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Acquisitions

12 Months Ended

Dec. 31, 2023

Acquisitions

4. Acquisitions

On March 22, 2022 (the “Acquisition Date”), the Company acquired BioDelivery Sciences International, Inc. (“BDSI”), a specialty pharmaceutical company working to deliver innovative therapies for individuals living with serious and debilitating chronic conditions (the “BDSI Acquisition”). Upon closing, the Company acquired Belbuca and Symproic.

The BDSI Acquisition was completed to leverage the Company’s existing sales force and other operations to commercialize additional products that are typically marketed to similar physicians and to develop other synergies. The Company obtained control through the acquisition of shares in an all-cash transaction which closed on March 22, 2022.

The total consideration paid for the BDSI acquisition was approximately $669,431 consisting of the following (in thousands, except per share amounts):


Fair Value of Purchase Price Consideration	Amount
Fair value of purchase price consideration paid at closing:
Cash consideration for all outstanding shares of BDSI's common and preferred stock (103,235,298 shares acquired at $5.60 per share)	$	578,118
Cash consideration paid to settle RSUs and in-the-money options		28,309
Cash paid to settle BDSI debt		63,004
Total purchase consideration	$	669,431

The Company has accounted for the BDSI Acquisition as a business combination and, accordingly, has included the assets acquired, liabilities assumed and results of operations in its financial statements following the Acquisition Date.

The final allocation of the consideration transferred to the assets acquired and liabilities assumed has been completed. During the three months ended March 31, 2023, the Company recorded measurement period adjustments to increase accrued expenses by $134 and deferred tax liabilities by $28, with a corresponding increase to goodwill of $162.

The following tables set forth the final allocation of the BDSI Acquisition purchase price to the estimated fair value of the net assets acquired at the Acquisition Date:


		Amounts Recognized at the Acquisition Date
Assets Acquired
Cash and cash equivalents		$	97,362
Accounts receivable			55,495
Inventory			77,382
Prepaid expenses and other current assets			6,125
Property and equipment			1,242
Operating lease assets			481
Intangible assets			435,000
Total assets		$	673,087
Liabilities Assumed
Accounts payable		$	12
Accrued liabilities			18,249
Accrued rebates, returns and discounts			56,261
Operating lease liabilities			481
Deferred tax liabilities			62,510
Total liabilities		$	137,513
Total identifiable net assets acquired			535,574
Goodwill			133,857
Total consideration transferred		$	669,431

The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the $435,000 of intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets, discounted to the present value at discount rates commensurate with risk. The Company amortizes the identifiable intangible assets on a straight-line basis over their respective useful lives (refer to Note 11, Goodwill and Intangible Assets). In addition, the acquired inventory was recognized at its acquisition-date fair value, which resulted in an increase of $54,700 compared to its preacquisition book value.

The excess of the purchase price over the fair value of identifiable net assets acquired represents goodwill. This goodwill is primarily attributable to synergies of merging operations. The acquired goodwill is not deductible for tax purposes.

Total revenues attributable to BDSI from the Acquisition Date through December 31, 2022 were $140,653. However, earnings attributable to BDSI from the Acquisition Date through December 31, 2022 are not distinguishable due to the rapid integration of BDSI’s core operations into the Company.

Unaudited Pro Forma Summary of Operations

The following table shows the unaudited pro forma summary of operations for the years ended December 31, 2022 and 2021, as if the BDSI Acquisition had occurred on January 1, 2021. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of January 1, 2021, and is not indicative of what such results would be expected for any future period:


	Years Ended December 31,
	2022			2021
Total revenues	$	493,284		$	443,571
Net income	$	8,674		$	15,015

The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and BDSI. The pro forma financial information primarily reflects the following pro forma adjustments:

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The Company’s acquisition related transaction costs of $14,718 were reflected as of January 1, 2021;

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Employee severance related expense of $8,008 was reflected as of January 1, 2021;

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Additional amortization expense from the acquired intangibles;

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Additional cost of product revenues related to the step-up basis in inventory to record inventory at fair value; and

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Adjustments to the Company’s interest expense related to repayment of the 2020 Term Loan and entering into the 2022 Term Loan as defined in Note 14, Debt.

In addition, all of the above adjustments were adjusted for the applicable tax impact.

Acquisition Related Expenses

During the year ended December 31, 2022, the Company incurred $31,297 of acquisition related expenses as a result of the BDSI Acquisition and the substantial majority were included in “Selling, general, and administrative” expenses in the consolidated statements of operations. These costs include transaction costs, which primarily consisted of financial advisory, banking, legal, and regulatory fees, and other consulting fees, incurred to complete the acquisition, employee-related expenses (severance cost and benefits) for terminated employees after the acquisition, BDSI directors and officers insurance, and miscellaneous other acquisition expenses incurred. The Company does not expect to incur any additional expenses related to the BDSI Acquisition.


	Year Ended December 31, 2022
Transaction costs	$	14,718
Employee-related expenses		8,008
BDSI directors and officers insurance		4,492
Other acquisition expenses		4,079
Total acquisition related expenses	$	31,297