UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 20172023
 
OR

o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to
Commission File Number: 001-35060
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PACIRA PHARMACEUTICALS,BIOSCIENCES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
51-0619477
Delaware
51-0619477
(State or Other Jurisdiction of

Incorporation or Organization)
(I.R.S. Employer

 Identification No.)
5 Sylvan Way, Suite 300
Parsippany, New Jersey, 07054
(Address and Zip Code of Principal Executive Offices)
(973) 254-3560
(Registrant’s Telephone Number, Including Area Code)


5401 West Kennedy Boulevard, Suite 890
Tampa, Florida 33609
(Address and Zip Code of Principal Executive Offices)
(813) 553-6680
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.001 per sharePCRXNasdaq Global Select Market


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒ Yes  o☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) x☒ Yes  o☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”filer”, “accelerated filer,”filer”, “smaller reporting company,”company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Emerging growth companyo
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. o☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐ Yes  x☒ No

As of November 5, 2017, 40,570,0021, 2023, 46,437,704 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.


PACIRA PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2017
PACIRA BIOSCIENCES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

Page #
PART I. FINANCIAL INFORMATION
4
Page #
Item 1.
4
34
45
56
67
79
810
2230
3247
3348
PART II. OTHER INFORMATION
49
49
3449
Risk Factors
34
Item 2.
3449
3449
3449
3450
3550
3652


Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 3
PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (Unaudited)
PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
September 30,
2023		December 31,
2022
ASSETS
Current assets:  
     Cash and cash equivalents$99,119 $104,139 
     Short-term available-for-sale investments136,069 184,512 
     Accounts receivable, net96,956 98,397 
     Inventories, net96,520 96,063 
     Prepaid expenses and other current assets18,591 15,223 
          Total current assets447,255 498,334 
Noncurrent available-for-sale investments— 37,209 
Fixed assets, net175,783 183,512 
Right-of-use assets, net63,394 70,877 
Goodwill163,243 163,243 
Intangible assets, net497,580 540,546 
Deferred tax assets151,660 160,309 
Investments and other assets35,547 27,170 
          Total assets$1,534,462 $1,681,200 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
     Accounts payable$16,511 $15,220 
     Accrued expenses59,884 89,785 
     Lease liabilities8,625 9,121 
     Current portion of convertible senior notes, net8,641 — 
Current portion of long-term debt, net— 33,648 
          Total current liabilities93,661 147,774 
Convertible senior notes, net397,976 404,767 
Long-term debt, net117,965 251,056 
Lease liabilities57,089 64,802 
Contingent consideration24,275 28,122 
Other liabilities11,945 9,669 
          Total liabilities702,911 906,190 
Commitments and contingencies (Note 15)
Stockholders’ equity:  
Preferred stock, par value $0.001; 5,000,000 shares authorized; none issued and outstanding at September 30, 2023 and December 31, 2022— — 
Common stock, par value $0.001; 250,000,000 shares authorized; 46,426,836 and 45,927,790 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively46 46 
     Additional paid-in capital963,181 924,095 
     Accumulated deficit(131,666)(148,751)
     Accumulated other comprehensive loss(10)(380)
          Total stockholders’ equity831,551 775,010 
          Total liabilities and stockholders’ equity$1,534,462 $1,681,200 
See accompanying notes to condensed consolidated financial statements.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 4
PACIRA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)
(Unaudited)
 September 30,
2017		 December 31,
2016
   (Note 2)
ASSETS 
  
Current assets: 
  
     Cash and cash equivalents$26,216
 $35,944
     Short-term investments267,864
 136,653
     Accounts receivable, net27,021
 29,937
     Inventories, net39,112
 31,278
     Prepaid expenses and other current assets5,622
 9,277
          Total current assets365,835
 243,089
Long-term investments80,807
 —
Fixed assets, net105,947
 101,016
Goodwill52,956
 46,737
Other assets545
 624
          Total assets$606,090
 $391,466
    
LIABILITIES AND STOCKHOLDERS’ EQUITY 
  
Current liabilities: 
  
     Accounts payable$12,278
 $7,511
     Accrued expenses39,701
 37,261
     Convertible senior notes320
 —
     Income taxes payable38
 66
          Total current liabilities52,337
 44,838
Convertible senior notes272,721
 108,738
Other liabilities16,232
 18,914
          Total liabilities341,290
 172,490
Commitments and contingencies (Note 12)

 

Stockholders’ equity: 
  
     Preferred stock, par value $0.001; 5,000,000 shares authorized; none issued and outstanding at
September 30, 2017 and December 31, 2016		—
 —
     Common stock, par value $0.001, 250,000,000 shares authorized; 40,564,766 shares issued and
outstanding at September 30, 2017; 37,480,952 shares issued and outstanding at December 31, 2016		41
 37
     Additional paid-in capital658,557
 565,207
     Accumulated deficit(393,731) (346,238)
     Accumulated other comprehensive loss(67) (30)
          Total stockholders’ equity264,800
 218,976
          Total liabilities and stockholders’ equity$606,090
 $391,466
PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Revenues:    
Net product sales$163,583 $166,560 $492,481 $492,563 
Royalty revenue343 906 1,253 2,305 
          Total revenues163,926 167,466 493,734 494,868 
Operating expenses:    
Cost of goods sold39,750 50,678 136,977 137,379 
Research and development20,830 19,405 56,794 67,292 
Selling, general and administrative67,947 61,283 203,640 190,546 
Amortization of acquired intangible assets14,322 14,322 42,966 42,966 
Contingent consideration charges (gains), restructuring charges and other3,356 489 (1,150)(13,232)
          Total operating expenses146,205 146,177 439,227 424,951 
Income from operations17,721 21,289 54,507 69,917 
Other (expense) income:    
Interest income2,766 1,234 8,019 1,757 
Interest expense(3,464)(9,856)(16,918)(28,935)
Loss on early extinguishment of debt— — (16,926)— 
Other, net(422)(10,598)(701)(11,369)
          Total other expense, net(1,120)(19,220)(26,526)(38,547)
Income before income taxes16,601 2,069 27,981 31,370 
Income tax expense(5,743)(2,762)(10,896)(5,359)
Net income (loss)$10,858 $(693)$17,085 $26,011 
Net income (loss) per share:    
Basic net income (loss) per common share$0.23 $(0.02)$0.37 $0.57 
Diluted net income (loss) per common share$0.23 $(0.02)$0.37 $0.56 
Weighted average common shares outstanding:  
     Basic46,416 45,831 46,151 45,400 
     Diluted52,067 45,831 46,343 52,220 
 
See accompanying condensed notes to condensed consolidated financial statements.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 5
PACIRA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Revenues: 
  
  
  
     Net product sales$66,951
 $66,119
 $205,515
 $198,309
     Collaborative licensing and milestone revenue26
 1,357
 361
 3,069
     Royalty revenue358
 879
 1,676
 2,091
          Total revenues67,335
 68,355
 207,552
 203,469
Operating expenses: 
  
  
  
     Cost of goods sold18,228
 43,152
 66,621
 86,483
     Research and development11,775
 9,754
 47,262
 28,609
     Selling, general and administrative40,644
 36,314
 122,316
 117,940
     Product discontinuation260
 —
 4,754
 —
          Total operating expenses70,907
 89,220
 240,953
 233,032
Loss from operations(3,572) (20,865) (33,401) (29,563)
Other (expense) income: 
  
  
  
     Interest income1,068
 346
 2,805
 923
     Interest expense(5,127) (1,601) (12,942) (5,203)
     Loss on early extinguishment of debt—
 —
 (3,732) —
     Other, net79
 (8) 169
 (8)
          Total other expense, net(3,980) (1,263) (13,700) (4,288)
Loss before income taxes(7,552) (22,128) (47,101) (33,851)
     Income tax expense(45) (36) (105) (126)
Net loss$(7,597) $(22,164) $(47,206) $(33,977)
        
Net loss per share: 
  
  
  
     Basic and diluted net loss per common share$(0.19) $(0.59) $(1.19) $(0.91)
Weighted average common shares outstanding: 
  
    
     Basic and diluted40,463
 37,312
 39,540
 37,171
PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Net income (loss)$10,858 $(693)$17,085 $26,011 
Other comprehensive income (loss):  
Net unrealized gain (loss) on investments, net of tax146 (163)362 (1,056)
Foreign currency translation adjustments17 98 8 219 
Total other comprehensive income (loss)163 (65)370 (837)
Comprehensive income (loss)$11,021 $(758)$17,455 $25,174 
 
See accompanying condensed notes to condensed consolidated financial statements.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 6
PACIRA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)
(Unaudited)
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Net loss$(7,597) $(22,164) $(47,206) $(33,977)
Other comprehensive income (loss):

  
  
  
Net unrealized gain (loss) on investments(3) (166) (37) 24
Total other comprehensive income (loss)(3) (166) (37) 24
Comprehensive loss$(7,600) $(22,330) $(47,243) $(33,953)
PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(In thousands)
(Unaudited)
 Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Accumulated Other Comprehensive Loss 
 SharesAmountTotal
Balance at June 30, 202346,409 $46 $950,626 $(142,524)$(173)$807,975 
Exercise of stock options1 — 25 — — 25 
Vested restricted stock units17 — — — — — 
Stock-based compensation— — 12,530 — — 12,530 
Other comprehensive income (Note 10)— — — — 163 163 
Net income— — — 10,858 — 10,858 
Balance at September 30, 202346,427 $46 $963,181 $(131,666)$(10)$831,551 

Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Accumulated Other Comprehensive Loss
SharesAmountTotal
Balance at June 30, 202245,802 $46 $895,151 $(137,956)$(605)$756,636 
Exercise of stock options37 — 1,563 — — 1,563 
Vested restricted stock units25 — — — — — 
Stock-based compensation— — 12,682 — — 12,682 
Other comprehensive loss (Note 10)— — — — (65)(65)
Net loss— — — (693)— (693)
Balance at September 30, 202245,864 $46 $909,396 $(138,649)$(670)$770,123 

See accompanying condensed notes to condensed consolidated financial statements.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 7
PACIRA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

(In thousands)
(Unaudited)
 Common Stock Additional
Paid-In
Capital		 Accumulated
Deficit		 Accumulated
Other
Comprehensive
Loss		  
 Shares Amount    Total
Balance at December 31, 201637,481
 $37
 $565,207
 $(346,238) $(30) $218,976
Cumulative effect adjustment of the adoption
of Accounting Standards Update 2016-09
(Note 2)		—
 —
 287
 (287) —
 —
Exercise of stock options459
 1
 5,303
 —
 —
 5,304
Vested restricted stock units99
 —
 —
 —
 —
 —
Shares issued under employee stock
purchase plan		36
 —
 1,056
 —
 —
 1,056
Stock-based compensation—
 —
 23,407
 —
 —
 23,407
Issuance of common stock upon
conversion of 2019 convertible senior notes		2,490
 3
 120,957
 —
 —
 120,960
Retirement of equity component
of 2019 convertible senior notes		—
 —
 (126,328) —
 —
 (126,328)
Equity component of 2022 convertible
senior notes issued, net		—
 —
 68,668
 —
 —
 68,668
Net unrealized loss on investments—
 —
 —
 —
 (37) (37)
Net loss—
 —
 —
 (47,206) —
 (47,206)
Balance at September 30, 201740,565
 $41
 $658,557
 $(393,731) $(67) $264,800
PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands)
(Unaudited)
 Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Accumulated Other Comprehensive Loss 
 SharesAmountTotal
Balance at December 31, 202245,928 $46 $924,095 $(148,751)$(380)$775,010 
Exercise of stock options63 — 1,939 — — 1,939 
Vested restricted stock units386 — — — — — 
Common stock issued under employee stock
purchase plan		50 — 1,672 — — 1,672 
Stock-based compensation— — 35,475 — — 35,475 
Other comprehensive income (Note 10)— — — — 370 370 
Net income— — — 17,085 — 17,085 
Balance at September 30, 202346,427 $46 $963,181 $(131,666)$(10)$831,551 
Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Accumulated Other Comprehensive (Loss) Income
SharesAmountTotal
Balance at December 31, 202144,734 $45 $942,091 $(211,895)$167 $730,408 
Reclassification of the equity component of convertible senior notes to liabilities upon adoption of Accounting Standards Update 2020-06 (1)
— — (96,468)47,235 — (49,233)
Exercise of stock options667 1 23,497 — — 23,498 
Vested restricted stock units324 — — — — — 
Common stock issued under employee stock
purchase plan		37 — 1,821 — — 1,821 
Stock-based compensation— — 35,415 — — 35,415 
Issuance of common stock upon conversion of 2022 convertible senior notes102 — 3,040 — — 3,040 
Other comprehensive loss (Note 10)— — — — (837)(837)
Net income— — — 26,011 — 26,011 
Balance at September 30, 202245,864 $46 $909,396 $(138,649)$(670)$770,123 
(1) Effective January 1, 2022, the Company adopted Accounting Standards Update 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) on a modified retrospective method of transition. As a result, the Company no longer separately presents in equity an embedded conversion feature for its convertible debt.

