop order issued or threatened by the SEC or any state securities commission and takeall reasonable actions required to prevent the entry of such stop order or to remove it if entered.(d) The Company shall use its reasonable best efforts to (i) register or qualify the RegistrableSecurities covered by such Registration Statement under such other securities or “blue sky” laws of such jurisdictionsin the United States as any Registering Shareholder holding such Registrable Securities reasonably (in light of suchShareholder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with orapproved by such other governmental agencies or authorities as may be necessary by virtue of the business andoperations of the Company and do any and all other acts and things that may be reasonably necessary or advisable toenable such Shareholder to consummate the disposition of the Registrable Securities owned by such RegisteringShareholder; provided that the Company shall not be required to (A) qualify generally to do business in any jurisdictionwhere it would not otherwise be required to qualify but for this Section 4.05(d), (B) subject itself to taxation in anysuch jurisdiction or (C) consent to general service of process in any such jurisdiction.(e) The Company shall immediately notify each Registering Shareholder holding such RegistrableSecurities covered by such Registration Statement, at any time when a prospectus relating thereto is required to bedelivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement oramendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, suchprospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be statedtherein or necessary to make the statements therein not misleading and promptly prepare and make available to eachsuch Registering Shareholder and file with the SEC any such supplement or amendment.(f) Except for a Demand Registration and Underwritten Shelf Take-down, the Board shall have theright to select the underwriter or underwriters in connection with any Public Offering. In connection with the offeringof Registrable Securities pursuant to a Demand Registration or Underwritten Shelf Take-down, the holders of amajority of the Registrable-22-  Securities to be registered in a Demand Registration or Underwritten Shelf Take-down shall select the underwriter orunderwriters. In connection with any Public Offering, the Company shall enter into customary agreements (includingan underwriting agreement in customary form, provided that the scope of the indemnity contained in such underwritingagreement on the part of the selling Shareholders is not more extensive than the indemnity described in Section 4.07hereof), provided that such agreements are consistent with this Agreement, and take all such other actions as arereasonably required in order to expedite or facilitate the disposition of such Registrable Securities in any such PublicOffering, including the engagement of a “qualified independent underwriter” in connection with the qualification of theunderwriting arrangements with FINRA. The Company shall make such representations and warranties to the holdersof Registrable Securities being registered, and the underwriters or agents, if any, in form, substance and scope as arecustomarily made by issuers in secondary underwritten public offerings and take any other actions as the Sponsors, orthe managing underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the registrationand disposition of such Registrable Securities. Each Shareholder participating in such underwriting shall also enter intosuch agreement, provided that the terms of any such agreement are consistent with this Agreement.(g) Upon execution of confidentiality agreements in form and substance reasonably satisfactory tothe Company, the Company shall make available for inspection by any Registering Shareholder and any underwriterparticipating in any disposition pursuant to a Registration Statement being filed by the Company pursuant to thisSection 4.05 and any attorney, accountant or other professional retained by any such Registering Shareholder orunderwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents andproperties of the Company (collectively, the “Records”) as shall be reasonably necessary or desirable to enable themto exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply allinformation reasonably requested by any Inspectors in connection with such Registration Statement. Records that theCompany determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not bedisclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement oromission in such Registration Statement or (ii) the release of such Records is ordered pursuant to a subpoena or otherorder from a court of competent jurisdiction or is otherwise required by law. Each Shareholder agrees that at the timethat such Shareholder is a Registering Shareholder, information obtained by it as a result of such inspections shall bedeemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in EquitySecurities unless and until such information is made generally available to the public, and further agrees that, uponlearning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to theCompany and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Recordsdeemed confidential.(h) The Company shall cause to be furnished to each Registering Shareholders and to each suchunderwriter, if any, a signed counterpart, addressed to such Registering Shareholder or underwriter, of (i) an opinion oropinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company’s independent publicaccountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfortletters, as the case may be, as a majority of such Shareholders or the managing underwriter therefor reasonablyrequests.-23-  (i) The Company shall otherwise use its reasonable best efforts to comply with all applicable rulesand regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earningsstatement or such other document that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158thereunder. The Company shall cooperate with each seller of Registrable Securities and each underwriter, if any,participating in the disposition of such Registrable Securities and their respective counsel in connection with any filingsto be made with FINRA.