FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2025

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in the principal or most advantageous market in an orderly transaction. To increase consistency and comparability in fair value measurements, the FASB established a three-level hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of fair value measurements are:

•Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

•Level 3: Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these items. The fair value of the Company’s convertible senior notes and its TLA Term Loan are calculated utilizing market quotations from an over-the-counter trading market for these notes (Level 2). The fair value of the Company’s acquisition-related contingent consideration is reported at fair value on a recurring basis (Level 3). The carrying amount of equity investments and convertible notes receivable without readily determinable fair values are recorded at cost minus impairment, if any, plus or minus observable price changes of identical or similar investments.

At June 30, 2025, the carrying values and fair values of the following financial assets and liabilities were as follows (in thousands):


	Carrying Value		Fair Value Measurements Using
			Level 1		Level 2		Level 3
Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis:
Financial Assets:
Equity investments	$	7,750	$	—	$	—	$	7,750
Convertible notes receivable	$	2,500	$	—	$	—	$	2,500
Financial Liabilities:
Acquisition-related contingent consideration	$	17,209	$	—	$	—	$	17,209

Financial Liabilities Measured at Amortized Cost:
Term loan A facility due March 2028	$	97,828	$	—	$	98,256	$	—
2.125% convertible senior notes due 2029 (1)	$	280,267	$	—	$	281,419	$	—
0.750% convertible senior notes due 2025 (2)	$	202,397	$	—	$	201,113	$	—

(1) The closing price of the Company’s common stock as reported on the Nasdaq Global Select Market was $23.90 per share on June 30, 2025, compared to a conversion price of $39.56 per share. At June 30, 2025, as the conversion price was above the stock price, the requirements for conversion have not been met.

(2) The 0.750% Convertible senior notes matured and were repaid on August 1, 2025.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Equity and Convertible Note Investments

The Company holds strategic investments in clinical and preclinical stage privately-held biotechnology companies in the form of equity and convertible note investments as follows (in thousands):


	Equity Investments		Convertible Notes Receivable		Total
Balance at December 31, 2023	$	15,877	$	12,134	$	28,011


Foreign currency adjustments	—		(236)		(236)
Balance at December 31, 2024	15,877		11,898		27,775
Purchases	—		1,250		1,250
Impairment	(4,000)		(7,000)		(11,000)
Realized gain of prior investments (1)	4,227		1,674		5,901
Settled investments (1)	(8,315)		(5,322)		(13,637)
Foreign currency adjustments	(39)		—		(39)
Balance at June 30, 2025	$	7,750	$	2,500	$	10,250

(1) In conjunction with the GQ Bio Acquisition, the settlement of the Company’s prior equity investment and notes receivable were part of the fair value of consideration exchanged. Upon acquiring the remaining 81% ownership interest in GQ Bio, the Company remeasured its previously held equity interest to its acquisition-date fair value. The $4.2 million gain resulting from the equity investment was recognized as other, net within the condensed consolidated statement of operations. In settling the notes receivable, the Company recognized $1.7 million in interest income. See Note 3, GQ Bio Therapeutics Acquisition, for information on the GQ Bio Acquisition.

During the three and six months ended June 30, 2025, an impairment of an equity investment and convertible note receivable totaling $11.0 million was recorded in other, net in the condensed consolidated statements of operations.

In June 2025, the Company invested $1.3 million in a convertible note receivable related to one of its existing early-stage strategic investments.

Acquisition-Related Contingent Consideration

The Company has recognized contingent consideration related to the Flexion Acquisition in the amount of $17.2 million and $20.2 million as of June 30, 2025 and December 31, 2024, respectively.

The Company’s contingent consideration obligations are recorded at their estimated fair values and are revalued each reporting period if and until the related contingencies are resolved. The Company has measured the fair value of its contingent consideration using a Monte Carlo simulation. These inputs include, as applicable, estimated forecasts of revenue and costs and the discount rates used to calculate the present value of estimated future payments. Significant changes may increase or decrease the probabilities of achieving the related commercial and regulatory events, shorten or lengthen the time required to achieve such events, or increase or decrease estimated forecasts.