See accompanying condensed notes to condensed consolidated financial statements.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 8
PACIRA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 (In thousands)
(Unaudited)
 Nine Months Ended 
 September 30,
 2017 2016
   (Note 2)
Operating activities: 
  
Net loss$(47,206) $(33,977)
Adjustments to reconcile net loss to net cash provided by operating activities: 
  
     Depreciation of fixed assets and amortization of intangibles10,174
 9,659
     Amortization of unfavorable lease obligation and debt issuance costs884
 359
     Amortization of debt discount7,365
 3,066
     Loss on early extinguishment of debt3,732
 —
     Loss on disposal of fixed assets2,139
 —
     Stock-based compensation23,407
 23,516
Changes in operating assets and liabilities: 
  
     Accounts receivable, net2,916
 (910)
     Inventories, net(7,834) 24,169
     Prepaid expenses and other assets3,734
 (4,202)
     Accounts payable, accrued expenses and income taxes payable4,542
 (5,691)
     Other liabilities(2,999) 115
          Net cash provided by operating activities854
 16,104
Investing activities: 
  
     Purchases of fixed assets(14,190) (19,827)
     Purchases of investments(436,017) (158,390)
     Sales of investments223,962
 137,170
     Payment of contingent consideration(6,219) (13,790)
          Net cash used in investing activities(232,464) (54,837)
Financing activities: 
  
     Proceeds from exercise of stock options5,304
 5,200
     Proceeds from shares issued under employee stock purchase plan1,056
 995
     Proceeds from 2022 convertible senior notes345,000
 —
     Repayment of 2019 convertible senior notes(118,193) (4)
     Payment of debt issuance and financing costs(11,000) —
     Costs for conversion of convertible senior notes(285) —
          Net cash provided by financing activities221,882
 6,191
Net decrease in cash and cash equivalents(9,728) (32,542)
Cash and cash equivalents, beginning of period35,944
 56,984
Cash and cash equivalents, end of period$26,216
 $24,442
Supplemental cash flow information: 
  
     Cash paid for interest$6,896
 $3,852
     Cash paid for income taxes, net of refunds$133
 $253
Non-cash investing and financing activities:   
     Issuance of common stock from conversion of 2019 convertible senior notes$120,960
 $—
     Retirement of equity component of 2019 convertible senior notes$(126,328) $—
     Net increase (decrease) in accrued fixed assets$3,054
 $(185)
PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
 20232022
Operating activities:  
Net income$17,085 $26,011 
Adjustments to reconcile net income to net cash provided by operating activities:  
Deferred taxes9,014 2,895 
Depreciation of fixed assets and amortization of intangible assets57,089 61,095 
Amortization of debt issuance costs2,311 2,957 
Amortization of debt discount728 2,107 
Loss on early extinguishment of debt16,926 — 
Stock-based compensation35,475 35,415 
Changes in contingent consideration(3,847)(23,394)
Impairment of investment— 10,000 
Other losses2,415 377 
Changes in operating assets and liabilities:  
Accounts receivable, net1,440 2,847 
Inventories, net(457)1,751 
Prepaid expenses and other assets(6,986)(568)
Accounts payable1,988 4,681 
Accrued expenses and income taxes payable(26,156)(23,560)
Other liabilities40 623 
Net cash provided by operating activities107,065 103,237 
Investing activities:  
Purchases of fixed assets(13,363)(24,584)
Purchases of available-for-sale investments(111,682)(319,426)
Sales of available-for-sale investments200,970 152,636 
Payment of contingent consideration— (32,000)
Purchases of equity and debt investments(6,758)(13,000)
Net cash provided by (used in) investing activities69,167 (236,374)
Financing activities:  
Proceeds from exercises of stock options1,939 23,482 
Proceeds from shares issued under employee stock purchase plan1,672 1,820 
Proceeds from Term loan A facility149,550 —
Repayment of 2022 convertible senior notes— (156,960)
Repayment of 2024 convertible senior notes— (192,609)
Repayment of Term loan B facility(296,875)(18,750)
Repayment of Term loan A facility(30,625)— 
Debt extinguishment costs(5,750)— 
Payment of debt issuance and financing costs(1,163)— 
Net cash used in financing activities(181,252)(343,017)
Net decrease in cash and cash equivalents(5,020)(476,154)
Cash and cash equivalents, beginning of period104,139 585,578 
Cash and cash equivalents, end of period$99,119 $109,424 
Supplemental cash flow information: 
Cash paid for interest$24,931 $23,620 
Cash paid for income taxes, net of refunds$2,072 $4,216 
Non-cash investing and financing activities:  
Issuance of common stock from conversion of 2022 convertible senior notes$— $3,040 
Fixed assets included in accounts payable and accrued liabilities$1,470 $5,486 
See accompanying condensed notes to condensed consolidated financial statements.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 9
PACIRA PHARMACEUTICALS,BIOSCIENCES, INC.
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1—DESCRIPTION OF BUSINESS
Pacira Pharmaceuticals,BioSciences, Inc. and its subsidiaries (collectively, the “Company” or “Pacira”) is a specialty pharmaceutical company focused on the development, manufacture and commercialization of pharmaceutical products, based onindustry leader in its proprietary DepoFoam® extended release drug delivery technology, for use primarily in hospitals and ambulatory surgery centers. Pacira is committedcommitment to driving innovation in postsurgicalnon-opioid pain management with opioid-sparing strategies.

and providing non-opioid pain management options to as many patients as possible to redefine the role of opioids as rescue therapy only. The Company is also developing innovative interventions to address debilitating conditions involving the sympathetic nervous system, such as cardiac electrical storm, chronic pain and spasticity. The Company’s lead product,long-acting, local analgesic, EXPAREL® (bupivacaine liposome injectable suspension), which consists of bupivacaine encapsulatedwas commercially launched in DepoFoam, was approved by the United States, Food and Drug Administration, or FDA, on October 28, 2011 and launched commerciallyU.S., in April 2012. DepoFoam2012 and approved in select European countries and the United Kingdom, or U.K., in November 2021. EXPAREL utilizes the Company’s proprietary multivesicular liposome (pMVL) drug delivery technology that encapsulates drugs without altering their molecular structure, and releases them over a desired period of time. In November 2021, the Company acquired Flexion Therapeutics, Inc., or Flexion (the “Flexion Acquisition”), and added ZILRETTA® (triamcinolone acetonide extended-release injectable suspension) to its product portfolio. ZILRETTA is also the basisfirst and only extended-release, intra-articular (meaning in the joint) injection indicated for the Company’s other FDA-approved product, DepoCyt(e), whichmanagement of osteoarthritis, or OA, knee pain. In April 2019, the Company had manufactured foradded iovera°® to its commercial partners.offering with the acquisition of MyoScience, Inc., or MyoScience (the “MyoScience Acquisition”). The Company also sells its bupivacaine liposome injectable suspension productiovera° system is a handheld cryoanalgesia device used to deliver a commercial partnerprecise, controlled application of cold temperature to serve animal health indications.targeted nerves.
Pacira is subject to risks common to companies in similar industries and stages, of development, including, but not limited to, competition from larger companies, reliance on revenue from one product,three products, reliance on a singlelimited number of wholesalers, reliance on a limited number of manufacturing site,sites, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology, and compliance with government regulations.regulations and risks related to cybersecurity.
The Company is managed and operated as a single business focused on the development, manufacture, marketing, distribution and sale of non-opioid pain management and regenerative health solutions. The Company is managed by a single management team, and, consistent with its organizational structure, the Chief Executive Officer—who is the Company’s chief operating decision maker—manages and allocates resources at a consolidated level. Accordingly, the Company views its business as one reportable operating segment to evaluate its performance, allocate resources, set operational targets and forecast its future financial results.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
These interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), for interim reporting. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
2022 (the “2022 Annual Report”).
The condensed consolidated financial statements at September 30, 2017,2023, and for the three and nine monthnine-month periods ended September 30, 20172023 and 2016,2022, are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information set forth herein in accordance with GAAP. The condensed consolidated balance sheet at December 31, 20162022 is derived from the audited consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K forReport. The condensed consolidated financial statements as presented reflect certain reclassifications from previously issued financial statements to conform to the current year ended December 31, 2016.presentation. The accounts of wholly-owned subsidiaries are included in the condensed consolidated financial statements. Intercompany accounts and transactions have been eliminated in consolidation.
The results of operations for thethese interim periods are not necessarily indicative of results that may be expected for any other interim periods or for the full year.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 10
Concentration of Major Customers
    
The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers (including AmerisourceBergen Health Corporation, Cardinal Health, Inc. and McKesson Drug Company), but shipments of the product are sent directly to individual accounts, such as hospitals, ambulatory surgery centers and individual doctors. The Company also sells EXPAREL directly to ambulatory surgery centers and physicians. The Company sells ZILRETTA primarily to specialty distributors and specialty pharmacies, who then subsequently resell ZILRETTA to physicians, clinics and certain medical centers or hospitals. The Company also contracts directly with healthcare providers and intermediaries such as Group Purchasing Organizations, or GPOs. The Company sells its bupivacaine liposome injectable suspension for veterinary use to a third-party licensee in the U.S. and sells iovera° directly to end users.
The table below includes the percentage of sales processedrevenues comprised by the Company’s three largest wholesalers in each period presented:

Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
 Largest wholesaler33%31%33%31%
 Second largest wholesaler24%22%24%23%
 Third largest wholesaler19%22%20%22%
     Total76%75%77%76%
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
 Largest wholesaler34% 31% 35% 32%
 Second largest wholesaler30% 27% 29% 27%
 Third largest wholesaler26% 27% 26% 27%

90% 85% 90% 86%
Recent Accounting PronouncementsNOTE 3—REVENUE

Revenue from Contracts with Customers
Recently AdoptedThe Company’s net product sales consist of (i) EXPAREL in the U.S., the European Union, or E.U., and the U.K.; (ii) ZILRETTA in the U.S.; (iii) iovera° in the U.S., Canada and the E.U. and (iv) sales of its bupivacaine liposome injectable suspension for veterinary use. Royalty revenues are related to a collaborative licensing agreement from the sale of its bupivacaine liposome injectable suspension for veterinary use. The Company does not consider revenue from sources other than sales of EXPAREL and ZILRETTA to be material sources of its consolidated revenue. As such, the following disclosure is limited to revenue associated with net product sales of EXPAREL and ZILRETTA.

Net Product Sales
In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update includes multiple provisions intended to simplify various aspectsThe Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers based on orders of the accounting for share-based payment transactions including accounting for excess tax benefitsproduct placed by end-users, namely hospitals, ambulatory surgery centers and tax deficiencies, classificationhealthcare provider offices. EXPAREL is delivered directly to the end-user without the wholesaler ever taking physical possession of excess tax benefitsthe product. The Company primarily sells ZILRETTA to specialty distributors and tax deficienciesspecialty pharmacies, who then subsequently resell ZILRETTA to physicians, clinics and certain medical centers or hospitals. The Company also contracts directly with healthcare providers and intermediaries such as GPOs. Product revenue is recognized when control of the promised goods are transferred to the customers, in an amount that reflects the statement of cash flows and accounting for award forfeitures. The update also removesconsideration the requirement to delay recognition of an excess tax benefit until it reduces current taxes payable, instead, it is requiredCompany expects to be entitled to in exchange for transferring those goods. EXPAREL and ZILRETTA revenues are recorded at the time the products are transferred to the customer.
Revenues from sales of products are recorded net of returns allowances, prompt payment discounts, service fees, government rebates, volume rebates and chargebacks. These reserves are based on estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of settlement, subject to normal valuation allowance considerations. This update became effectivethe sale, using the most likely amount method, except for returns, which is based on the Company beginning January 1, 2017.expected value method. The Company elected an accounting policy change to record forfeitures as they occur rather than estimating forfeitures during each period and recorded a charge of $0.3 million to retained earnings as of January 1, 2017 related to the reversal of cumulative forfeiture estimates. The adoption of this standard also resultedincludes these estimated amounts in the recognition of $29.3 million of previously unrecognized excess tax benefits in deferred tax assets, fully offset by a valuation allowance. The changes have been applied prospectively in accordance with the update and prior periods have not been adjusted. All tax-related cash flows resulting from stock-based compensation, including the excess tax benefits related to the settlement of stock-based awards, will be classified as cash flows from operating activities in the Company’s consolidated statements of cash flows.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The standard requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the previous guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures, one of which is net realizable value). The standard became effective for the Company prospectively beginning January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on the Company’s consolidated financial statements.

Not Adopted as of September 30, 2017

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires that an entity recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to its customers. In order to achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performanceextent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved.
Chargebacks for fees and discounts to qualified government healthcare providers represent the estimated obligations resulting from contractual commitments to sell products to qualified Department of Veteran Affairs hospitals and 340B entities at prices lower than the list prices charged to other customers. The 340B Drug Discount Program is a U.S. federal government program that requires participating drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at reduced prices. Customers charge the Company for the difference between the product payment and the statutory selling price to the qualified entity. Reserves are established in the contractsame period that the related revenue is recognized, resulting in a reduction of product revenue and (5) recognize revenue when (or as)trade receivables, net. Chargeback amounts are generally determined at the entity satisfies a performance obligation. During the fiscal third quartertime of 2015, the FASB approved a one year deferralsale to the effective date to be adoptedqualified government healthcare provider by all public companies for all annual periodscustomers, and interim reporting periods beginning after December 15, 2017. During 2016, the FASB issued additional guidance and clarification relating to identifying performance obligations, licensing, principal versus agent considerations, assessing collectability, presentation of sales taxes, noncash consideration and contract modifications and completed contracts at transition. These updates will replace existing revenue recognition guidance under GAAP when it becomes effective for the Company beginning January 1, 2018,generally issues credits for such
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 11
amounts within weeks of the customer’s notification to the Company of the sale. Reserves for chargebacks consist of credits that the Company expects to issue for units that the Company expects will be sold to qualified healthcare providers, and permits two methodschargebacks that customers have claimed, but for which the Company has not yet issued a credit.
The calculation for some of adoption: the full retrospective method, whichthese items requires the standardmanagement to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earningsmake estimates based on sales data, historical return data, contracts, statutory requirements and other related information that may become known in the period of adoption. While the Company is continuing to evaluate the impactfuture. The adequacy of these updatesprovisions is reviewed on its consolidated financial statements, it does not expect thata quarterly basis.
Accounts Receivable
The majority of accounts receivable arise from product sales and represent amounts due from wholesalers, hospitals, ambulatory surgery centers, specialty distributors, specialty pharmacies and individual physicians. Payment terms generally range from zero to four months from the implementationdate of ASU 2014-09the transaction, and the subsequently issued related guidance will haveaccordingly, there is no significant financing component.
Performance Obligations
A performance obligation is a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 becomes effective for the Company beginning January 1,

2018. Early adoption is not permitted except for certain provisions. The Company currently does not expect that the pending adoption of ASU 2016-01 will havepromise in a material effect on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842). This update requires lesseescontract to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. The lease liability will be equaltransfer a distinct good or service to the present valuecustomer and is the unit of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment for items such as initial direct costs. For income statement purposes, the new standard retains a dual model similar toaccount in Accounting Standards Codification, or ASC, 840, requiring leases606. A contract’s transaction price is allocated to be classifiedeach distinct performance obligation and recognized as either operatingrevenue when, or financing. For lessees, operating leases will resultas, the performance obligation is satisfied.
At contract inception, the Company assesses the goods promised in straight-line expense (similarits contracts with customers and identifies a performance obligation for each promise to current accountingtransfer to the customer a good that is distinct. When identifying individual performance obligations, the Company considers all goods promised in the contract regardless of whether explicitly stated in the customer contract or implied by lessees for operating leases under ASC 840) while financing leases will resultcustomary business practices. The Company’s contracts with customers require it to transfer an individual distinct product, which represents a single performance obligation. The Company’s performance obligation with respect to its product sales is satisfied at a point in a front-loaded expense pattern (similartime, which transfers control upon delivery of EXPAREL and ZILRETTA to current accounting by lessees for capital leases under ASC 840). This update also introduces new disclosure requirements for leasing arrangements. The standard is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted.its customers. The Company is currently evaluatingconsiders control to have transferred upon delivery because the impactcustomer has legal title to the asset, physical possession of ASU 2016-02 on its consolidated financial statements. Referthe asset has been transferred, the customer has significant risks and rewards of ownership of the asset and the Company has a present right to Note 12, Commitments and Contingencies, for further discussion on the Company’s leases.payment at that time.

Disaggregated Revenue
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. This update also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. This ASU is effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies existing guidance on how companies present and classify certain cash receipts and cash paymentsfollowing table represents disaggregated net product sales in the statement of cash flows by addressing specific cash flow issues in an effort to reduce diversity in practice, including guidance on debt prepayment or extinguishment costs and contingent consideration payments made after a business combination. This update is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact of ASU 2016-15 on its consolidated financial statements.presented as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net product sales:
   EXPAREL$128,667 $132,642 $394,202 $398,854 
   ZILRETTA28,798 26,494 82,393 77,546 
   iovera°5,260 4,467 13,645 10,694 
   Bupivacaine liposome injectable suspension858 2,957 2,241 5,469 
      Total net product sales$163,583 $166,560 $492,481 $492,563 

Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the consolidated financial statements of the Company.