(j) The Company may require each such Registering Shareholder, by written notice given to eachsuch Registering Shareholder not less than ten (10) days prior to the filing date of such Registration Statement, topromptly, and in any event within seven (7) days after receipt of such notice, furnish in writing to the Company suchinformation regarding the distribution of the Registrable Securities as the Company may from time to time reasonablyrequest and such other information as may be legally required in connection with such registration. Each holder ofRegistrable Securities agrees to furnish such information to the Company and cooperate with the Company asreasonably necessary to enable the Company to comply with the provisions of this Agreement.(k) Each Shareholder agrees that at the time that such Shareholder is a Registering Shareholder,upon receipt of any written notice from the Company of the occurrence of any event requiring the preparation of asupplement or amendment of a prospectus relating to the Registrable Securities covered by a registration statement thatis required to be delivered under the Securities Act so that, as thereafter delivered to the purchasers of such RegistrableSecurities, such prospectus will not contain an untrue statement of a material fact or omit to state any material factrequired to be stated therein or to make the statements therein not misleading, such Shareholder shall forthwithdiscontinue disposition of Registrable Securities pursuant to the registration statement covering such RegistrableSecurities until such Shareholder’s receipt of the copies of a supplemented or amended prospectus, and, if so directedby the Company, such Shareholder shall deliver to the Company all copies, other than any permanent file copies thenin such Shareholder’s possession, of the most recent prospectus covering such Registrable Securities at the time ofreceipt of such notice. If the Company shall give such notice, the Company shall extend the period during which suchRegistration Statement shall be maintained effective (including the period referred to in Section 4.05(a)) by the numberof days during the period from and including the date of the giving of notice pursuant to Section 4.05(e) to the datewhen the Company shall make available to such Shareholder a prospectus supplemented or amended to conform withthe requirements of Section 4.05(e).(l) The Company shall use its reasonable best efforts to list all Registrable Securities covered bysuch Registration Statement on any securities exchange or quotation system on which any of the Registrable Securitiesare then listed or traded and if none of the Registrable Securities are so listed, on any securities exchange or quotationsystem on which similar securities issued by the Company are then listed, and if no such similar securities are listed, onany national securities exchange.(m) The Company shall have appropriate officers of the Company (i) prepare and makepresentations at any “road shows” and before analysts and rating agencies, as the case may be, (ii) take otherreasonable actions to obtain ratings for any Registrable Securities and (iii)-24-  otherwise use their reasonable best efforts to cooperate as requested by the underwriters in the offering, marketing orselling of the Registrable Securities.Section 4.06. Indemnification by the Company. The Company shall indemnify and hold harmless eachShareholder, its officers, directors, employees, managers, members, partners and agents, and each Person, if any, whocontrols any such Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Actfrom and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses ofinvestigation and reasonable attorneys’ fees and expenses) (“Damages”) caused by or relating to any untrue statementor alleged untrue statement of a material fact contained in any Registration Statement or prospectus relating to theRegistrable Securities (as amended or supplemented if the Company shall have furnished any amendments orsupplements thereto) or any preliminary or free writing prospectus, or caused by or relating to any omission or allegedomission to state therein a material fact required to be stated therein or necessary to make the statements therein notmisleading or caused by or related to any violation or alleged violation of the Securities Act or Exchange Act, exceptinsofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statementor omission so made in reliance upon and in conformity with information furnished in writing to the Company by suchShareholder or on such Shareholder’s behalf expressly for use therein, provided that, with respect to any untruestatement or omission or alleged untrue statement or omission made in any preliminary prospectus, or in anyprospectus, as the case may be, the indemnity agreement contained in this paragraph shall not apply to the extent thatany Damages result from the fact that a current copy of the prospectus (or such amended or supplemented prospectus,as the case may be) was not sent or given to the Person asserting any such Damages at or prior to the writtenconfirmation of the sale of the Registrable Securities concerned to such Person if it is determined that the Company hasprovided such prospectus to such Shareholder and it was the responsibility of such Shareholder to provide such Personwith a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and suchcurrent copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have curedthe defect giving rise to such Damages.Section 4.07. Indemnification by the Participating Shareholders. Each Shareholder, at the time that suchShareholder is a Registering Shareholder holding Registrable Securities included in any Registration Statement agrees,severally but not jointly, to indemnify and hold harmless from and against all Damages the Company, its officers,directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of theSecurities Act or Section 20 of the Exchange Act (i) with respect to information furnished in writing to the Companyby such Shareholder or on such Shareholder’s behalf expressly for use in any Registration Statement or prospectusrelating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus or (ii) tothe extent that any Damages result from the fact that a current copy of the prospectus (or such amended orsupplemented prospectus, as the case may be) was not sent or given to the Person asserting any such Damages at orprior to the written confirmation of the sale of the Registrable Securities concerned to such Person if it is determinedthat it was the responsibility of such Shareholder to provide such Person with a current copy of the prospectus (or suchamended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amendedor supplemented prospectus, as the case may be) was available to such Shareholder and would