1.	Organization and Business

Heron Therapeutics, Inc. is a biotechnology company focused on improving the lives of patients by developing best-in-class medicines that address major unmet medical needs. We are developing novel, patient-focused solutions that apply our innovative science and technologies to already-approved pharmacological agents. Our goal is to build on therapeutics with well-known pharmacology by improving their tolerability and efficacy as well as broadening their potential field of use.

We are currently developing pharmaceutical products for patients suffering from cancer or pain. SUSTOL is being developed for the prevention of both acute and delayed CINV associated with moderately emetogenic chemotherapy or highly emetogenic chemotherapy. Our New Drug Application (“NDA”) for SUSTOL is pending review with the U.S. Food and Drug Administration (“FDA”), and was assigned a Prescription Drug User Fee Act (“PDUFA”) goal date of January 17, 2016. In January 2016, we were notified by the FDA that it would not take action on our SUSTOL NDA by the PDUFA date and that the FDA anticipates taking action in late February 2016. In addition to SUSTOL, we are currently developing several other pharmaceutical products for patients suffering from cancer or pain. HTX-019, also being developed for the prevention of CINV, is an intravenous formulation of aprepitant, a neurokinin-1 receptor antagonist. HTX-011, a long-acting formulation of the local anesthetic bupivacaine in a fixed-dose combination with the anti-inflammatory meloxicam, is being developed for the prevention of post-operative pain.

Liquidity

We have incurred significant operating losses and negative cash flows from operations, and we had an accumulated deficit of $412.8 million as of December 31, 2015. As of December 31, 2015, we had cash, cash equivalents and short-term investments of $131.2 million.

We believe that our current working capital is sufficient to fund operations through 2016, including pursuing regulatory approval for SUSTOL in the U.S. and, if approved, making significant investments to support commercialization, and completing Phase 2 and 3 clinical studies currently ongoing and expected to commence in 2016 relative to our HTX-011 and HTX-019 product candidates. In the event that we pursue preclinical and/or clinical development in other areas, potentially acquire other strategic assets, or if SUSTOL is not approved or has less commercial success than is expected, we may need to raise additional capital, and we may seek funds through various sources, including debt and equity offerings, corporate collaborations, bank borrowings, arrangements relating to assets, sale of royalty streams we may receive on our products or other financing methods or structures. The source, timing and availability of any financings will depend on market conditions, development program progress, interest rates and other factors. If we are unable to obtain sufficient financing on acceptable terms or otherwise, we may be required to reduce or defer our activities. Our capital requirements going forward will depend on numerous factors, including but not limited to: the scope, rate of progress, results and costs of preclinical testing and clinical trials; an approval decision by the FDA with respect to SUSTOL; the timing of and costs associated with the commercial launch of SUSTOL, if approved; the degree of commercial success of SUSTOL; the number and characteristics of product development programs we pursue and the pace of each program, including the timing of clinical trials; the time, cost and outcome involved in seeking other regulatory approvals; scientific progress in our research and development programs; the magnitude and scope of our research and development programs; our ability to establish and maintain strategic collaborations or partnerships for research, development, clinical testing, manufacturing and marketing of our product candidates; the cost and timing of establishing sales, marketing and distribution capabilities if we commercialize products independently; the cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop; and general market conditions.

We may not be able to raise sufficient additional capital when we need it on favorable terms, or at all. The sale of additional equity in the future may be dilutive to our stockholders. If we are unable to obtain adequate funds on reasonable terms, we may be required to curtail operations significantly or to obtain funds by entering into financing, supply or collaboration agreements on unattractive terms.