NOTE 3—4—INVENTORIES
The components of inventories, net are as follows (in thousands):
September 30,December 31,
20232022
Raw materials$49,196 $39,810 
Work-in-process23,765 28,853 
Finished goods23,559 27,400 
     Total$96,520 $96,063 
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 12
 September 30, December 31,
 2017 2016
Raw materials$14,113
 $11,742
Work-in-process9,013
 11,621
Finished goods15,986
 7,915
     Total$39,112
 $31,278



NOTE 4—5—FIXED ASSETS

Fixed assets, net, summarized by major category, consist of the following (in thousands):
September 30,December 31,
September 30, December 31,20232022
2017 2016
Machinery and laboratory equipment$35,496
 $34,309
Machinery and equipmentMachinery and equipment$120,481 $118,684 
Leasehold improvements34,723
 33,787
Leasehold improvements61,508 61,302 
Computer equipment and software6,985
 5,623
Computer equipment and software16,242 15,360 
Office furniture and equipment1,603
 1,606
Office furniture and equipment2,543 2,420 
Construction in progress72,690
 63,201
Construction in progress106,383 103,226 
Total151,497
 138,526
 Total307,157 300,992 
Less: accumulated depreciation(45,550) (37,510)Less: accumulated depreciation(131,374)(117,480)
Fixed assets, net$105,947
 $101,016
 Fixed assets, net$175,783 $183,512 
For the three months ended September 30, 20172023 and 2016,2022, depreciation expense was $3.4$4.1 million and $3.3$5.8 million, respectively. For the three months ended September 30, 20172023 and 2016,2022, there was $0.7 million and $1.1 million of capitalized interest on the construction of manufacturing sites, was $0.3 million and $0.5 million, respectively.

For the nine months ended September 30, 20172023 and 2016,2022, depreciation expense was $10.2$14.1 million and $9.6$18.0 million, respectively. For the nine months ended September 30, 20172023 and 2016,2022, there was $2.8 million and $2.9 million of capitalized interest on the construction of manufacturing sites, was $0.7 million and $1.2 million, respectively.

At September 30, 20172023 and December 31, 2016,2022, total fixed assets, net includes leasehold improvements and manufacturing process equipment and leasehold improvements located in EnglandEurope in the amount of $57.2$38.3 million and $33.7$44.7 million, respectively.

As of September 30, 2023 and December 31, 2022, the Company had asset retirement obligations of $4.0 million and $3.3 million, respectively, included in accrued expenses and other liabilities on its condensed consolidated balance sheets, for costs associated with returning leased spaces to their original condition upon the termination of certain of its lease agreements.
NOTE 5—GOODWILL6—LEASES

The Company leases all of its facilities, including its EXPAREL and iovera° handpiece manufacturing facility at its Science Center Campus in San Diego, California. The Company also has two embedded leases with Thermo Fisher Scientific Pharma Services for the use of their manufacturing facility in Swindon, England for the production of EXPAREL and ZILRETTA. A portion of the associated monthly base fees has been allocated to the lease components based on a relative fair value basis.
In March 2007,Since July 2022 and February 2023, the Company acquiredhas been recognizing sublease income for laboratory space leased in Woburn, Massachusetts and a portion of office space leased in Burlington, Massachusetts, respectively, from leases that were assumed as part of the Flexion Acquisition.
During the third quarter of 2023, the Company partially exited its Burlington, Massachusetts office space lease that had been assumed as part of the Flexion Acquisition through a one-time termination fee of $0.8 million, which released its obligation of $1.6 million in future cash payments for the respective proportion of square footage exited. The partial lease termination resulted in a nominal gain which was recorded within contingent consideration charges (gains), restructuring charges and other in the condensed consolidated statements of operations.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 13
The operating lease costs for the facilities include lease and non-lease components, such as common area maintenance and other common operating expenses, along with executory costs such as insurance and real estate taxes. Total operating lease expense, net is as follows (in thousands):
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
Fixed lease costs$3,559 $3,440 $10,818 $10,509 
Variable lease costs499 540 1,444 1,520 
Sublease income(167)(169)(489)(169)
Total$3,891 $3,811 $11,773 $11,860 
Supplemental cash flow information related to operating leases is as follows (in thousands):
Nine Months Ended
September 30,
20232022
Cash paid for operating lease liabilities, net of lease incentives$11,055 $9,922 
The Company has elected to net the amortization of the right-of-use asset and the reduction of the lease liability principal in other liabilities in the condensed consolidated statements of cash flows.
The Company has measured its operating lease liabilities at an estimated discount rate at which it could borrow on a collateralized basis over the remaining term for each operating lease. The weighted average remaining lease terms and the weighted average discount rates are summarized as follows:
September 30,
20232022
Weighted average remaining lease term6.26 years7.11 years
Weighted average discount rate7.03 %6.95 %
Maturities of the Company’s operating lease liabilities are as follows (in thousands):
YearAggregate Minimum
Payments Due
2023 (remaining three months)$3,249 
202413,038 
202512,775 
202612,814 
202712,587 
Thereafter27,351 
   Total future lease payments81,814 
   Less: imputed interest(16,100)
   Total operating lease liabilities$65,714 


Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 14
NOTE 7—GOODWILL AND INTANGIBLE ASSETS
Goodwill
The Company’s goodwill results from the acquisition of Pacira Pharmaceuticals, Inc. (the Company’s California operating subsidiary) from SkyePharma Holding, Inc., or Skyepharma, its California operating(now a subsidiary referredof Vectura Group plc) in 2007 (the “Skyepharma Acquisition”), the MyoScience Acquisition in 2019 and the Flexion Acquisition in 2021. The balance at each of September 30, 2023 and December 31, 2022 was $163.2 million.
The Skyepharma Acquisition occurred in March 2007, prior to herein as the Acquisition. The Company’s goodwill arose in April 2012 from arequirements to record contingent milestone payment to Skyepharma inconsideration at fair value under ASC 805-30. In connection with the Acquisition. The Acquisition was accounted for under Statement of Financial Accounting Standards 141, Accounting for Business Combinations, which was the effective GAAP standard at the Acquisition date. In connection with theSkyepharma Acquisition, the Company agreed to certain earn-out payments based on a percentage of net sales of DepoBupivacaine products collected, including EXPAREL, and certain other yet-to-be-developed products, as well as milestone payments for DepoBupivacaine products, including EXPAREL, as follows:
(i)$10.0 million upon the first commercial sale in the United States (met April 2012);
(ii)$4.0 million upon the first commercial sale in a major E.U. country (United Kingdom, France, Germany, Italy and Spain);
(iii)$8.0EXPAREL. The final Skyepharma milestone payment of $32.0 million when annual net sales collected reach $100.0 million (met September 2014);
(iv)$8.0 million when annual net sales collected reach $250.0 million (met June 2016); and
(v)$32.0 million when annual net sales collected reach $500.0 million.

The first milestone was met in April 2012, resulting in a $10.0 million payment to Skyepharma. The Company recorded this payment net of a $2.0 million contingent consideration liability recognized at the time of the Acquisition, resulting in $8.0 million recorded as goodwill. In September 2014, the Company recorded an $8.0 million milestone in connection with achieving $100.0 million of annual EXPAREL net sales collected reached $500.0 million was achieved in the fourth quarter of 2021 and paid during the first quarter of 2022.
Intangible Assets
Intangible assets, net, consists of the in-process research and development, or IPR&D, and developed technology from the Flexion Acquisition and developed technology and customer relationships from the MyoScience Acquisition and are summarized as follows (dollar amounts in June 2016,thousands):
September 30, 2023Gross Carrying ValueAccumulated AmortizationIntangible Assets, NetWeighted-Average Useful Lives
Developed technologies$590,000 $(127,336)$462,664 10 years, 5 months
Customer relationships90 (40)50 10 years
     Total finite-lived intangible assets, net590,090 (127,376)462,714 
Acquired IPR&D34,866 — 34,866 
     Total intangible assets, net$624,956 $(127,376)$497,580 
December 31, 2022Gross Carrying ValueAccumulated AmortizationIntangible Assets, NetWeighted-Average Useful Lives
Developed technologies$590,000 $(84,376)$505,624 10 years, 5 months
Customer relationships90 (34)56 10 years
     Total finite-lived intangible assets, net590,090 (84,410)505,680 
Acquired IPR&D34,866 — 34,866 
     Total intangible assets, net$624,956 $(84,410)$540,546 
Amortization expense on intangible assets was $14.3 million for both the Company recorded another $8.0 million milestone for achieving $250.0 million of annual EXPAREL net sales collected. For purposes of meeting future potential milestone payments, annual net sales are measured on a rolling quarterly basis. Cumulatively throughthree months ended September 30, 2017,2023 and 2022 and $43.0 million for both the Company has recorded an additional $29.0nine months ended September 30, 2023 and 2022.
Assuming no changes in the gross carrying amount of these intangible assets, the future estimated amortization expense on the finite-lived intangible assets will be $14.3 million as goodwill for earn-out payments that are based on a percentagethe remaining three months of net sales2023, $57.3 million each year from 2024 to 2030, $37.4 million in 2031, $7.9 million in 2032 and $2.2 million in 2033.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 15


NOTE 8—DEBT
The change in the carrying value of goodwillthe Company’s outstanding debt is summarized as follows (in thousands):
September 30,December 31,
20232022
Term loan A facility maturing March 2028$117,965 $— 
Term loan B facility maturing December 2026 (1)
— 284,704 
0.750% Convertible senior notes due August 2025397,976 396,126 
3.375% Convertible senior notes due May 20248,641 8,641 
     Total$524,582 $689,471 
(1) The TLB Term Loan (as defined below) was refinanced on March 31, 2023 as discussed below.
2028 Term Loan A Facility
On March 31, 2023, the Company entered into a credit agreement (the “TLA Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders, to refinance the indebtedness outstanding under the Company’s TLB Credit Agreement (as defined and discussed below). The term loan issued under the TLA Credit Agreement (the “TLA Term Loan”) was issued at a 0.30% discount and provides for a single-advance term loan A facility in the principal amount of $150.0 million, which is secured by substantially all of the Company’s and any subsidiary guarantor’s assets. Subject to certain conditions, the Company may, at any time, on one or more occasion, add one or more new classes of term facilities and/or increase the principal amount of the loans of any existing class by requesting one or more incremental term facilities. The net proceeds of the TLA Term Loan were approximately $149.6 million after deducting an original issue discount of $0.4 million.

The total debt composition of the TLA Term Loan is as follows (in thousands):
September 30,
2023
Term loan A facility maturing March 2028$119,375 
Deferred financing costs(1,013)
Discount on debt(397)
     Total debt, net of debt discount and deferred financing costs$117,965 
The TLA Term Loan matures on March 31, 2028 and the TLA Credit Agreement requires quarterly repayments of principal in the amount of $2.8 million which commenced on June 30, 2023, increasing to $3.8 million commencing March 31, 2025, with a remaining balloon payment of approximately $85.3 million due at maturity. Due to voluntary principal prepayments of $27.8 million made during the three months ended September 30, 2023, the Company is not required to make further principal payments for the remainder of 2023 and 2024.
The TLA Credit Agreement requires the Company to, among other things, maintain (i) a Senior Secured Net Leverage Ratio (as defined in the TLA Credit Agreement), determined as of the last day of each fiscal quarter, of no greater than 3.00 to 1.00 and (ii) a Fixed Charge Coverage Ratio (as defined in the Credit Agreement), determined as of the last day of each fiscal quarter, of no less than 1.50 to 1.00. The TLA Credit Agreement also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. As of September 30, 2023, the Company was in compliance with all financial covenants under the TLA Credit Agreement.
The Company may elect to borrow either (i) alternate base rate borrowings or (ii) term benchmark borrowings or daily simple SOFR (as defined in the TLA Credit Agreement) borrowings. Each term loan borrowing that is an alternate base rate borrowing bears interest at a rate per annum equal to (i) the Alternate Base Rate (as defined in the TLA Credit Agreement), plus (ii) a spread based on the Company’s Senior Secured Net Leverage Ratio ranging from 2.00% to 2.75%. Each term loan borrowing that is a term benchmark borrowing or daily simple SOFR borrowing bears interest at a rate per annum equal to (i) the Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR (as each is defined in the Credit Agreement), plus (ii) a spread based on the Company’s Senior Secured Net Leverage Ratio ranging from 3.00% to 3.75%. During the nine months ended September 30, 2023, the Company made a scheduled principal payment of $2.8 million as well as $27.8 million of voluntary principal prepayments. As of September 30, 2023, borrowings under the TLA Term Loan consisted entirely of term benchmark borrowings at a rate of 8.47%.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 16
 Carrying Value
Balance at December 31, 2016$46,737
Percentage payments on collections of net sales of DepoBupivacaine products6,219
Balance at September 30, 2017$52,956
2026 Term Loan B Facility
In December 2021, the Company entered into a term loan credit agreement (the “TLB Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and the initial lender. The term loan issued under the Credit Agreement (the “TLB Term Loan”) was issued at a 3.00% discount and allowed for a single-advance term loan B facility in the principal amount of $375.0 million, which was secured by substantially all of the Company’s and each subsidiary guarantor’s assets. The net proceeds of the TLB Term Loan were approximately $363.8 million after deducting an original issue discount of $11.2 million.
On March 31, 2023, the Company used the $149.6 million of net borrowings under the TLA Credit Agreement and cash on hand to repay the indebtedness outstanding under the TLB Credit Agreement and concurrently terminated the TLB Credit Agreement. The Company incurred a prepayment fee of 2.00% of the outstanding principal balance of the TLB Term Loan in connection with the termination.
NOTE 6—DEBTThe total debt composition of the TLB Term Loan was as follows (in thousands):
September 30,December 31,
20232022
Term loan B facility maturing December 2026$— $296,875 
Deferred financing costs— (3,919)
Discount on debt— (8,252)
     Total debt, net of debt discount and deferred financing costs$— $284,704 

During the nine months ended September 30, 2023, the Company made a scheduled principal payment of $9.4 million and repaid the outstanding $287.5 million principal on the TLB Term Loan, which resulted in a $16.9 million loss on early extinguishment of debt.
Convertible Senior Notes Due 20222025

On March 13, 2017,In July 2020, the Company completed a private placement of $345.0$402.5 million in aggregate principal amount of 2.375%its 0.750% convertible senior notes due 2022,2025, or 20222025 Notes, and entered into an indenture agreement,with Computershare Corporate Trust, N.A. (formerly Wells Fargo Bank, N.A.), or 20222025 Indenture, with respect to the 20222025 Notes. The 20222025 Notes accrue interest at a fixed rate of 2.375%0.750% per year, payable semiannually in arrears on AprilFebruary 1st and OctoberAugust 1st of each year. The 20222025 Notes mature on AprilAugust 1, 2022.2025.