have cured the defectgiving rise to such Damages. As a condition to including Registrable Securities in any Registration Statement filed-25-  in accordance with Section 4.01 through Section 4.12, the Company may require that it shall have received anundertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extentcustomarily provided by underwriters with respect to similar securities. No Shareholder shall be liable under thisSection 4.06 for any Damages in excess of the net proceeds realized by such Shareholder in the sale of RegistrableSecurities of such Shareholder to which such Damages relate.Section 4.08. Conduct of Indemnification Proceedings. If any proceeding (including any governmentalinvestigation) shall be instituted involving any Indemnified Party in respect of which indemnity may be soughtpursuant to Section 4.01 through Section 4.12, such Indemnified Party shall promptly notify the Person against whomsuch indemnity may be sought (the “Indemnifying Party”) in writing and the Indemnifying Party shall assume thedefense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shallassume the payment of all fees and expenses, provided that the failure of any Indemnified Party so to notify theIndemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that theIndemnifying Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Partyshall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of suchIndemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to theretention of such counsel or (ii) in the reasonable judgment of such Indemnified Party, representation of both parties bythe same counsel would be inappropriate due to actual or potential differing interests between them. It is understoodthat, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shallnot be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any localcounsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they areincurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing bythe Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effectedwithout its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or ifthere be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such IndemnifiedParties from and against any Damages (to the extent stated above) by reason of such settlement or judgment. Withoutthe prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending orthreatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity couldhave been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release ofsuch Indemnified Party from all liability arising out of such proceeding.Section 4.09. Contribution.(a) If the indemnification provided for in Section 4.06 to Section 4.08 is unavailable to theIndemnified Parties or insufficient in respect of any Damages (other than by reason of the exceptions provided herein),then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paidor payable by such Indemnified Party as a result of such Damages, as between the Company on the one hand and eachsuch Shareholder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and ofeach such Shareholder in connection with such statements or omissions, as well as any other relevant equitableconsiderations. The relative fault of the Company on the one-26-  hand and of each such Shareholder on the other shall be determined by reference to, among other things, whether theuntrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates toinformation supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunityto correct or prevent such statement or omission.(b) The Company and the Shareholders agree that it would not be just and equitable if contributionpursuant to this Section 4.09 were determined by pro rata allocation or by any other method of allocation that does nottake account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid orpayable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall bedeemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by suchIndemnified Party in connection with investigating or defending any such action or claim. Notwithstanding theprovisions of this Section 4.09, no Shareholder shall be required to contribute any amount in excess of the amount bywhich the net proceeds realized by such Shareholder in the sale of Registrable Securities of such Shareholder to whichsuch Damages relate exceeds the amount of any Damages that such Shareholder has otherwise been required to pay byreason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulentmisrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from anyPerson who was not guilty of such fraudulent misrepresentation. Subject to the foregoing and as among theShareholders, each Shareholder’s obligation to contribute pursuant to this Section 4.09 is several in the proportion thatthe proceeds of the offering received by such Shareholder bears to the total proceeds of the offering received by allsuch Registering Shareholders and not joint.Section 4.10. Cooperation by the Company. With a view to making available to the Shareholders thebenefits of certain rules and regulations of the SEC that may at any time permit the sale of securities to the publicwithout registration, the Company agrees to use its reasonable best efforts to:(a) make and keep public information available, as those terms are defined in Rule 144, at all timesafter the effective date that the Company becomes subject to the reporting requirements of the Securities Act or theExchange Act;(b) file with the SEC in a timely manner all reports and other documents required of the Companyunder the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements);(c) furnish to any Shareholder, so long as such Shareholder owns any Registrable Securities, uponrequest by such Shareholder, (i) a written statement by the Company that it has complied with the reportingrequirements of Rule 144 (at any time after ninety (90) days after the effective date of the first registration statementfiled by the Company for a Public Offering), and of the Securities Act and the Exchange Act (at any time after it hasbecome subject to such reporting requirements) or that it qualifies as a registrant whose securities may be resoldpursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of theCompany and (iii) such other reports and documents of the Company and other information in the possession of orreasonably obtainable by the Company as a Shareholder-27-  may reasonably request in availing itself of any rule or regulation of the SEC allowing a Shareholder to sell any suchsecurities without registration; and(d) upon