In November 2021, the Company completed the Flexion Acquisition, which provided for contingent consideration related to contingent value rights that were issued to Flexion shareholders and certain equity award holders which could aggregate up to a total of $372.3 million if certain regulatory and commercial milestones are met. The aggregate amount was initially $425.5 million prior to the Company’s September 2022 decision to formally discontinue further development of Flexion’s investigational product candidate, PCRX-301. The Company’s obligation to make milestone payments is limited to those milestones achieved through December 31, 2030, and are to be paid within 60 days of the end of the fiscal quarter of achievement. During the three and six months ended June 30, 2025, the Company recognized contingent consideration gains of $0.4 million and $3.0 million, respectively, due to revisions to the latest discount rates. During the three months ended June 30, 2024, the Company recognized a contingent consideration charge of $1.5 million primarily due to revisions to the latest discount rates. During the six months ended June 30, 2024, the Company recognized a contingent consideration gain of $2.3 million primarily due to an adjustment reflecting the probability of achieving the remaining regulatory milestone under the Flexion Acquisition by the milestone expiration date. These adjustments were recorded within contingent consideration (gains) charges, acquisition-related expenses, restructuring and other in the condensed consolidated statements of operations. At June 30, 2025, the weighted average discount rate was 7.9%.

The following table includes the key assumptions used in the valuation of the Company’s contingent consideration:


Assumption						Ranges Utilized as of June 30, 2025
Discount rates						7.6% to 8.2%
Probability of payment for remaining regulatory milestone						0%

The change in the Company’s contingent consideration recorded at fair value using Level 3 measurements is as follows (in thousands):


	Contingent Consideration Fair Value
Balance at December 31, 2023	$	24,698
Fair value adjustments and accretion	(4,457)
Balance at December 31, 2024	20,241
Fair value adjustments and accretion	(3,032)

Balance at June 30, 2025	$	17,209

Available-for-Sale Investments

Short-term investments consist of asset-backed securities collateralized by credit card receivables, investment grade commercial paper and corporate, federal agency, government and Yankee bonds with maturities greater than three months, but less than one year. Net unrealized gains and losses (excluding credit losses, if any) from the Company’s short-term investments are reported in other comprehensive (loss) income. At June 30, 2025 and December 31, 2024, all of the Company’s short-term investments are classified as available-for-sale investments and are determined to be Level 2 instruments, with the exception of U.S. government bonds, which are measured at fair value using standard industry models with observable inputs. The fair value of the commercial paper is measured based on a standard industry model that uses the three-month U.S. Treasury bill rate as an observable input. The fair value of the asset-backed securities and corporate bonds is principally measured or corroborated by trade data for identical issues in which related trading activity is not sufficiently frequent to be considered a Level 1 input or that of comparable securities. The fair value of U.S. government bonds is based on level 1 trading activity. At the time of purchase, all available-for-sale investments had an “A” or better rating by Standard & Poor’s.

The following summarizes the Company’s short-term available-for-sale investments at June 30, 2025 and December 31, 2024 (in thousands):


June 30, 2025 Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Level 2)
Current:
Asset-backed securities	$	8,531	$	—	$	(1)	$	8,530
Commercial paper	106,793		4		(26)		106,771
Corporate bonds	25,078		4		(6)		25,076


Yankee bond	5,002		1		—		5,003







Total	$	145,404	$	9	$	(33)	$	145,380


December 31, 2024 Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Level 2)
Current:
Asset-backed securities	$	21,626	$	43	$	—	$	21,669
Commercial paper	142,556		120		(55)		142,621
Corporate bonds	32,502		25		(5)		32,522
U.S. federal agency bonds	5,996		8		—		6,004

Yankee bond	5,012		13		—		5,025







Total	$	207,692	$	209	$	(60)	$	207,841

At June 30, 2025, there were no investments available for sale that were materially less than their amortized cost.

The Company elects to recognize its interest receivable separate from its available-for-sale investments. At June 30, 2025 and December 31, 2024, the interest receivable from its available-for-sale investments recognized in prepaid expenses and other current assets was $0.4 million and $0.5 million, respectively.

Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term available-for-sale investments and accounts receivable. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. Such amounts may exceed federally-insured limits.

As of June 30, 2025, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 34%, 21% and 16%. At December 31, 2024, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 34%, 18% and 16%. For additional information regarding the Company’s wholesalers, see Note 2, Summary of Significant Accounting Policies. EXPAREL and ZILRETTA revenues are primarily derived from major wholesalers and specialty distributors that generally have significant cash resources. The Company performs ongoing credit evaluations of its customers as warranted and generally does not require collateral. Allowances for credit losses on the Company’s accounts receivable are maintained based on historical payment patterns, current and estimated future economic conditions, aging of accounts receivable and its write-off history. As of June 30, 2025 and December 31, 2024, there were $0.5 million and $0.4 million of allowances for credit losses on the Company’s accounts receivable, respectively.