The total debt composition of the 20222025 Notes is as follows (in thousands):
 September 30, December 31,
 2017 2016
2.375% convertible senior notes due 2022$345,000
 $—
Deferred financing costs(7,880) —
Discount on debt(64,399) —
     Total debt, net of debt discount and deferred financing costs$272,721
 $—

September 30,December 31,
20232022
0.750% convertible senior notes due August 2025$402,500 $402,500 
Deferred financing costs(4,524)(6,374)
     Total debt, net of debt discount and deferred financing costs$397,976 $396,126 
The net proceeds from the issuance of the 20222025 Notes were $334.0approximately $390.0 million, after deducting commissions and the offering expenses paid by the Company. A portion of the net proceeds from the 20222025 Notes werewas used by the Company to repurchase the majority$185.0 million in aggregate principal amount of its then-outstanding 2.375% convertible senior notes due 20192022 in privately-negotiated transactions.

transactions for a total of $211.1 million of cash (including accrued interest).
Holders may convert the 20222025 Notes at any time prior to the close of business on the business day immediately preceding October 1, 2021,February 3, 2025, only underif certain circumstances are met, including if during the following circumstances:
(i) during anyprevious calendar quarter, commencing after the calendar quarter ended June 30, 2017 (and only during such calendar quarter), if the last reported salesales price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter iswas greater than 130% of the conversion price on eachthen applicable trading day;
(ii) during the five business-day period immediately after any five consecutive trading-day period (the ‘‘measurement period’’) in which the trading price (as defined in the 2022 Indenture) per $1,000 principal amount of the 2022 Notes for each trading day of the measurement period was less than 98% of the productat least 20 out of the last reported sale price30 consecutive trading days of the Company’s common stock andquarter. During the quarter ended September 30, 2023, the conditions for conversion rate on each such trading day;
(iii) upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of the Company’s assets; or
(iv) if the Company calls the 2022 Notes for redemption, until the close of business on the business day immediately preceding the redemption date.

were not met.
On or after October 1, 2021,February 3, 2025, until the close of business on the second scheduled trading day immediately preceding AprilAugust 1, 2022,2025, holders may convert their 20222025 Notes at any time.

Upon conversion, holders will receive the principal amount of their 20222025 Notes and any excess conversion value, calculated based on the per share volume-weighted average price for each of the 40 consecutive trading days during the observation period (as more fully described in the 20222025 Indenture). For both the principal and excess conversion value, holders may receive cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s option. The initial conversion rate for the 20222025 Notes is 14.949113.9324 shares of common stock per $1,000
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 17
principal amount, which is equivalent to an initial conversion price of $66.89$71.78 per share of the Company’s common stock. The

conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. The initial conversion price of the 20222025 Notes represents a premium of approximately 37.5%32.5% to the closing sale price of $48.65$54.17 per share of the Company’s common stock on the NASDAQNasdaq Global Select Market on MarchJuly 7, 2017,2020, the date that the Company priced the private offering of the 20222025 Notes.

As of September 30, 2017,2023, the 20222025 Notes had a market price of $973 perof $909 per $1,000 principal amount. In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the 20222025 Notes will be paid pursuant to the terms of the 20222025 Indenture. In the event that all of the 20222025 Notes are converted, the Company would be required to repay the $345.0$402.5 million in principal value and any conversion premium in any combination of cash and shares of its common stock (at the Company’s option).

Prior to AprilBeginning on August 1, 2020,2023 (but, in the Company may not redeemcase of a redemption of less than all of the 2022 Notes. On or after April 1, 2020,outstanding 2025 Notes, no later than the 40th scheduled trading day immediately before the maturity date), the Company may redeem for cash all or part of the 20222025 Notes if the last reported sale price (as defined in the 20222025 Indenture) of the Company’s common stock has been at least 130% of the conversion price then in effect for (i) each of at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior toending on, and including, the trading day immediately before the date on which the Company providessends the related notice of redemption.redemption and (ii) the trading day immediately before the date the Company sends such notice. The redemption price will equal the sum of (i) 100% of the principal amount of the 20222025 Notes being redeemed, plus (ii) accrued and unpaid interest, including additional interest, if any, to, but excluding, the redemption date. In addition, calling the 20222025 Notes for redemption will constitute a “make whole“make-whole fundamental change ”change” (as defined in the 20222025 Indenture) and will, in certain circumstances, increase the conversion rate applicable to the conversion of such notes if it is converted in connection with the redemption. No sinking fund is provided for the 20222025 Notes.
If the Company undergoes a fundamental change, as defined in the 2022 Indenture, subject to certain conditions, holders of the 2022 Notes may require the Company to repurchase for cash all or part of their 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if a ‘‘make-whole fundamental change’’ (as defined in the 2022 Indenture) occurs prior to April 1, 2022, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its notes in connection with the make-whole fundamental change.

The 2022 Notes are the Company’s general unsecured obligations that rank senior in right of payment to all of its indebtedness that is expressly subordinated in right of payment to the 2022 Notes, and equal in right of payment to the Company’s unsecured indebtedness. The 2022 Notes are also effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to any debt or other liabilities (including trade payables) of the Company’s subsidiaries.

While the 20222025 Notes are currently classified on the Company’s condensed consolidated balance sheet at September 30, 20172023 as long-term debt, the future convertibility and resulting balance sheet classification of this liability will beis monitored at each quarterly reporting date and will beis analyzed dependent upon market prices of the Company’s common stock during the prescribed measurement periods. In the event that the holders of the 20222025 Notes have the election to convert the 20222025 Notes at any time during the prescribed measurement period, the 20222025 Notes would then be considered a current obligation and classified as such.

Convertible Senior Notes Due 2024 Assumed from the Flexion Acquisition
Under Accounting Standards Codification 470-20, DebtPrior to the Flexion Acquisition, on May 2, 2017, Flexion issued an aggregate of $201.3 million principal amount of 3.375% convertible senior notes due 2024 (the “Flexion 2024 Notes”), pursuant to the indenture, dated as of May 2, 2017 (the “Original Flexion Indenture”), between Flexion and Computershare Corporate Trust, N.A. (formerly Wells Fargo Bank, N.A.), as trustee (the “Flexion Trustee”), as supplemented by the First Supplemental Indenture, dated as of November 19, 2021, between Flexion and the Flexion Trustee (the “First Supplemental Flexion Indenture” and, together with Conversionthe Original Flexion Indenture, the “Flexion Indenture”). The Flexion 2024 Notes mature on May 1, 2024, are unsecured and Other Options, an entity must separately accountaccrue interest at a rate of 3.375% per annum, payable semi-annually on May 1st and November 1st of each year. Upon the Flexion Acquisition, the principal was assumed and recorded at fair value by the Company.
As a result of the Flexion Acquisition, and in connection with a Fundamental Change Company Notice and Offer to Purchase (the “Notice”) to the holders of the Flexion 2024 Notes in accordance with the Flexion Indenture, holders of the Flexion 2024 Notes became entitled to certain Flexion Acquisition-related conversion and repurchase rights. On December 6, 2021, as a result of the Flexion Acquisition and in accordance with the Flexion Indenture, the Company offered to repurchase for cash all of the liability and equity components of convertible debt instruments (such as the 2022 Notes) that may be settled entirely or partiallyoutstanding Flexion 2024 Notes, at a repurchase price in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The liability component of the instrument is valued in a manner that reflects the market interest rate for a similar nonconvertible instrument at the date of issuance. The initial carrying value of the liability component of $274.1 million was calculated using a 7.45% assumed borrowing rate. The equity component of $70.9 million, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the 2022 Notes and is recorded in additional paid-in capital on the consolidated balance sheet at the issuance date. That equity component is treated as a discount on the liability component of the 2022 Notes, which is amortized over the five year term of the 2022 Notes using the effective interest rate method. The equity component is not re-measured as long as it continuesequal to meet the conditions for equity classification.
The Company allocated the total transaction costs of $11.0 million related to the issuance of the 2022 Notes to the liability and equity components of the 2022 Notes based on their relative values. Transaction costs attributable to the liability component are amortized to interest expense over the five-year term of the 2022 Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity.


The 2022 Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company. The 2022 Indenture contains customary events of default with respect to the 2022 Notes, including that upon certain events of default, 100% of the principal andamount of the Flexion 2024 Notes being repurchased, plus accrued and unpaid interest thereon to, but excluding, January 7, 2022, subject to the terms and conditions set forth therein. Any holder that did not exercise its repurchase right in accordance with the terms of the Notice retained the conversion rights associated with such holder’s Flexion 2024 Notes under the Flexion Indenture as well as the right to receive interest payments on the Flexion 2024 Notes.
On January 7, 2022, following the expiration of the offer to purchase, the Company accepted the $192.6 million aggregate principal amount of Flexion 2024 Notes will automatically become due and payable.that were validly tendered (and not validly withdrawn). No Flexion 2024 Notes were converted in connection with the Notice. At September 30, 2023, the remaining principal outstanding is $8.6 million.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 18
Convertible Senior Notes Due 20192022
On January 23, 2013,In March 2017, the Company completed a private placement of $120.0$345.0 million in aggregate principal amount of 3.25%2.375% convertible senior notes due 2019,2022, or 20192022 Notes, and entered into an indenture agreement, or 2019 Indenture, with respect to the 20192022 Notes. The 2019 Notes accrue interest at a fixed rate of 3.25% per year, payable semiannually in arrears on FebruaryOn April 1, and August 1 of each year. The 2019 Notes mature on February 1, 2019.

The total debt composition of the 2019 Notes is as follows (in thousands):
 September 30, December 31,
 2017 2016
3.25% convertible senior notes due 2019$338
 $118,531
Deferred financing costs(2) (1,276)
Discount on debt(16) (8,517)
     Total debt, net of debt discount and deferred financing costs$320
 $108,738

In March 2017, the Company used part of the net proceeds from the issuance of2022, the 2022 Notes discussed above to repurchase $117.7matured and the Company settled the remaining outstanding principal balance of $160.0 million aggregate principaland a conversion premium of the 2019 Notes in privately-negotiated transactions for an aggregate$4.8 million through a cash payment of approximately $118.2$156.9 million in cash and the issuance of an aggregate of approximately 2.5 million shares of common stock. The partial repurchase of the 2019 Notes resulted in a $3.7 million loss on early debt extinguishment. In May 2017, the Company repurchased $0.5 million aggregate principal of the 2019 Notes in a privately-negotiated transaction for an aggregate of approximately $0.5 million in cash and the issuance of an aggregate of approximately 10 thousand shares of common stock. At September 30, 2017, approximately $0.3 million of principal remains outstanding on the 2019 Notes.

On or after August 1, 2018, until the close of business on the second scheduled trading day immediately preceding February 1, 2019, holders may convert their 2019 Notes at any time. Upon conversion, holders will receive cash up to the principal amount of the 2019 Notes and, with respect to any excess conversion value, may receive cash,101,521 shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s option. The initial conversion rate for the 2019 Notes was 40.2945 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of $24.82 per share of the Company’s common stock. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

Holders may convert their 2019 Notes prior to August 1, 2018 only if certain circumstances are met, including if during the previous calendar quarter, the sales price of the Company’s common stock was greater than 130% of the conversion price then applicable for at least 20 out of the last 30 consecutive trading days of the quarter. During the quarter ended September 30, 2017, this condition for conversion was met. As a result, the 2019 Notes are classified as a current obligation and will be convertible until December 31, 2017. As of September 30, 2017, the 2019 Notes had a market price of $1,505 per $1,000 principal amount, compared to an estimated conversion value of $1,513 per $1,000 principal amount. In the event that the remaining 2019 Notes are converted, the Company would be required to repay the $0.3 million of principal value in cash and settle approximately $0.2 million of the conversion premium in cash, common stock or a combination of cash and shares of its common stock at the Company’s option as of September 30, 2017.

As of February 1, 2017, the Company may redeem for cash all or part of the 2019 Notes if the last reported sale price (as defined in the Indenture) of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period, ending within five trading days prior to the date on which the Company provides notice of redemption. If the 2019 Notes are called for redemption, the holder has the right to submit these notes for conversion at any time prior to the redemption date, and the Company will, in addition to paying the principal and conversion premium, pay a make-whole premium equal to the sum of the present value of the remaining scheduled payments of interest that would have been made on the Notes to be converted had such notes remained outstanding from the applicable conversion date to the maturity date.


increased additional paid-in capital by $3.0 million.
Interest Expense

The following table sets forth the total interest expense recognized in the periods presented (in(dollar amounts in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Contractual interest expense$3,471 $9,343 $16,670 $26,724 
Amortization of debt issuance costs683 903 2,311 2,956 
Amortization of debt discount25 695 728 2,107 
Capitalized interest and other (Note 5)(715)(1,085)(2,791)(2,852)
        Total$3,464 $9,856 $16,918 $28,935 
Effective interest rate on total debt2.98 %5.42 %3.96 %5.66 %
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Contractual interest expense$2,051
 $963
 $5,293
 $2,890
Amortization of debt issuance costs393
 153
 984
 459
Amortization of debt discount3,003
 1,022
 7,365
 3,066
Capitalized interest and other (Note 4)(320) (537) (700) (1,212)
        Total$5,127
 $1,601
 $12,942
 $5,203
        
Effective interest rate on convertible senior notes7.81% 7.22% 7.75% 7.22%

NOTE 7—9—FINANCIAL INSTRUMENTS
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 FASBFinancial Accounting Standards Board (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—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—2:Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

•Level 3—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 at September 30, 2017 are calculated utilizing market quotations from an over-the-counter trading market for these instrumentsnotes (Level 2). The carrying amount and fair value of the 2019 NotesCompany’s acquisition-related contingent consideration is reported at fair value on a recurring basis (Level 3). The carrying amounts of equity investments and 2022 Notes areconvertible notes receivable without readily determinable fair values have not been adjusted for either an impairment or upward or downward adjustments based on observable transactions.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 19
At September 30, 2023, the carrying values and fair values of the following financial assets and liabilities were as follows (in thousands):
Financial Liabilities Carried at Historical Cost Carrying Value Fair Value Measurements Using
September 30, 2017  Level 1 Level 2 Level 3
2.375% convertible senior notes due 2022 (1)
 $272,721
 $—
 $335,513
 $—
3.25% convertible senior notes due 2019 (2)
 $320
 $—
 $509
 $—