the reasonable request of any Shareholder, and subject always to the fiduciary duties ofthe directors to the Company and to applicable law, instruct the transfer agent in writing that it shall rely on the writtenlegal opinion of such Shareholder’s counsel, and that the transfer agent shall act in accordance with the reasonablewritten instructions of such Shareholder’s counsel, with respect to any transfer of Equity Securities.Section 4.11. Restriction on Company Grants of Subsequent Registration Rights. So long as anySponsor holds any Registrable Securities in respect of which registration rights provided for in Section 4.01 of thisAgreement remain in effect, the Company will not, directly or indirectly, without the Requisite Consent, grant to anyPerson or agree to otherwise become obligated in respect of (i) the rights of registration in the nature or substantially inthe nature of those set forth in Section 4.01 of this Agreement that would have priority over or parity with theRegistrable Securities with respect to the inclusion of such securities in any registration or (ii) demand registrationrights exercisable prior to such time as the Sponsors can first exercise their rights under Section 4.01.Section 4.12. Assignment of Registration Rights. Following the IPO, the registration rights grantedpursuant to Section 4.01 through Section 4.11 shall not be assignable, except to a Permitted Transferee.ARTICLE 5 ACCOUNTING AND TAX MATTERSSection 5.01. Books and Records; Financial Reports. At all times during the existence of the Company,the Company shall maintain, at its registered office, books of account for the Company. Subject to reasonableconfidentiality restrictions and other reasonable standards, in each case established by the Board, and subject at alltimes to the fiduciary duties of the directors and officers of the Company and to applicable law, the Company shall, andshall cause its and its Subsidiaries’ officers, directors, employees, auditors and other agents to, for as long as anySponsor’s Relative Ownership Percentage is at least ten percent (10%), (a) afford the officers, employees, auditors andother agents of such Sponsor, during normal business hours and upon reasonable written notice to the Company,reasonable access and consultation rights at all reasonable times to the officers, auditors, legal counsel of the Companyand its Subsidiaries, employees, properties, offices, plants and other facilities of the Company’s Subsidiaries, and to allbooks and records of the Company and its Subsidiaries, and (b) afford such Sponsor the opportunity to discuss theCompany’s and its Subsidiaries’ affairs, finances and accounts with the officers of the Company and its Subsidiariesfrom time to time as each such Sponsor may reasonably request and such officers shall give due consideration to anyadvice or views provided by such Sponsor.Section 5.02. Tax Returns. The Board, at the expense of the Company, shall cause Osmotica HoldingsS.C.SP., a special limited partnership (société en commandite spéciale) pursuant to the Luxembourg law dated 10August 1915 on commercial companies (art. 22-1 et-28-  seq., as amended from time to time) (“LuxCo”) to endeavor to cause the preparation and timely filing (includingextensions) of all tax returns for any period prior to the Effective Time. Each Shareholder shall furnish to theCompany all pertinent information in its possession that is necessary to enable LuxCo’s tax returns to be prepared andfiled.Section 5.03. Accounting Methods; Elections. The Board shall cause LuxCo to determine the accountingmethods and conventions to be used in the preparation of LuxCo’s tax returns and shall cause LuxCo to make any andall elections under the tax laws of the United States and any other relevant jurisdictions as to the treatment of items ofincome, gain, loss, deduction and credit of LuxCo, or any other method or procedure related to the preparation ofLuxCo’s tax returns, in each case, for any period prior to the Effective Time; provided, however, that the Companyshall elect to be classified as an association taxable as a corporation pursuant to United States Treasury RegulationsSection 301.7701-3(a) for United States federal and applicable state and local income tax purposes, and none of theBoard, the Shareholders or LuxCo shall take any action inconsistent therewith.Section 5.04. United States Federal Income Tax Classification. The Shareholders intend, and theCompany shall cause LuxCo, not to take any position inconsistent with, treating LuxCo as an association taxable as acorporation for United States federal, state and local income and franchise tax purposes for any period prior to theEffective Time.ARTICLE 6 CERTAIN COVENANTS AND AGREEMENTSSection 6.01. Confidentiality.(a) Each Shareholder agrees that it shall (and shall cause its Affiliates, and its and their officers,directors, employees, partners, legal counsel, accountants, tax advisors, agents and representatives (collectively, the“Confidentiality Affiliates”) to) (i) hold confidential and not disclose (other than by a Shareholder to its ConfidentialityAffiliates having a reasonable need to know in connection with the permitted purposes hereunder), without the priorapproval of the Board, all confidential or proprietary written, recorded or oral information or data (including research,developmental, engineering, manufacturing, technical, marketing, sales, financial, operating, performance, cost,business and process information or data, know how and computer programming and other software techniques)provided or developed by the Company and any of its Subsidiaries, another Shareholder or its Confidentiality Affiliatesin connection herewith or with the Business, whether such confidentiality or proprietary status is indicated orally or inwriting or in a context in which any of the Company and any of its Subsidiaries or the disclosing Shareholder or any oftheir Confidentiality Affiliates reasonably communicated, or the receiving Shareholder or its Confidentiality Affiliatesshould reasonably have understood, that the information should be treated as confidential, whether or not the specificwords “confidential” or “proprietary” are used (“Confidential Information”) and (ii) use such Confidential Informationonly for the purposes of performing its obligations hereunder to which it is a party and carrying on the business of theCompany and monitoring its investment in the Company; provided, however, that Shareholders may disclose any suchConfidential Information on a confidential basis to (x) current and prospective lenders in connection with a loan orprospective loan to the Company,-29-  after such lender has entered into a non-disclosure agreement reasonably acceptable to the Board, (y) and, inconnection with a Transfer of Equity Securities in the Company permitted under this Agreement, to prospectivepurchasers of such Equity Securities, after such prospective purchaser has entered into a non-disclosure agreementreasonably acceptable to the Board, as well as to such prospective purchaser’s legal counsel, auditors, agents andrepresentatives, and (z) to the Sponsor’s respective Co-Invest Vehicles and to the members of such Co-Invest Vehicles;provided, further, that any Person to which a Sponsor discloses Confidential Information pursuant to clause (z) shallbe deemed a Confidentiality Affiliate of such Sponsor. Notwithstanding the foregoing, the Avista Shareholder maydisclose any such Confidential Information on a confidential basis to limited partners or prospective limited partners orinvestors of the Avista Shareholder or its Confidentiality Affiliates (including any prospective investors in one of itsCo-Invest Vehicles), subject to such limited partners or prospective limited partners or investors having an obligation orhaving agreed to, maintain the confidentiality of any such Confidential Information; provided, however, that theAvista Shareholder shall not (and shall cause its Confidentiality Affiliates and its limited partners or prospective limitedpartners or investors of such Shareholder or its Confidentiality Affiliates not to) disclose any Confidential Informationto any Person that is a Company Competitor. Each Shareholder agrees that it shall be responsible and liable for anybreach of this Section 6.01 by its Confidentiality Affiliates and its limited partners or prospective limited partners orinvestors of such Shareholder or its Confidentiality Affiliates (as if such Confidentiality Affiliates, limited partners orprospective limited partners or investors were parties to and bound by the provisions of this Section 6.01 by whichsuch Shareholder is bound), and that, subject to the fiduciary duties of the directors of the Company, either Sponsormay direct the Company in its enforcement of such obligations without the need for any consent or approval of theother Sponsor or the Board where the breach or alleged breach involves the other Sponsor or its ConfidentialityAffiliates.(b) The obligations contained in Section 6.01 shall not apply, or shall cease to apply, toConfidential Information if or when, and to the extent that, such Confidential Information (i) was, or becomes throughno breach of the receiving Shareholder’s obligations hereunder, known to the public, (ii) becomes known to thereceiving Shareholderr or its Confidentiality Affiliates from other sources under circumstances not involving anybreach of any confidentiality obligation between such source and the disclosing Shareholder’s or discloser’sConfidentiality Affiliates or a third party, (iii) is independently developed by the receiving Shareholder or itsConfidentiality Affiliates, or (iv) is required to be disclosed by law, governmental regulation or applicable legalprocess; provided, that to the extent permitted by law, such Shareholder shall notify the Company promptly of suchrequest or requirement so that the Company may seek an appropriate protective order or other appropriate relief (itbeing understood that either Sponsor may direct the Company in such efforts of such obligations without the need forany consent or approval of the other Sponsor or the Board where the other Sponsor or one of its ConfidentialityAffiliates is the disclosing party); provided, further, that in the absence of a protective order or other appropriate relief,such Shareholder shall use commercially reasonable efforts to obtain an order or other assurance that confidentialtreatment will be accorded to such portion of the information required to be disclosed as the Company shall designate.Section 6.02. Directors’ and Officers’ Insurance. The Company shall purchase, within a reasonable periodfollowing the date of this Agreement, and maintain for such periods as the Board shall in good faith determine, at itsexpense, insurance in an amount determined in good faith by the Board to be appropriate, on behalf of any person whoafter the date of this Agreement-30-  is or was a director, manager or officer of the Company or any Subsidiary, or is or was serving at the request of theBoard, the Company or any Subsidiary as a director, manager, officer, or agent of another limited company,corporation, partnership, joint venture, trust or other enterprise, including any direct or indirect subsidiary of theCompany, against any expense, liability or loss asserted against such Person and incurred by such Person in any suchcapacity, or arising out of such Person’s status as such, subject to customary exclusions. The provisions of this Section6.02 shall survive any termination of this Agreement.Section 6.03. No Exclusive Duty to Company. In recognition that the Sponsors and their respectivePermitted Transferees currently have, and will or may in the future have or will consider acquiring, investments innumerous companies with respect to which the Sponsors (or their Affiliates, associated investment funds, portfoliocompanies or employees, as applicable) and their respective Permitted Transferees may serve as an advisor, a directoror in some other capacity, and in recognition that the Sponsors (or their Affiliates, associated investment funds,portfolio companies or employees, as applicable) and their respective Permitted Transferees may have a myriad ofduties to various investors and partners, and in anticipation that the Company, on the one hand, and a Sponsor (or theirAffiliates, associated investment funds, portfolio companies or employees, as applicable) and its Permitted Transfereeson the other hand, may engage in the same or similar activities or lines of business and have an interest in the sameareas of corporate opportunities, and in recognition of the benefits to be derived by the Company hereunder and inrecognition of the difficulties which may confront the Sponsors and their respective Permitted Transferees indetermining the full scope of its duties in any particular situation, subject to and to the fullest extent permitted byapplicable law, the provisions of this Section 6.03 are set forth to regulate, define and guide the conduct of certainaffairs of the Company as they may involve the Sponsors