Carrying ValueFair Value Measurements Using
Level 1Level 2Level 3
Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis:
Financial Assets:
Equity investments$15,877 $— $— $15,877 
Convertible notes receivable$11,938 $— $— $11,938 
Financial Liabilities:
   Acquisition-related contingent consideration$24,275 $— $— $24,275 
Financial Liabilities Measured at Amortized Cost:
Term loan A facility due March 2028$117,965 $— $118,778 $— 
   0.750% convertible senior notes due 2025 (1)
$397,976 $— $365,772 $— 
   3.375% convertible senior notes due 2024$8,641 $— $8,641 $— 
(1) The closing price of the Company’s common stock as reported on the Nasdaq Global Select Market was $37.55$30.68 per share at September 30, 20172023 compared to a conversion price of $66.89$71.78 per share. Currently,At September 30, 2023, as the conversion price iswas above the stock price.price, the requirements for conversion have not been met. The maximum conversion premium that can becould have been due on the 20222025 Notes is approximately 5.25.6 million shares of the Company’s common stock, which assumes no increasesincrease in the conversion rate for certain corporate events.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
(2) Equity and Convertible Note Investments
The closingCompany holds strategic investments in clinical and preclinical stage privately-held biotechnology companies in the form of equity and convertible note investments. The following investments have no readily determinable fair value and are recorded at cost minus impairment, if any, plus or minus observable price changes of identical or similar investments (in thousands):
Equity InvestmentsConvertible Notes ReceivableTotal
Balance at December 31, 2021$14,127 $4,132 $18,259 
   Purchases11,750 1,250 13,000 
   Impairment(10,000)— (10,000)
   Foreign currency adjustments— (67)(67)
Balance at December 31, 202215,877 5,315 21,192 
   Purchases— 6,758 6,758 
   Foreign currency adjustments— (135)(135)
Balance at September 30, 2023$15,877 $11,938 $27,815 
Acquisition-Related Contingent Consideration
The Company has recognized contingent consideration related to the Flexion Acquisition and the MyoScience Acquisition in the amount of $24.3 million and $28.1 million as of September 30, 2023 and December 31, 2022, respectively. For more information, see Note 14, Contingent Consideration Charges (Gains), Restructuring Charges and Other.
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 probability-weighted discounted cash flow approach that is based on unobservable inputs and a Monte Carlo simulation. These inputs include, as applicable, estimated probabilities and the timing of achieving specified commercial and regulatory milestones, 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.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 20
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 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 months ended September 30, 2023, the Company recorded charges of $2.8 million primarily due to market volatility which affects the liability’s present value. During the nine months ended September 30, 2023, the Company recorded gains of $3.8 million due to adjustments to long-term forecasts which reduced the probability of meeting the sales-based contingent consideration milestones by December 31, 2030, the expiration date for achieving the milestones. The gains recognized during the nine months ended September 30, 2023 were partially offset by a decrease in the assumed discount rate that is utilized in calculating the liability’s present value, based on a significant improvement in the Company’s incremental borrowing rate resulting from the TLA Credit Agreement entered into in March 2023. During the three and nine months ended September 30, 2022, the Company recorded gains of $0.5 million and $13.8 million, respectively, primarily due to adjustments to near-term forecasts for the earnout period of the contingent consideration. These adjustments were recorded as contingent consideration charges (gains), restructuring charges and other in the condensed consolidated statements of operations. At September 30, 2023, the weighted average discount rate was 10.6% and the probability of payment for the achievement of the remaining regulatory milestone by the expiration date was 12.5%. As of September 30, 2023 and December 31, 2022, a contingent consideration liability related to the Flexion Acquisition was recognized in the amount of $24.3 million and $28.1 million, respectively.
In April 2019, the Company completed the MyoScience Acquisition pursuant to the terms of an Agreement and Plan of Merger, which provided for contingent milestone payments of up to an aggregate of $100.0 million upon the achievement of certain regulatory and commercial milestones. The Company’s obligation to make milestone payments is limited to those milestones achieved through December 31, 2023, and are to be paid within 60 days of the end of the fiscal quarter of achievement. As of September 30, 2023, the maximum potential remaining milestone payments to be paid are $43.0 million. At September 30, 2023, the probability of success for the regulatory milestone that has not yet been met was assessed as zero. As of September 30, 2023 and December 31, 2022, a contingent consideration liability related to the MyoScience Acquisition has been assessed as zero. During the three and nine months endedSeptember 30, 2022, the Company recognized contingent consideration gains of $0.5 million and $9.6 million, respectively, due to the reduced probability of meeting the contingent consideration milestones by December 31, 2023, the expiration date for achieving the milestones.
The following table includes the key assumptions used in the valuation of the Company’s common stock was $37.55 per share at September 30, 2017 compared to a conversion price of $24.82 per share which, if converted, would resultcontingent consideration:
Assumption
Flexion Ranges
Utilized as of
September 30, 2023
Discount rates10.1% to 11.1%
Probabilities of payment for regulatory milestones0% to 12.5%
Projected year of payment for regulatory and commercial milestones2030
The change in a conversion premium of less than ten thousand shares of the Company’s common stock or $0.2 million of cash. The maximum conversion premium that can be due on the 2019 Notescontingent consideration recorded at fair value using Level 3 measurements is approximately ten thousand shares of the Company’s common stock, which assumes no increases in the conversion rate for certain corporate events.as follows (in thousands):
Contingent Consideration
Fair Value
Balance at December 31, 2021$57,598 
Fair value adjustments and accretion(29,476)
Balance at December 31, 202228,122 
   Fair value adjustments and accretion(3,847)
Balance at September 30, 2023$24,275 

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 and government bonds with maturities greater than three months, but less than one year. Long-termNoncurrent investments consist of asset-backed securities collateralized by credit card receivablesfederal agency bonds and corporategovernment bonds with maturities greater than one year. The netyear but less than three years. Net unrealized gains and losses (excluding credit losses, if any) from the Company’s short-term and long-term investments are reported in other comprehensive income (loss). At September 30, 2017,2023 and December 31, 2022, all of the
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 21
Company’s short-term and long-termnoncurrent investments are classified as available for saleavailable-for-sale investments and are determined to be Level 2 instruments, 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. At September 30, 2017, the Company’s short-term and long-termtime of purchase, all available-for-sale investments were rated Ahad an “A” or better rating by Standard & Poor’s.
The following summarizes the Company’s short-term and noncurrent available-for-sale investments at September 30, 20172023 and December 31, 20162022 (in thousands):
September 30, 2023 InvestmentsCostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
(Level 2)
Current:
Asset-backed securities$15,473 $— $(32)$15,441 
Commercial paper65,781 1 (110)65,672 
U.S. federal agency bonds40,332 — (116)40,216 
U.S. government bonds14,797 — (57)14,740 
          Total$136,383 $1 $(315)$136,069 
December 31, 2022 InvestmentsDecember 31, 2022 InvestmentsCostGross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value
(Level 2)
Current:Current:
Asset-backed securitiesAsset-backed securities$6,836 $— $(3)$6,833 
Commercial paperCommercial paper134,423 23 (386)134,060 
U.S. federal agency bondsU.S. federal agency bonds41,971 — (337)41,634 
U.S. government bondsU.S. government bonds2,003 — (18)1,985 
SubtotalSubtotal$185,233 $23 $(744)$184,512 
Noncurrent:Noncurrent:
September 30, 2017 Debt Securities Cost Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair Value
(Level 2)
Short-term:        
Asset-backed securities $35,281
 $—
 $(4) $35,277
Commercial paper 34,350
 5
 (1) 34,354
Corporate bonds 198,222
 35
 (24) 198,233
Subtotal 267,853
 40
 (29) 267,864
Long-term:        
Asset-backed securities 24,192
 —
 (16) 24,176
Corporate bonds 56,693
 —
 (62) 56,631
U.S. federal agency bondsU.S. federal agency bonds22,783 2 (66)22,719 
U.S. government bondsU.S. government bonds14,499 — (9)14,490 
Subtotal 80,885
 —
 (78) 80,807
Subtotal37,282 2 (75)37,209 
Total $348,738
 $40
 $(107) $348,671
 Total$222,515 $25 $(819)$221,721 
December 31, 2016 Debt Securities Cost Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Fair Value
(Level 2)
Short-term:        
   Asset-backed securities $9,012
 $—
 $(2) $9,010
   Commercial paper 39,530
 8
 (15) 39,523
   Corporate bonds 88,141
 11
 (32) 88,120
      Total $136,683
 $19
 $(49) $136,653

Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets and liabilities acquired in a business combination and long-lived assets, which would be recognized at fair value if deemed to be impaired or if reclassified as assets held for sale. The fair value in these instances would be determined using Level 3 inputs. At September 30, 2017, the Company had2023, there were no financial instrumentsinvestments available for sale that were measured using Level 3 inputs.materially less than their amortized cost.

The Company elects to recognize its interest receivable separate from its available-for-sale investments. At September 30, 2023 and December 31, 2022, the interest receivable from its available-for-sale investments recognized in prepaid expenses and other current assets was $0.4 million and $0.8 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 investments,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 September 30, 2017,2023, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 33%37%, 31%18% and 28%, respectively.15%. At December 31, 2016,2022, three wholesalers each accounted for over 10% of the Company’s accounts receivable, at 36%34%, 29%19% and 25%, respectively (for18%. For additional information regarding the Company’s wholesalers, see Note 2, Summary of Significant Accounting Policies). RevenuesEXPAREL and ZILRETTA revenues are primarily derived from major wholesalers and pharmaceutical companiesspecialty 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 doubtfulcredit 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 the Company’s actualits write-off history. As of September 30, 20172023 and December 31, 2016, no2022, the Company did not deem any allowances for doubtful accounts were deemed necessary by the Companycredit losses on its accounts receivable.receivable necessary.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 22







NOTE 8—10—STOCKHOLDERS’ EQUITY
Accumulated Other Comprehensive Loss
The following tables illustrate the changes in the balances of the Company’s accumulated other comprehensive loss for the periods presented (in thousands):
Net Unrealized Gain (Loss) From Available-For-Sale InvestmentsUnrealized Foreign Currency TranslationAccumulated Other Comprehensive Loss
Balance at December 31, 2022$(523)$143 $(380)
   Net unrealized gain on investments, net of tax (1)
362 — 362 
   Foreign currency translation adjustments— 8 8 
Balance at September 30, 2023$(161)$151 $(10)
Net Unrealized (Loss) Gain From Available-For-Sale InvestmentsUnrealized Foreign Currency TranslationAccumulated Other Comprehensive (Loss) Income
Balance at December 31, 2021$139 $28 $167 
   Net unrealized loss on investments, net of tax (1)
(1,056)— (1,056)
   Foreign currency translation adjustments— 219 219 
Balance at September 30, 2022$(917)$247 $(670)
(1) Net of a $0.2 million tax expense and $0.3 million tax benefit for the nine months ended September 30, 2023 and 2022, respectively.
NOTE 11—STOCK PLANS
Stock Incentive Plans

The Company’s Amended and Restated 2011 Stock Incentive Plan, or 2011 Plan, was originally adopted by its board of directors and approved by its stockholders in June 2011 and was amended and restated in June 2014, June 2016, June 2019, June 2021 and June 2023. In June 2023, the Company’s stockholders approved the amendment and restatement which increased the number of shares of common stock authorized for issuance as equity awards under the 2011 Plan by 3,300,000 shares. The 2011 Plan allows the granting of incentive stock options, non-statutory stock options, restricted stock units and other stock-based awards.
Stock-Based Compensation
The Company recognized stock-based compensation expense in the periods presented as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Cost of goods sold$1,272 $1,599 $4,432 $4,429 
Research and development2,220 1,783 5,817 4,761 
Selling, general and administrative9,038 9,300 25,226 26,225 
        Total$12,530 $12,682 $35,475 $35,415 
Stock-based compensation from:
    Stock options$5,957 $6,711 $18,163 $20,038 
    Restricted stock units6,373 5,758 16,592 14,588 
    Employee stock purchase plan200 213 720 789 
        Total$12,530 $12,682 $35,475 $35,415 
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 23
  Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
  2017 2016 2017 2016
Cost of goods sold $1,502
 $1,627
 $4,272
 $4,786
Research and development 824
 690
 2,128
 2,598
Selling, general and administrative 6,337
 5,044
 17,007
 16,132
        Total $8,663
 $7,361
 $23,407
 $23,516
         
Stock-based compensation from:        
    Stock options (employee awards) $6,310
 $5,684
 $17,968
 $18,318
    Stock options (consultant awards) 36
 150
 118
 872
    Restricted stock units (employee awards) 2,161
 1,425
 4,772
 3,650
    Employee stock purchase plan 156
 102
 549
 676
        Total $8,663
 $7,361
 $23,407
 $23,516
Equity Awards

The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the nine months ended September 30, 2023:
Stock Options Number of
Stock Options		 Weighted Average Exercise Price (Per Share)
 Outstanding at December 31, 20226,272,994 $52.38 
     Granted1,435,143 39.13 
     Exercised(62,680)30.93 
     Forfeited(195,249)53.65 
     Expired(339,565)53.15 
 Outstanding at September 30, 20237,110,643 49.82 
Restricted Stock Units Number of
Restricted
Stock Units		 Weighted Average Grant Date Fair Value (Per Share)
Unvested at December 31, 20221,149,462 $57.26 
     Granted774,462 39.20 
     Vested(385,732)55.05 
     Forfeited(143,866)55.39 
Unvested at September 30, 20231,394,326 48.01 
The weighted average fair value of stock options granted during the nine months ended September 30, 2023 was $16.21 per share. The fair values of stock options granted were estimated using the Black-Scholes option valuation model with the following weighted average assumptions:
Black-Scholes Weighted Average AssumptionNine Months Ended September 30, 2023
Expected dividend yieldNone
Risk-free interest rate4.00%
Expected volatility41.32%
Expected term of options4.86 years
Employee Stock Purchase Plan

The Company’s Amended and Restated 2014 Employee Stock Purchase Plan, or ESPP, features two six-month offering periods per year, running from January 1to June 30 and July 1 to December 31. Under the ESPP, employees may elect to contribute after-tax earnings to purchase shares at 85% of the closing fair market value of the Company’s common stock on either the offering date or the purchase date, whichever is less.lesser. During the nine months ended September 30, 2017, 35,7452023, 50,634 shares were purchased and issued underthrough the ESPP.

Equity Awards

The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the nine months ended September 30, 2017:
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 24
Stock Options  Number of Options  Weighted Average Exercise Price
 Outstanding at December 31, 2016 5,207,743
 $42.16
     Granted 1,009,650
 44.29
     Exercised (458,535) 11.57
     Forfeited (389,720) 49.76
     Expired (198,038) 75.49
 Outstanding at September 30, 2017 5,171,100
 43.43
Restricted Stock Units  Number of Units  Weighted Average Grant Date Fair Value
Unvested at December 31, 2016 364,403
 $52.85
     Granted 338,583
 44.22
     Vested (99,504) 54.15
     Forfeited (63,731) 51.17
Unvested at September 30, 2017 539,751
 47.38


The weighted average fair valueTable of stock options granted during the nine months ended September 30, 2017 was $20.89 per share. The fair values of stock options granted were estimated using the Black-Scholes option valuation model with the following weighted average assumptions:Contents
Nine Months Ended September 30, 2017
Expected dividend yieldNone
Risk free interest rate1.80%
Expected volatility51.4%
Expected term of options5.32 years

NOTE 9—STOCKHOLDERS’ EQUITY

Accumulated Other Comprehensive Income (Loss)
The following table illustrates the changes in the balances of the Company’s accumulated other comprehensive income (loss) for the periods presented (in thousands):
  Nine Months Ended 
 September 30,
Net unrealized gains (losses) from available for sale investments: 2017 2016
Balance at beginning of period $(30) $(52)
Other comprehensive income (loss) before reclassifications (37) 24
Amounts reclassified from accumulated other comprehensive income (loss) —
 —
Balance at end of period $(67) $(28)