and their respective Permitted Transferees. Subject to and tothe full extent permitted by law, and notwithstanding any other provision of this Agreement or in any agreementcontemplated herein or applicable provision of law or equity or otherwise, except as a Sponsor may otherwise agree inwriting after the date hereof:(a) the Sponsors (or their one or more Affiliates, associated investment funds, portfolio companiesor employees, as applicable) and their respective Permitted Transferees will have the right:(i) to directly or indirectly engage in any business (including any business activities or lines ofbusiness that are the same as or similar to those pursued by, or competitive with, the Sponsors or any of itsSubsidiaries) or invest, own or deal in equity securities of any other Person so engaged in any business;(ii) to directly or indirectly do business with any client or customer of the Sponsors or any ofits Subsidiaries;(iii) to take any other action that a Sponsor (or their Affiliates, associated investment funds,portfolio companies or employees, as applicable) and its Permitted Transferees believe in good faith is necessary orappropriate to fulfill their obligations as described in the first sentence of this Section 6.03; and-31-  (iv) not to present potential transactions, matters or business opportunities to the Company orany of its Subsidiaries, and to pursue, directly or indirectly, any such opportunity for itself, and to direct any suchopportunity to another Person.(b) the Sponsors (or their Affiliates, associated investment funds, portfolio companies oremployees, as applicable) and their respective Permitted Transferees will have no duty (contractual or otherwise) tocommunicate or present any corporate opportunities to the Company or any of its Subsidiaries or to refrain from anyactions specified in Section 6.03(a), and the Company, on their own behalf and on behalf of their respective Affiliates,hereby renounces and waives any right to require the Sponsors (or their Affiliates, associated investment funds,portfolio companies or employees, as applicable) and their Permitted Transferees to act in a manner inconsistent withthe provisions of this Section 6.03.(c) the Sponsors (or their Affiliates, associated investment funds, portfolio companies or employees,as applicable) and their respective Permitted Transferees shall not be liable to the Company or any of its Subsidiariesfor breach of any duty (contractual or otherwise) by reason of any activities or omissions of the types referred to in thisSection 6.03 or by reason of its or their participation therein.ARTICLE 7 MISCELLANEOUSSection 7.01. Binding Effect; Assignability; Benefit.(a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and theirrespective heirs, successors, legal representatives and permitted assigns. Any Shareholder that ceases to beneficiallyown any Equity Securities shall cease to be bound by the terms hereof (other than as expressly set forth herein or withrespect to Section 6.01 or ARTICLE 7).(b) Other than as expressly set forth herein, neither this Agreement nor any right, remedy,obligation or liability arising hereunder or by reason hereof shall be assignable by any party hereto pursuant to anyTransfer of Equity Securities or otherwise.(c) Except for Section 4.06, Section 4.08, Section 4.09, Section 4.09, Section 6.02, Section6.03, Section 7.04,Section 7.05,Section 7.06 and Section 7.07, nothing in this Agreement, expressed or implied, isintended to confer on any Person other than the parties hereto, and their respective heirs, successors, legalrepresentatives and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of thisAgreement.Section 7.02. Notices.(a) In the event a notice or other document is required to be sent hereunder to the Company, theBoard, or any Shareholder or legal representative of a Shareholder, such notice or other document shall be made inwriting by hand-delivery, registered or certified first-class-32-  mail, facsimile, email, or air courier guaranteeing overnight delivery to such party at the following addresses (or at suchother address as shall be given in writing by any party to the others):(i) in the case of the Company:Osmotica Pharmaceuticals plc25 – 28 North Wall QuayDublin 1IrelandAttention: Chris KleinFacsimile No.: 908-809-1301 with a copy (which shall not constitute notice) to:Ropes & Gray LLPPrudential Tower, 800 Boylston StreetBoston, MA 02199-3600Attention: Craig MarcusEmail: Craig.Marcus@ropesgray.com(ii) in the case of the Board:Board of Directors of Osmotica Pharmaceuticals plc25 – 28 North Wall QuayDublin 1IrelandAttention: Chris KleinFacsimile No.: 908-809-1301 with a copy (which shall not constitute notice) to:Ropes & Gray LLPPrudential Tower, 800 Boylston StreetBoston, MA 02199-3600Attention: Craig MarcusEmail: Craig.Marcus@ropesgray.com (iii) if to any Shareholder, to the address, e-mail address or facsimile set forth on the books ofthe Company or any other address or facsimile number as a party may hereafter specify for such purpose to theCompany.(b) The Company, the Board, or any Shareholder or their respective legal representatives mayeffect a change of address for purposes of this Agreement by giving notice of such change to the Company, and theCompany shall, upon the request of any such Person, notify the other parties hereto of such change in the mannerprovided herein. Until such notice of change of address is properly given, the addresses set forth herein shall beeffective for all purposes.-33-  (c) All notices given in accordance with this Section 7.02 shall be deemed to have been duly given:when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid,if mailed; when sent, if sent via email; when transmission confirmation is received, if sent by facsimile; and on the nextbusiness day, if timely delivered to an air courier guaranteeing overnight delivery.Section 7.03. Waiver; Amendment; Termination.(a) No provision of this Agreement may be waived, amended or otherwise modified except by aninstrument in writing executed by (i) the Company and (ii) with the Requisite Consent; provided, however, that anywaiver, amendment or modification that adversely affects Management Shareholders disproportionately as compared tothe Sponsors (taking into account and considering the rights of Management Shareholders prior to such amendment ormodification), shall require the prior written consent of the holders of a majority of the Ordinary Shares then held bythe Management Shareholders; provided, further, that any waiver, amendment or modification that materially andadversely affects a Shareholder disproportionately as compared to all other Shareholders, shall require the prior writtenconsent of a majority-in-interest of such Shareholders so adversely affected; provided, further, that no update of anySchedule hereto shall be deemed to constitute an amendment to this Agreement.