NOTE 10—12—NET INCOME (LOSS) PER SHARE

Basic net income (loss) per common share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of common shares outstanding plus dilutive potential common shares outstanding during the period.
Potential common shares include the shares of common stock issuable upon the exercise of outstanding stock options, and warrants, the vesting of RSUs and the purchase of shares from the ESPP (using the treasury stock method) as well as, if applicable. Potential common shares associated with convertible notes are treated under the conversion ofif-converted method, adjustments are made to the excess conversion value on the 2019 Notes and 2022 Notes. As discussed in Note 6, Debt, the Company has either the obligation or the option to pay cash for the aggregate principal amount due upon the conversion of its convertible senior notes. Since it is the Company’s intent to settle the principal amount of its convertible senior notes in cash, the potentially dilutive effect of such notes ondiluted net income (loss) per common share is computed undercalculation as if the treasury stock method.Company had converted the convertible debt on the first day of each period presented. Adjustments to the numerator are made to add back the interest expense associated with the convertible debt on a post-tax basis. Adjustments to the denominator reflect the number of shares assumed to be convertible at the beginning of the period.
Potential common shares are excluded from the diluted net lossincome (loss) per common share computation to the extent they would be antidilutive. Because the Company reported a net loss for the three and nine months ended September 30, 2017 and 2016, no potentially dilutive securities have been included in the computation of diluted net loss per share for those periods.
The following table sets forth the computation of basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2023 and 2022 (in thousands, except per share amounts):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Numerator:
   Net income (loss)—basic$10,858 $(693)$17,085 $26,011 
ASU 2020-06 convertible notes if-converted method adjustment1,029 — — 3,112 
   Adjusted net income (loss)—diluted$11,887 $(693)$17,085 $29,123 
Denominator:
   Weighted average common shares outstanding—basic46,416 45,831 46,151 45,400 
Computation of diluted securities:
ASU 2020-06 convertible notes if-converted method adjustment5,608 — — 5,608 
   Dilutive effect of stock options20 — 68 937 
   Dilutive effect of RSUs23 — 122 272 
Dilutive effect of ESPP purchase options— — 2 3 
   Weighted average common shares outstanding—diluted52,067 45,831 46,343 52,220 
Net income per share:
   Basic net income (loss) per common share$0.23 $(0.02)$0.37 $0.57 
   Diluted net income (loss) per common share$0.23 $(0.02)$0.37 $0.56 
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 25
The following table summarizes the outstanding stock options, RSUs, ESPP purchase options and convertible senior notes that were excluded from the diluted net income (loss) per common share calculation because the effects of including these potential shares were antidilutive in the periods presented (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Weighted average number of stock options7,057 6,344 5,953 2,439 
Convertible senior notes— 5,608 5,608 797 
Weighted average number of RSUs1,349 1,180 956 277 
Weighted average ESPP purchase options39 — 13 — 
      Total8,445 13,132 12,530 3,513 
For the three months ended September 30, 2022 and nine months ended September 30, 2023, the antidilutive impact associated with the Company’s convertible senior notes would have included an interest expense add-back to net income of $1.0 million and $3.1 million, respectively.
NOTE 13—INCOME TAXES
Income before income taxes and income tax expense are as follows (dollar amounts in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Income (loss) before income taxes:
   Domestic$16,631 $9,230 $29,047 $39,610 
   Foreign(30)(7,161)(1,066)(8,240)
Total income before income taxes$16,601 $2,069 $27,981 $31,370 
Income tax expense$5,743 $2,762 $10,896 $5,359 
Effective tax rate35 %133 %39 %17 %
The Company’s income tax expense represents the estimated annual effective tax rate applied to the year-to-date domestic operating results adjusted for certain discrete tax items.
The Company’s effective tax rates for the three and nine months ended September 30, 20172023 include costs related to non-deductible stock-based compensation and 2016 (in thousands, except per share amounts):
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
2017 2016 2017 2016
Numerator:       
   Net loss$(7,597) $(22,164) $(47,206) $(33,977)
Denominator:       
   Weighted average common shares outstanding40,463
 37,312
 39,540
 37,171
Net loss per share:       
   Basic and diluted net loss per common share$(0.19) $(0.59) $(1.19) $(0.91)

non-deductible executive compensation, partially offset by credits and a fair value adjustment for Flexion contingent consideration.
The following outstanding stock options, RSUs, conversion premiums on the Company’s convertible senior notes, warrants and ESPP purchase options are antidilutive in the periods presented (in thousands):
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Weighted average number of stock options5,405
 4,632
 5,203
 4,403
Weighted average number of RSUs549
 372
 426
 265
Conversion premium on the 2019 Notes5
 1,750
 546
 2,288
Weighted average number of warrants—
 —
 —
 1
Weighted average ESPP purchase options22
 20
 32
 22
      Total5,981
 6,774
 6,207
 6,979

NOTE 11—INCOME TAXES

Income (loss) before income taxes is as follows (in thousands):
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Loss before income taxes:       
   Domestic$(6,867) $(21,780) $(45,136) $(32,806)
   Foreign(685) (348) (1,965) (1,045)
      Total loss before income taxes$(7,552) $(22,128) $(47,101) $(33,851)

The Company recorded incomeeffective tax expense of less than $0.1 million inrates for the three months ended September 30, 2017 and 2016. The Company recorded income tax expense of $0.1 million in the nine months ended September 30, 20172022 include costs related to non-deductible executive compensation, valuation allowances recorded against non-U.S. operating results and 2016. The tax provisions reflect current state income taxes. Due to netU.S. capital losses, in both periods presented, no current federal income tax expense was recorded. Due to the fact that the Company’s deferred tax assets are fullypartially offset by benefits for a valuation allowance,first quarter Skyepharma milestone payment, a fair value adjustment for Flexion contingent consideration and the tax provisions do not reflect deferred tax expenses.impact of stock-based compensation adjustments.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 26
During
NOTE 14—CONTINGENT CONSIDERATION CHARGES (GAINS), RESTRUCTURING CHARGES AND OTHER
Contingent consideration charges (gains), restructuring charges and other for the three and nine months ended September 30, 2017,2023 and 2022 summarized below (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Severance-related expenses$— $194 $— $4,259 
Acquisition-related fees390 905 1,588 4,918 
Other acquisition expenses— 433 — 985 
Total acquisition-related charges390 1,532 1,588 10,162 
Flexion contingent consideration2,793 (520)(3,847)(13,837)
MyoScience contingent consideration— (523)— (9,557)
Restructuring charges173 — 1,109 — 
Total contingent consideration charges (gains), restructuring charges and other$3,356 $489 $(1,150)$(13,232)
Flexion Acquisition and Contingent Consideration
The Company recognized acquisition-related costs of $0.4 million and $1.6 million during the three and nine months endedSeptember 30, 2023, respectively, primarily related to vacant and underutilized Flexion leases. The Company establishedrecognized acquisition-related costs of $1.5 million and $10.2 million during the three and nine months endedSeptember 30, 2022, respectively, primarily related to severance, legal fees, third-party services and other one-time charges.
The Company recognized $2.8 million of contingent consideration charges and $3.8 million of contingent consideration gains during the three and nine months endedSeptember 30, 2023, respectively. The Company recognized $0.5 million and $13.8 million of contingent consideration gains during the three and nine months endedSeptember 30, 2022, respectively. See Note 9, Financial Instruments, for information regarding the method, key assumptions used in the fair value measurements of contingent consideration and more information regarding the changes in fair value.
MyoScience Contingent Consideration
The Company recognized $0.5 million and $9.6 million of contingent consideration gains during the three and nine months ended September 30,2022, respectively. See Note 9, Financial Instruments, for information regarding the method, key assumptions used in the fair value measurements of contingent consideration and more information regarding the changes in fair value.
Restructuring Charges
In June 2023, the Company implemented a deferred tax liabilityrestructuring plan in an effort to improve its operational efficiencies. The restructuring charges are predominantly related to one-time employee termination benefits through a reduction of $26.5headcount, such as severance and related costs. During the three and nine months ended September 30, 2023, the Company recognized $0.2 million with an offset to additional paid-in capital resulting from the conversion featureand $1.1 million, respectively, of the 2022 Notes. The initial difference between the book valuerestructuring charges, of convertible debt issued with a beneficial conversion feature and its tax basis is a temporary difference. The net effect of the deferred tax liability recorded to additional paid-in capital was zero because the Companywhich substantially all has a full valuation allowance against its net deferred tax assets.been paid.

NOTE 12—15—COMMITMENTS AND CONTINGENCIES
Leases
The Company’s leases for its research and development, manufacturing and warehouse facilities in San Diego, California expire in August 2020 and its lease for its corporate headquarters in Parsippany, New Jersey expires in March 2028.

As of September 30, 2017, aggregate annual minimum payments due under the Company’s lease obligations are as follows (in thousands): 

Year Aggregate Minimum Payments
2017 (remaining three months) $2,004
2018 8,063
2019 8,272
2020 6,389
2021 1,207
2022 through 2028 7,545
    Total $33,480

Litigation

From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of its business, including those related to patents, product liability and government investigations. Except as described below, the Company is not presently a party to any litigation whichlegal proceedings that it believes to be material, and is not aware of any pending or threatened litigation against the Company which it believes could have a material adverse effect on its business, operating results, financial condition or cash flows.

MyoScience Milestone Litigation
In April 2015,August 2020, the Company and its subsidiary, Pacira CryoTech, Inc. (“Pacira CryoTech”), filed a lawsuit in the Court of Chancery of the State of Delaware against Fortis Advisors LLC (“Fortis”), solely in its capacity as representative for the former securityholders of MyoScience, and certain other defendants, seeking declaratory judgment with respect to certain terms of the merger agreement for the MyoScience Acquisition (the “MyoScience Merger Agreement”), specifically related to the achievement of certain milestone payments under the MyoScience Merger Agreement. In addition, the Company and Pacira
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 27
CryoTech sought general, special and compensatory damages against the other defendants related to breach of fiduciary duties in connection with the purported achievement of milestone payments under the MyoScience Merger Agreement, and breach of the MyoScience Merger Agreement and certain other agreements with the defendants. In October 2020, Fortis filed an answer and counterclaim against the Company and Pacira CryoTech seeking to recover certain milestone payments under the MyoScience Merger Agreement. The total remaining value of these milestones is $30.0 million, plus attorneys’ fees.
A trial was conducted in September 2023, and a decision is expected in the second half of 2024. The Company is unable to predict the outcome of this action at this time.
eVenus Pharmaceutical Laboratories Litigations
In October 2021, the Company received a subpoena fromNotice Letter advising that eVenus Pharmaceutical Laboratories, Inc., or eVenus, of Princeton, New Jersey, submitted to the FDA an Abbreviated New Drug Application, or ANDA with a Paragraph IV certification seeking authorization for the manufacturing and marketing of a generic version of EXPAREL (266 mg/20 mL) in the U.S. Departmentprior to the expiration of Justice, U.S. Attorney’s OfficePatent No. 11,033,495 (the ’495 patent).
In November 2021, the Company filed a patent infringement suit against eVenus and its parent company in the U.S. District Court for the District of New Jersey requiring(21-cv-19829) asserting infringement of the production’495 patent. This triggered an automatic 30-month stay of final approval of the eVenus ANDA. On January 6, 2022, eVenus filed an Answer with counterclaims to the Complaint, alleging the ’495 patent is invalid and/or not infringed through the manufacture, sale, or offer for sale of the product described in product described in eVenus’s ANDA submission.
In December 2021, the Company received a second Notice Letter advising that eVenus submitted to the FDA an amendment to its ANDA with a Paragraph IV Certification seeking authorization for the manufacturing and marketing of a broad rangegeneric version of documents pertainingEXPAREL (133 mg/10 mL) in the U.S. prior to the expiration of the ’495 patent. In the Notice Letter, eVenus also advised that it submitted a Paragraph IV Certification to the FDA seeking authorization for the manufacturing and marketing of a generic version of EXPAREL (266 mg/20 mL and promotional practices related133 mg/10 mL) in the U.S. prior to EXPAREL. the expiration of U.S. Patent No. 11,179,336 (the ’336 patent). eVenus further alleges in the Notice Letter that both the ’495 patent and the ’336 patent are invalid and/or not infringed.
In February 2022, the Company filed a second patent infringement suit against eVenus and its parent company in the U.S. District Court for the District of New Jersey (22-cv-00718) asserting that the 133 mg/10 mL ANDA product will infringe the ’495 and ’336 patents and that the 266 mg/20 mL ANDA product will infringe the ’336 patent. This filing triggered a second automatic 30-month stay of final approval for the 133 mg/10 mL ANDA product. The first and second patent infringement suits were consolidated.
In February 2023, eVenus filed its first amended answer to the first amended complaint, alleging patent invalidity, non-infringement and inequitable conduct. The Company has denied the allegations in eVenus’s first amended answer. The Company has subsequently voluntarily dismissed its claims with respect to the ’336 Patent. A trial on the remaining claims is currently scheduled for February 2024.
In April 2023, the Company filed a third patent infringement suit against eVenus, its parent company, and Fresenius Kabi USA, LLC, in the U.S. District Court for the District of New Jersey (23-cv-2367) asserting that the 133 mg/10 mL and 266 mg/20 mL ANDA products will infringe U.S. Patent No. 11,426,348 (the ’348 patent). In July 2023, eVenus filed its answer with claims for declaratory judgment, alleging patent invalidity, non-infringement and inequitable conduct with respect to the ’348 patent as well as the Company’s other patents, U.S. Patent Nos. 11,278,494; 11,304,904; 11,311,486; 11,357,727 and 11,452,691.The parties have subsequently dismissed all patents other than the ’348 patent from this litigation.
The Company is cooperatingunable to predict the outcome of this litigation at this time.
Research Development Foundation
Pursuant to an agreement with the government’s inquiry.Research Development Foundation, or RDF, the Company was required to pay RDF a low single-digit royalty on the collection of revenues from certain products, for as long as certain patents assigned to the Company under the agreement remain valid. RDF has the right to terminate the agreement for an uncured material breach by the Company, in connection with its bankruptcy or insolvency or if it directly or indirectly opposes or disputes the validity of the assigned patent rights. The Company’s ’495 patent was issued on June 15, 2021. Thereafter, RDF asserted that the issuance of that patent extends the Company’s royalty obligations under the agreement until 2041. The Company can makebelieves that the royalty period under the agreement ended on December 24, 2021 with the expiration of its U.S. Patent No. 9,585,838. Because of the disagreement over the interpretation of the agreement, in December 2021, the Company filed a declaratory judgment
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 28
lawsuit in the U.S. District Court for the District of Nevada (21-cv-02241). The lawsuit seeks a declaration from the court that the Company owes no assurances asroyalties to RDF with respect to its EXPAREL product after December 24, 2021.
On August 8, 2023, the time or resources that will need to be devoted to this inquiry or its final outcome, or the impact, if any,United States District Court, District of this inquiry or any proceedings on its business, financial condition, results of operations and cash flows.

NOTE 13—COMMERCIAL PARTNERS AND OTHER AGREEMENTS

DepoCyt(e) Discontinuation

In June 2017,Nevada, granted the Company’s board of directors approved a decision to discontinue all future production of DepoCyt® (U.S. and Canada) and DepoCyte® (European Union) due to persistent technical issues specific to the DepoCyt(e) manufacturing process. DepoCyt(e) accountedmotion for 2.6% of the Company’s 2016 total full-year revenues of $276.4 million. As of June 30, 2017, the Company had ceased all production of DepoCyt(e).

In the three months ended September 30, 2017, the Company recorded a non-recurring charge of $0.3 million related to the discontinuation of its DepoCyt(e) manufacturing activities, including $0.1 million for DepoCyt(e) related inventory, which is recordedpartial summary judgment in cost of goods sold, and $0.2 million for asset retirement obligations and other estimated exit costs.