(b) This Agreement shall terminate at such time that there are no Registrable Securities, except forthe provisions of Section 4.06,Section 4.06 Section 4.08, Section 4.08 and Section 4.09 and all of this ARTICLE 7.Section 7.04. Non-Recourse. Notwithstanding anything that may be expressed or implied in this Agreement,the Company and each Shareholder covenant, agree and acknowledge that no recourse under this Agreement or anydocuments or instruments delivered in connection with this Agreement in respect of each Shareholder's obligationsunder this Agreement or any documents or instruments delivered in connection with this Agreement shall be hadagainst any current or future director, officer, employee, general or limited partner or member or equity holder of anyShareholder or of any Affiliate or assignee thereof (in their capacity as such and not, as the case may be, in theircapacity as a director or officer of the Company), whether by the enforcement of any assessment or by any legal orequitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed andacknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by anycurrent or future officer, agent or employee of any Shareholder or any current or future member or equity holder of anyShareholder or any current or future director, officer, employee, partner or member or equity holder of any Shareholderor of any Affiliate or assignee thereof (in their capacity as such and not, as the case may be, in their capacity as adirector or officer of the Company), as such for any obligation of any Shareholder under this Agreement or anydocuments or instruments delivered in connection with this Agreement for any claim based on, in respect of or byreason of such obligations or their creation.Section 7.05. Governing Law; Venue. All issues and questions concerning the construction, validity,interpretation and enforceability of this Agreement and the exhibits and schedules hereto, and their negotiation,execution, performance or nonperformance, interpretation, termination, construction and all matters based upon, arisingout of or related to any of the-34-  foregoing, whether arising in law or equity, shall be governed by, and construed in accordance with, the laws of theNew York, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State ofNew York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Stateof New York. Any legal action or proceeding with respect this Agreement shall be brought in the courts of the UnitedStates District Court for the Southern District of New York or any other competent court of the State of New York,and, by execution and delivery of this Agreement, each party hereby irrevocably accepts for itself and in respect of itsproperty, generally and unconditionally, the exclusive jurisdiction of such courts. Each party irrevocably waives anyobjection which it may now or hereafter have to the laying of venue of the aforesaid actions or proceedings arising outof or in connection with this Agreement in the courts referred to in this paragraph and hereby further irrevocablywaives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such courthas been brought in an inconvenient forum. Each party agrees that service of process upon such party in any actionshall be effective if notice is given in accordance with Section 7.02.Section 7.06. WAIVER OF JURY TRIAL. EACH OF THE SHAREHOLDERS HEREBYIRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING(INCLUDING COUNTERCLAIMS) RELATING TO OR ARISING OUT OF OR IN CONNECTION WITHTHIS AGREEMENT OR ANY OF THE TRANSACTIONS OR RELATIONSHIPS HEREBYCONTEMPLATED OR OTHERWISE IN CONNECTION WITH THE ENFORCEMENT OF ANY RIGHTSOR OBLIGATIONS HEREUNDER.Section 7.07. Specific Enforcement; Cumulative Remedies. The parties hereto acknowledge that moneydamages may not be an adequate remedy for violations of this Agreement and that any party, in addition to any otherrights and remedies which the parties may have hereunder or at law or in equity, may, in his or its sole discretion, applyto a court of competent jurisdiction for specific performance or injunction or such other relief as such court may deemjust and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted byapplicable law, each party waives any objection to the imposition of such relief. All rights, powers and remediesprovided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and notalternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude thesimultaneous or later exercise of any other such rights, powers or remedies by such party.Section 7.08. Entire Agreement. This Agreement, together with all agreements referenced to herein and anyschedules, exhibits and other documents referred to herein or therein constitute the entire agreement and understandingamong the parties hereto in respect of the subject matter hereof and thereof and supersede all prior andcontemporaneous arrangements, agreements and understandings, both oral and written, whether in term sheets,presentations or otherwise among the parties hereto, or between any of them, with respect to the subject matter hereofand thereof.Section 7.09. Severability.(a) If any term, provision, covenant or restriction of this Agreement is held by a court of competentjurisdiction or other authority to be invalid, void or unenforceable, the-35-  remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effectand shall in no way be affected, impaired or invalidated. Upon such a determination, the parties shall negotiate in goodfaith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptablemanner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extentpossible.(b) To the extent the terms of the Constitution or any other constitutive documents of the Companyare contradictory to, or inconsistent with, the terms of this Agreement, the terms of this Agreement shall, to the extentpermitted by law, supersede such conflicting or inconsistent terms. All terms of the Constitution and any otherconstitutive documents not contradictory to, or inconsistent with, the terms of this Agreement shall remain in full forceand effect.Section 7.10. Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts,each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were uponthe same instrument.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -36-  IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by theirrespective authorized officers as of the day and year first above written. OSMOTICA PHARMACEUTICALS PLC By: /s/ Christopher Klein Name: Christopher Klein Title: Secretary [Signature Page to Shareholders Agreement]  ALTCHEM LIMITED By: /s/ Georgia Kafkalia Name: Georgia Kafkalia Title: Director [Signature Page to Shareholders Agreement]  ACP HOLDCO (OFFSHORE), L.P. By: ACP III AIV GP, Ltd. Its: General Partner By: /s/ Ben Silbert Name: Ben Silbert Title: Director [Signature Page to Shareholders Agreement]  ACP III AIV, L.P. By: ACP III AIV GP, Ltd. Its: General Partner By: /s/ Ben Silbert Name: Ben Silbert Title: Director [Signature Page to Shareholders Agreement]  ORBIT CO-INVEST I, LLC By: Avista Capital Partners III GP, L.P. Its: Manager By: /s/ Ben Silbert Name: Ben Silbert Title: Authorized Representative [Signature Page to Shareholders Agreement]  ORBIT CO-INVEST III, LLC By: Avista Capital Partners III GP, L.P. Its: Manager By: /s/ Ben Silbert Name: Ben Silbert Title: Authorized Representative [Signature Page to Shareholders Agreement]  ORBIT CO-INVEST A-I LLC By: Altchem Limited Its: Manager By: /s/ Georgia Kafkalia Name: Georgia Kafkalia Title: Director [Signature Page to Shareholders Agreement]  /s/ Jarret Miller Jarret Miller [Signature Page to Shareholders Agreement]  HARPUA, L.L.C By: /s/ Andrew Einhorn Name: Andrew Einhorn Title: Manager [Signature Page to Shareholders Agreement]  /s/ Brian Markison Brian Markison [Signature Page to Shareholders Agreement]  /s/ JD Schaub JD Schaub [Signature Page to Shareholders Agreement]  ALASKA TRUST COMPANY, AS TRUSTEE OF THE STEVEN SQUASHIC 2013 NON-GRANTOR ALASKA TRUST DATED SEPTEMBER 11, 2013 By: /s/ Brandon Cintula Name: Brandon Cintula Title: Senior Vice President & Senior Trust Officer [Signature Page to Shareholders Agreement]  PREMIER TRUST, INC., AS TRUSTEE OF THE KEVIN HUDY 2013 NON- GRANTOR NEVADA TRUST DATED SEPTEMBER 18, 2013 By: /s/ Brian Simmons Name: Brian Simmons Title: Trust Officer [Signature Page to Shareholders Agreement]  /s/ Christopher Klein Christopher Klein [Signature Page to Shareholders Agreement]  /s/ David Purdy David Purdy [Signature Page to Shareholders Agreement]  /s/ Rich Buecheler Rich Buecheler [Signature Page to Shareholders Agreement]  Annex A Management Shareholders 1. Brian Markison2. JD Schaub3. Alaska Trust Company, as Trustee of the Steven Squashic 2013 Non-Grantor Alaska Trust dated September11, 20134. Premier Trust, Inc., as Trustee of the Kevin Hudy 2013 Non-Grantor Nevada Trust dated September 18, 20135. Christopher Klein6. David Purdy7. Rich Buecheler8. Jarret Miller9. Harpua, L.L.C[Signature Page to Shareholders Agreement]Exhibit 21.1 Osmotica Pharmaceuticals plc Subsidiary State or Other Jurisdiction of OrganizationOsmotica Holdings S.C.Sp. LuxembourgOsmotica Holdings US LLC DelawareOsmotica Holdings Corp LTD CyprusOsmotica Kereskedelmi es Szolgaltato Kft HungaryOsmotica Pharmaceutical Corp. DelawareRevitaLid, Inc. DelawareOsmotica Argentina, S.A. ArgentinaOrbit Blocker I LLC DelawareOrbit Blocker II LLC DelawareValkyrie Group Holdings, Inc. DelawareVertical/Trigen Holdings, LLC(1) DelawareOsmotica Pharmaceutical US, LLC DelawareVertical/Trigen Midco, LLC DelawareVertical/Trigen Opco, LLC DelawareTrigen Laboratories, LLC DelawareVertical Pharmaceuticals, LLC Delaware(1) Vertical/Trigen Holdings, LLC is jointly-owned by Orbit Blocker I, LLC, Orbit Blocker II, LLC, Valkyrie Group Holdings, Inc. andOsmotica Pharmaceutical Corp.Exhibit 23.1Consent of Independent Registered Public Accounting FirmOsmotica Pharmaceuticals plcDublin, IrelandWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-228045) ofOsmotica Pharmaceuticals plc, of our report dated March 27, 2019, relating to the consolidated financial statements, whichappears in this Form 10-K./s/ BDO USA, LLPWoodbridge, New JerseyMarch 27, 2019Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Brian Markison, certify that:1. I have reviewed this annual report on Form 10-K of Osmotica Pharmaceuticals plc;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial 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, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered bythis report based on such evaluation; and(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) thathas materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Date: March 27, 2019 /s/ Brian Markison Name: Brian Markison Title: Chief Executive Officer(Principal Executive Officer) Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICERPURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew Einhorn, certify that:1. I have reviewed this annual report on Form 10-K of Osmotica Pharmaceuticals plc;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial 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, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this report isbeing prepared;(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered bythis report based on such evaluation; and(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) thathas materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financialreporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting. Date: March 27, 2019 /s/ Andrew Einhorn Name: Andrew Einhorn Title: Chief Financial Officer(Principal Financial Officer) Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of Osmotica Pharmaceuticals plc (the “Company”) on Form 10-K forthe year ended December 31, 2018 as filed with the Securities and Exchange Commission on the datehereof (the “Report”), I, Brian Markison, Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to myknowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company. Date: March 27, 2019 /s/ Brian Markison Brian Markison Chief Executive Officer(Principal Executive Officer) Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of Osmotica Pharmaceuticals plc (the “Company”) on Form 10-K forthe year ended December 31, 2018 as filed with the Securities and Exchange Commission on the datehereof (the "Report"), I, Andrew Einhorn, Chief Financial Officer of the Company, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to myknowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financialcondition and results of operations of the Company. Date: March 27, 2019 /s/ Andrew Einhorn Andrew Einhorn Chief Financial Officer(Principal Financial Officer) 

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