In the nine months ended September 30, 2017, the Company recorded a non-recurring charge of $5.3 million related to the discontinuation of its DepoCyt(e) manufacturing activities, including $0.6 million for DepoCyt(e) related inventory, which is recorded in cost of goods sold, and $4.7 million for the remaining lease costs less an estimate of potential sublease income for the facility where DepoCyt(e) was manufactured, the write-off of property, plant and equipment, employee severance, asset retirement obligations and other estimated exit costs.

As of September 30, 2017, a summary of the Company’s costs and reserves related to the DepoCyt(e) discontinuation are as follows (in thousands):

 Severance and Related Costs Lease Costs Write-Off of Property, Plant & Equipment and Inventory Asset Retirement Obligations and Other Discontinuation Costs Total
Balance at December 31, 2016$—
 $—
 $—
 $—
 $—
Charges incurred309
 1,902
 2,470
 653
 5,334
Cash payments made(178) (437) —
 (330) (945)
Disposal of property, plant &
equipment and inventory		—
 —
 (2,470) —
 (2,470)
Adjustments—
 —
 —
 —
 —
Balance at September 30, 2017$131
 $1,465
 $—
 $323
 $1,919

The Company may be required to make additional payments or incur additional costs relating to the DepoCyt(e) discontinuation which could be materialrespect to the Company’s resultsclaim for a declaration that it no longer owes royalties for EXPAREL made under the 45-liter manufacturing process as of operations and/December 24, 2021. As a result, the Company expects to receive $14.5 million from RDF, representing the royalties that the Company paid to RDF under protest after December 24, 2021 for EXPAREL made from the 45-liter manufacturing process. Once it becomes probable that the settlement amount will be received, the Company will record a settlement gain within other operating expenses in the condensed consolidated statement of operations. During the pendency of the remaining lawsuit, the Company will continue to pay royalties associated with the 200-liter manufacturing process to RDF under protest. The Company is unable to predict the outcome of this action at this time.
Other Commitments and Contingencies
Pediatric Trial Commitments
The FDA, as a condition of EXPAREL approval, has required the Company to study EXPAREL for infiltration and as a brachial plexus block in the pediatric setting. The Company was granted deferrals for the required pediatric trials until after the indications were approved in adults. Similarly, in Europe, the Company agreed with the European Medicines Agency, or cash flowsEMA, on a Pediatric Investigation Plan as a prerequisite for submitting a Marketing Authorization Application (MAA) in a given period.
DePuy Synthes Sales, Inc.the E.U. Despite the U.K.’s withdrawal from the E.U., the agreed pediatric plan is applicable in the U.K.
In January 2017,December 2019, the Company announced positive results for its extended pharmacokinetic and safety study (“PLAY”) for local analgesia in children aged six to 17 undergoing cardiovascular or spine surgeries. Those positive results were the initiationbasis for the submission of a Co-Promotion Agreement,supplemental New Drug Application, or sNDA, in the Agreement, with DePuy Synthes Sales, Inc.U.S. to include use in patients six years of age and older for single-dose infiltration to produce postsurgical local analgesia. In March 2021, the Company announced that the FDA approved the sNDA in the U.S. In the E.U. and U.K., or DePuy Synthes, partthe Company also submitted the results of the Johnson & Johnson family of companies,PLAY study as Type II variations in the E.U. and U.K. to market and promoteinclude the use of EXPAREL in children aged six years or older as a field block for orthopedic procedurestreatment of somatic post-operative pain for small- to medium-sized wounds. The EMA and the Medicines and Healthcare Products Regulatory Agency, or MHRA, in the United States. DePuy Synthes field representatives, specializingU.K. both approved the variations in joint reconstruction, spine, sports medicinetheir respective regions in November 2022. The Company received notification from the FDA in October 2023 that its pediatric studies requirement had been waived for the indication of brachial plexus interscalene nerve block to produce postsurgical regional analgesia in pediatric patients. The Company is still working with the FDA, EMA and trauma, will collaborate with,MHRA to finalize the regulatory pathways for its remaining pediatric commitments.
Contingent Milestone Payments
Refer to Note 9, Financial Instruments, for information on potential contingent milestone payments related to the Flexion Acquisition and supplement,MyoScience Acquisition.
PCRX-201
PCRX-201, a novel, intra-articular gene therapy product candidate that produces the anti-inflammatory protein interleukin-1 receptor antagonist (IL-1Ra) treating OA pain in the knee, was added to the Company’s field teams by expanding the reach and frequency of EXPAREL education in the hospital surgical suite and ambulatory surgery center settings.
Under the five-year arrangement, DePuy Synthes will be the exclusive third-party distributor during the termportfolio as part of the AgreementFlexion Acquisition in November 2021. Prior to promote and sell EXPAREL for operating room use for orthopedic and spine surgeries (including knee, hip, shoulder, sports and trauma surgeries)the Flexion Acquisition, in February 2017, Flexion entered into an agreement with GQ Bio Therapeutics GmbH (formerly named GeneQuine Biotherapeutics GmbH) to acquire the United States. DePuy Synthes is entitledglobal rights to PCRX-201, a tiered commission ranging from low single-digits to double-digits on sales of EXPAREL under the Agreement, subject to conditions, limitations and adjustments. The initial termgene therapy product candidate. As part of the Agreement commenced on January 24, 2017agreement, up to an aggregate of $56.0 million of payments could become due upon the achievement of certain development and ends on December 31, 2021, with the optionregulatory milestones, including up to extend the Agreement in additional 12 month increments upon mutual agreement of the parties, subject to certain conditions.
The Company and DePuy Synthes have mutual termination rights under the Agreement, subject to certain terms, conditions and advance notice requirements, provided that the Company or DePuy Synthes generally may not terminate the Agreement, without cause, within three years of the effective date of the Agreement. The Company also has additional unilateral termination rights under certain circumstances. The Agreement contains customary representations, warranties, covenants and confidentiality provisions, and also contains mutual indemnification obligations. DePuy Synthes is also subject to certain obligations and restrictions, including required compliance with certain laws and regulations and the Company’s policies, in connection with fulfilling their obligations under the Agreement.

CrossLink BioScience, LLC

In October 2013, the Company and CrossLink BioScience, LLC, or CrossLink, commenced a five-year arrangement for the promotion and sale of EXPAREL, pursuant to the terms$4.5 million through initiation of a Master Distributor Agreement (as amended, the “CrossLink Agreement”). On June 30, 2016, the Company provided notice to CrossLink electing to terminate the CrossLink Agreement effective asPhase 2 proof of September 30, 2016. In connection with the terminationconcept clinical trial and, following successful proof of the CrossLink Agreement, a termination fee based on a percentage of earned performance-based fees is due to CrossLink. This fee of $7.1 million is payable to CrossLink quarterly over two years beginning in the fourth quarter of 2016, and was recorded in selling, general and administrative expense in the condensed consolidated statements of operations for the three and nine month periods ended September 30, 2016. At September 30, 2017, $2.4 million is classified in accrued expenses.

NOTE 14—SUBSEQUENT EVENTS

TELA Bio

In October 2017, the Company made an initial cash investment of $15 million in TELA Bio, Inc., or TELA Bio, a privately-held surgical reconstruction company that markets its proprietary OviTexTM portfolio of products for ventral hernia repair and abdominal wall reconstruction. The Company may be required to investconcept, up to an additional $10$51.5 million in TELA Bio under certain performance scenarios or upon its own election.development and global regulatory approval milestone payments.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 29
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and in accordance with the rules and regulations of the United States Securities and Exchange Commission, or SEC.
This Quarterly Report on Form 10-Q and certain other communications made by us contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended or(the “Exchange Act”), and the ExchangePrivate Securities Litigation Reform Act of 1995, including, without limitation, statements aboutrelated to: the Flexion Acquisition (as defined below) and the costs and benefits thereof, our growth and future operating results discovery and trends, our strategy, plans, objectives, expectations (financial or otherwise) and intentions, future financial results and growth potential, including our plans with respect to the repayment of our indebtedness, anticipated product portfolio, development programs, patent terms, development of products, strategic alliances and intellectual property. For this purpose, any statement that is not a statement of historical fact should be considered a forward-looking statement. We often use the words “believe,” “anticipate,” “plan,” “estimate,” “expect,” “intend,” “may,” “will,” “would,” “could,” “can” and similar expressions to help identify forward-looking statements. We cannot assure you that our estimates, assumptions and expectations will prove to have been correct. TheseActual results may differ materially from these indicated by such forward-looking statements include,as a result of various important factors, including risks relating to, among others, statements about:others: the successful transition of our chief executive officer and chairman; risks associated with acquisitions, such as the risk that the acquired businesses will not be integrated successfully, that such integration may be more difficult, time-consuming or costly than expected or that the expected benefits of the transaction will not occur; the lingering impact of the COVID-19 pandemic on elective surgeries, our manufacturing and supply chain, global and United States, or U.S., economic conditions (including inflation and rising interest rates), and our business, including our revenues, financial condition, cash flows and results of operations; the success of our sales and manufacturing efforts in support of the commercialization of EXPAREL®(bupivacaine (bupivacaine liposome injectable suspension), ZILRETTA® (triamcinolone acetonide extended-release injectable suspension) and our other products;iovera°®; the rate and degree of market acceptance of EXPAREL;EXPAREL, ZILRETTA and iovera°; the size and growth of the potential markets for EXPAREL, ZILRETTA and iovera° and our ability to serve those markets; our plans to expand the use of EXPAREL, ZILRETTA and iovera° to additional indications and opportunities, and the timing and success of any related clinical trials;trials for EXPAREL, ZILRETTA and iovera°; the commercial success of EXPAREL, ZILRETTA and iovera°; the related timing and success of United States Food and Drug Administration, or FDA, supplemental New Drug Applications, or sNDA;sNDAs, and premarket notification 510(k)s; the outcomerelated timing and success of the U.S. Department of Justice,European Medicines Agency, or DOJ, inquiry; the Company’sEMA, Marketing Authorization Applications, or MAAs; our plans to evaluate, develop and pursue additional DepoFoam®-based product candidates;candidates utilizing our proprietary multivesicular liposome, or pMVL, drug delivery technology; the approval of the commercialization of our products in other jurisdictions; clinical trials in support of an existing or potential DepoFoam-basedpMVL-based product; our commercialization and marketing capabilities andcapabilities; our ability to successfully complete an EXPAREL capacity expansion project in San Diego, California; our ability to successfully complete a ZILRETTA capital project in Swindon, England; the outcome of any litigation; the ability of the Company and Patheon UK Limited, or Patheon, to successfully integrate any future acquisitions into our existing business; the recoverability of our deferred tax assets; and timely construct dedicated EXPAREL manufacturing suites. assumptions associated with contingent consideration payments.

Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Westatements, and as such we anticipate that subsequent events and developments will cause our views to change. Except as required by applicable law, we undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and readers should not rely on the forward-looking statements as representing our views as of any date subsequent to the date of the filing of this Quarterly Report on Form 10-Q.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements. These factors include items mentioned herein and the matters discussed and referenced in Part I-Item 1A. “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 20162022 (the “2022 Annual Report”) and in other reports as filed with the Securities and Exchange Commission, or SEC.

Unless the context requires otherwise, references to “Pacira,” “we,” the “Company,” “us” and “our” in this Quarterly Report on Form 10-Q refer to Pacira Pharmaceuticals,BioSciences, Inc. and its subsidiaries. In addition, references in this Quarterly Report on
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q to DepoCyt(e) mean DepoCyt® when discussed in the context| Page 30

Overview
Pacira is the industry leader in our commitment to non-opioid pain management and providing non-opioid pain management options to as many patients as possible to redefine the role of opioids as rescue therapy only. We are a specialty pharmaceutical company committedalso developing innovative interventions to driving innovation in postsurgicaladdress debilitating conditions involving the sympathetic nervous system, such as cardiac electrical storm, chronic pain management with opioid-sparing strategies.and spasticity. Our product pipeline is based onlong-acting, local analgesic EXPAREL® (bupivacaine liposome injectable suspension) utilizes our proprietary DepoFoam extended releaseunique pMVL drug delivery technology that encapsulates drugs without altering their molecular structure and releases them over a desired period of time. In the U.S., EXPAREL is the only opioid-free, long-acting local and regional analgesic approved for use primarily in hospitalsinfiltration, field blocks and ambulatory surgery centers. We are currently commercializing EXPAREL, an amide-type local anesthetic indicated for single-dose administration into the surgical siteinterscalene brachial plexus nerve block to produce local or regional postsurgical analgesia. EXPAREL wasis also approved byfor infiltration in pediatric patients aged six years and older in the FDAU.S. In Europe, EXPAREL is approved as a brachial plexus block or femoral nerve block for treatment of post-operative pain in Octoberadults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults and children aged six years and older. Since its initial approval in 2011, and commercially launched in April 2012.more than 13 million patients have been treated with EXPAREL. We drop-ship EXPAREL directly to the end-userend-users based on orders placed to wholesalers or directly to us, and we havethere is no product held by wholesalers. Our earlier-stage pipeline includes two DepoFoam-based product candidates, DepoTranexamic AcidWith the acquisition of Flexion Therapeutics, Inc., or Flexion, in November 2021 (the “Flexion Acquisition”), we acquired ZILRETTA® (triamcinolone acetonide extended-release injectable suspension), the first and DepoMeloxicam.only extended-release, intra-articular therapy that can provide major relief for osteoarthritis, or OA, knee pain for three months and has the potential to become an alternative to hyaluronic acid, platelet rich plasma injections or other early intervention treatments. With the acquisition of MyoScience, Inc., or MyoScience, in April 2019 (the “MyoScience Acquisition”), we acquired iovera°®, a handheld cryoanalgesia device used to deliver a precise, controlled application of cold temperature to targeted nerves, which we sell directly to end users. EXPAREL, ZILRETTA and the iovera° system are highly complementary products as long-acting, non-opioid therapies that alleviate pain.
We expect to continue to incur significant expenses as we pursue the expanded use of EXPAREL, ZILRETTA and iovera° in additional indications and opportunities; advanceprocedures; progress our earlier-stage product candidate pipeline; seek FDA approvalsadvance regulatory activities for EXPAREL, ZILRETTA, iovera° and our other product candidates; develop ourinvest in sales and marketing capabilities to prepareresources for their commercial launch;EXPAREL, ZILRETTA and iovera°; expand and enhance our manufacturing capacity for EXPAREL, ZILRETTA and iovera°; invest in products, businesses and technologies; and support regulatory and legal matters.
Global Economic Conditions
Direct and indirect effects of global economic conditions may negatively impact our business, financial condition and results of operations. Such impacts may include, but are not limited to, the effect of prolonged periods of inflation on our customers and suppliers and longer lead-times or the inability to secure a sufficient supply of materials. Additional negative impacts may also arise that we are unable to foresee. The nature and extent of such impacts are subject to material change, and will depend on future developments which are dynamic, highly uncertain and cannot be predicted.

Recent Highlights and Developments
•
In October 2017, we made an initial cash investment of $15 million in TELA Bio, Inc., or TELA Bio, a privately-held surgical reconstruction company that markets its proprietary OviTexTM portfolio of products for ventral hernia repair and abdominal wall reconstruction. OviTex Reinforced BioScaffolds (RBSs) are intended for use as a surgical mesh to reinforce and/or repair soft tissue where weakness exists. We may be required to invest up to an additional $10 million in TELA Bio under certain performance scenarios or at our own election.

•In October 2017,2023, we announced that the appointments of Marcelo Bigal, MD, PhD, Abraham Ceesay, Michael Yang and Alethia Young to our Board of Directors. Each of the new directors adds diversity of experience and background to the Pacira board of directors, while also enhancing racial and gender diversity. Following these director appointments, Pacira now has 12 experienced directors, all with relevant industry experience.
•In October 2023, we announced a grant of $2.5 million to the American Society of Anesthesiologists, or ASA, Charitable Foundation, to advance the medical specialty of anesthesiology and pain medicine; facilitate best-in-class clinician education and improve patient care. We also joined ASA’s Industry Supporter Program to support the Society’s more than 56,000 physician anesthesiologist members to improve patient care and reduce reliance on opioids for the treatment of postsurgical or chronic pain. As an Industry Supporter, Pacira is helping to establish a strong, mutually beneficial relationship with the anesthesiology community, strengthen collaboration between physician anesthesiologists and industry, and add to the value the Society provides to patients and the public, while providing invaluable year-round support of ASA programs and priorities related to non-opioid alternatives and postsurgical care.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 31
EXPAREL

In the U.S., EXPAREL is currently indicated for single-dose infiltration in patients six years of age and older to produce postsurgical local analgesia and in adults as an interscalene brachial plexus nerve block to produce postsurgical regional analgesia. Safety and efficacy have not been established in other nerve blocks. In Europe, EXPAREL is approved as a brachial plexus block or femoral nerve block for treatment of post-operative pain in adults and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults, and in children aged 6 years or older as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds.

EXPAREL Label and Global Expansion

•Lower extremity nerve block. The FDA accepted the resubmission ofis currently reviewing our sNDA seeking expansion of the EXPAREL label to include administration vialower extremity nerve block for prolonged regional analgesia. The expected action

date by the FDA under theprocedures with a Prescription Drug User Fee Act, or PDUFA, is April 6, 2018. The sNDAaction date of November 13, 2023. Our application is based on the positive dataresults from atwo Phase 3 registration studies. The first study, ofwhich evaluated EXPAREL inadmixed with bupivacaine HCl as a femoral nerve block forin the adductor canal in patients undergoing total knee arthroplasty, or TKA, (lower extremity)achieved the primary endpoint, demonstrating a statistically significant reduction in cumulative pain scores from 0 to 96 hours compared with bupivacaine HCl (p<0.01). EXPAREL admixed with bupivacaine HCl also achieved a statistically significant reduction in postsurgical opioid consumption through 96 hours (p<0.01) compared with bupivacaine HCl, a key secondary endpoint. The second study, which evaluated EXPAREL as a sciatic nerve block in the popliteal fossa in patients undergoing bunionectomy, achieved the primary endpoint by demonstrating a statistically significant reduction in cumulative pain scores from 0 to 96 hours compared with bupivacaine HCl (p<0.00001). EXPAREL achieved a statistically significant reduction in postsurgical opioid consumption (p<0.00001) and a statistically significant percentage of opioid-free subjects (p<0.001) through 96 hours compared with bupivacaine HCl, which were key secondary endpoints. EXPAREL was well tolerated with a safety profile consistent with bupivacaine HCl.

•Pediatrics. We expect to initiate a Phase 1 pharmacokinetic study after which we would initiate a registration study to support expansion of the EXPAREL single-dose infiltration label to include patients under six years of age. If successful, we expect this study, followed by a larger Phase 3 study, will support expansion of the EXPAREL labels in the U.S. and E.U. We are also discussing with the FDA, EMA and Medicines and Healthcare Products Regulatory Agency (MHRA) our regulatory strategy for EXPAREL administered as a nerve block in the pediatric setting. The Company received notification from the FDA in October 2023 that its pediatric studies requirement had been waived for the indication of brachial plexus interscalene nerve block to produce postsurgical regional analgesia in pediatric patients.

•Stellate ganglion block. Planning is underway for a multicenter Phase 3 registration study of EXPAREL in brachial plexusas a stellate ganglion block for shoulder surgeries (upper extremity). Itpreventing postoperative atrial fibrillation after cardiothoracic surgery. We are working with a steering committee of Key Opinion Leaders in regional anesthesia and stellate ganglion blocks to help finalize study design. We are also includes safety and pharmacokinetic data through 120 hours.
In September 2017, we announced a collaboration with Aetna, one of the nation’s leading diversified health care benefits companies,working to align with the support of the American Association of Oral and Maxillofacial Surgeons,FDA on a national program aimed at reducing the number of opioid tablets dispensedour plan to patients undergoing impacted third molar (wisdom tooth) extractions by at least 50 percent through the utilization of EXPAREL to provide prolonged non-opioid postsurgical pain control. Aetna will reimburse oral surgeons enrolled in the program for their use of EXPAREL in impacted third molar extraction cases performed once the surgeons have completed training on use of the product.
EXPAREL
Expanded Indication

The FDA is currently reviewing our sNDA seeking an expansion ofexpand the EXPAREL label to include administration via nervestellate ganglion block for prolonged regional analgesia. We believein the event that this new indication would a) present an alternative long-term methodthe results of pain control with a single injection, replacing the costly and cumbersome standard of care requiring a perineural catheter, drug reservoir and pump needed to continuously deliver bupivacaine and b) allow us to further leverage our manufacturing and commercial infrastructure. The expected action date by the FDA is April 6, 2018.
The sNDA is based on the positive data from a Phase 3 study ofare sufficiently positive. We believe a stellate ganglion block utilizing EXPAREL will be critical in an unmet need with post-operative ventricular and atrial dysrhythmias.

•Global expansion. In Europe, EXPAREL is approved as a brachial plexus block or femoral nerve block for TKA (lower extremity)treatment of post-operative pain in adults and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in adults, and as a field block for treatment of somatic post-operative pain from small- to medium-sized surgical wounds in children aged six years or older. We launched EXPAREL in the U.K. and targeted E.U. countries in 2021. In Latin America, we have a distribution agreement with Eurofarma Laboratories S.A., or Eurofarma, for the development and commercialization of EXPAREL. Eurofarma has the exclusive right to market and distribute EXPAREL in 19 countries in Latin America, including Argentina, Brazil, Colombia and Mexico. In addition, Eurofarma will be responsible for regulatory filings for EXPAREL in these countries. We will receive royalties and are also eligible to receive regulatory- and commercial-based milestone payments that are triggered by the achievement of certain events.

ZILRETTA

ZILRETTA is the first and only extended-release, intra-articular therapy for OA knee pain. ZILRETTA employs a proprietary microsphere technology combining triamcinolone acetonide, or TA, a commonly administered, immediate-release corticosteroid, with a poly lactic-co-glycolic acid, or PLGA, matrix to provide extended pain relief. PLGA is a proven extended-release delivery vehicle that is metabolized to carbon dioxide and water as it releases drug in the intra-articular space
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 32
and is used in other approved drug products and surgical devices. The ZILRETTA microspheres slowly and continuously release triamcinolone acetonide into the knee to provide significant pain relief for 12 weeks, with some people experiencing pain relief through 16 weeks. ZILRETTA was approved by the FDA in October 2017 and launched in the U.S. shortly thereafter.

We believe ZILRETTA’s extended-release profile may also provide effective treatment for OA pain of the shoulder, and we intend to initiate a Phase 3 trial investigating ZILRETTA in shoulder OA in the first half of 2024. In addition, we are evaluating a study in knee OA patients comparing ZILRETTA to immediate release TA in patients with Type 2 diabetes.

ZILRETTA Clinical Benefits

ZILRETTA combines a commonly administered steroid, TA, with PLGA, delivering a 32 mg dose of TA to provide extended therapeutic concentrations in the joint and persistent analgesic effect.

Based on the strength of its pivotal and other clinical trials, we believe that ZILRETTA represents an important treatment option for the millions of patients in the U.S. in need of safe and effective extended relief from OA knee pain. The pivotal Phase 3 trial showed that ZILRETTA significantly reduced OA knee pain for 12 weeks, with some people experiencing pain relief through 16 weeks. Both the magnitude and duration of pain relief provided by ZILRETTA in clinical trials were clinically meaningful with the magnitude of pain relief among the largest seen to date in OA clinical trials. The overall frequency of treatment-related adverse events in these trials was similar to those observed with placebo, and no drug-related serious adverse events were reported. We believe that ZILRETTA holds the potential to become the corticosteroid of choice given its safety and efficacy profile, and the fact that it is the first and only extended-release corticosteroid on the market. In September 2021, the American Association of Orthopaedic Surgeons, or AAOS, updated its evidence-based clinical practice guidelines, finding ZILRETTA can improve patient outcomes over traditional immediate-release corticosteroids.

Planning is underway for a multicenter Phase 3 registration study of ZILRETTA for the treatment of glenohumeral OA. We received agreement from the FDA to move forward with that study, and we plan to expand the ZILRETTA label to include OA of the shoulder in the event that the results of the Phase 3 study are sufficiently positive.

iovera°
The iovera° system is a non-opioid handheld cryoanalgesia device used to produce precise, controlled doses of cold temperature to targeted nerves. It is FDA 510(k) cleared in the U.S., has a CE mark in the E.U. and is cleared for marketing in Canada for the blocking of pain. We believe the iovera° system is highly complementary to EXPAREL in brachial plexus block for shoulder surgeries (upper extremity). It also includes safety and pharmacokinetic data through 120 hours. Eight Pacira-sponsored studies support this expanded indication. In total, 570 subjects receivedZILRETTA as a dose of EXPAREL ranging from 2 mg to 310 mg. In addition, the sNDA includes data from two investigator-initiated studiesnon-opioid therapy that provide additional experience in smaller, peripheralalleviates pain using a non-pharmacological nerve block settings.to disrupt pain signals being transmitted to the brain from the site of injury or surgery. It is also indicated for the relief of pain and symptoms associated with arthritis of the knee for up to 90 days.
Phase 4 Trials

iovera° Clinical Benefits
We are investing
There is a growing body of clinical data demonstrating success with iovera° treatment for OA of the knee. Surgical intervention is typically a last resort for patients suffering from OA of the knee. In one study, the majority of the patients suffering from OA of the knee experienced pain relief up to 150 days after being treated with iovera°.

Preliminary findings demonstrated reductions in a seriesopioids, including:

•The daily morphine equivalent consumption in the per protocol group analysis was significantly lower at 72 hours (p<0.05), 6 weeks (p<0.05) and 12 weeks (p<0.05).
•Patients who were administered iovera° were far less likely to take opioids six weeks after surgery. The number of blinded, randomized Phase 4 trialspatients taking opioids six weeks after TKA in key surgical procedures with EXPAREL as the foundationcontrol group was three times the number of a multimodal analgesic regimen. Our Phase 4 trials are also designed to support clinician education on procedure-specific best-practice care.patients taking opioids in the cryoanalgesia group (14% vs. 44%, p<0.01).
In July 2017, results from our Phase 4 study of EXPAREL•Patients in patients undergoing total knee replacement were published in The Journal of Arthroplasty. The study compared EXPAREL admixed with bupivacaine HCl versus bupivacaine HCl alone. EXPAREL achieved statistical significance for its co-primary endpoints of opioid reduction and postsurgical pain. The EXPARELthe iovera° group demonstrated a 78 percent reduction in opioid consumption from zero to 48 hours after surgery and astatistically significant reduction in pain scores from their baseline pain scores at 72 hours (p<0.05) and at 12 weeks (p<0.05).

We believe these data validate iovera° as a clinically meaningful non-opioid alternative for patients undergoing TKA, and that iovera° offers the opportunity to 48 hours after surgery. EXPARELprovide patients with non-opioid pain control well in advance of any necessary surgical intervention through a number of key product attributes:
•iovera° is safe and effective with immediate pain relief that can last for months as the nerve regenerates over time;
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 33
•iovera° is repeatable;
•The iovera° technology does not risk damage to the surrounding tissue;
•iovera° is a convenient handheld device with a single-use procedure-specific Smart Tip; and
•iovera° can be delivered precisely using ultrasound guidance or an anatomical landmark.

In September 2021, the AAOS updated its evidence-based clinical practice guidelines, reporting that denervation therapy—including cryoneurolysis—may reduce knee pain and improve function in patients with symptomatic OA of the knee.

We are also achieved statistical significanceencouraged by usage of iovera° in other areas. Key Opinion Leaders in orthopedics, spine and anesthesia are interested in replacing heat-based radiofrequency ablation with iovera° cold therapy. There is interest across a wide range of treatment opportunities such as low back pain, spine, spasticity and rib fracture. We intend to use investigator-initiated studies and grants to develop data across these areas.

iovera° Global Expansion

In July 2021, we entered into a licensing agreement with Verve Medical Products, Inc. for the study’s key secondary endpoints related to opioid reduction. Patientsdistribution of iovera° in Canada. We began selling iovera° in Canada in the EXPAREL arm required 77.6 percent fewer opioids through 72 hours than thosefourth quarter of 2021. Additionally, we began selling iovera° in the bupivacaine arm with 10 percent remaining opioid-freeE.U. through 48 and 72 hours (compared to zero patientsa contracted sales force in the bupivacaine arm; P<0.01). Timefirst quarter of 2022.

The Osteoarthritis Market

OA is the most common form of arthritis. It is also called degenerative joint disease and occurs most frequently in the hands, hips and knees. With OA, the cartilage within a joint begins to first opioid rescue was analyzed using logistic regressionbreak down and Kaplan-Meier methods, with a significant difference between the EXPAREL group versusunderlying bone begins to change. These changes usually develop slowly and worsen over time. OA can cause pain, stiffness and swelling. In some cases it also causes reduced function and disability—some people are no longer able to do daily tasks or work. According to the bupivacaine group; P=0.0230.Centers for Disease Control and Prevention, OA affects over 32.5 million adults in the U.S.
Product Pipeline

DepoFoamThe lifetime risk of developing symptomatic knee OA is used to extend the release of active drug substances. With this technology, we are currently developing two new DepoFoam-based product candidates—DepoTranexamic Acid, or DepoTXA, an antifibrinolytic, and DepoMeloxicam, or DepoMLX, a non-steroidal anti-inflammatory drug, or NSAID. Completion of clinical trials may take several years or more. The length of time generally varies45 percent according to the type, complexity, noveltyArthritis Foundation. The prevalence of symptomatic knee OA increases with each decade of life, with the annual incidence of knee OA being highest between age 55 and intended use64 years old. There are 14 million individuals in the U.S. who have symptomatic knee OA, and nearly two million are under the age of 45. Surgical intervention is typically a last resort for patients suffering from OA of the knee.

With the addition of ZILRETTA to our product candidate.offering, we can now offer clinicians the flexibility to individualize OA knee pain treatment with either ZILRETTA or a drug-free nerve block with iovera° based on patient factors and preference, physician training, site of care and reimbursement considerations.

Clinical Development Programs

PCRX-201

PCRX-201 is a novel, IA gene therapy product candidate that produces the anti-inflammatory protein, IL-1Ra, for treating OA pain in the knee. Based upon compelling initial Phase 1 efficacy and safety data for PCRX-201, we are preparing to initiate a second Phase 1 study in OA of the knee and intend to request a Regenerative Medicine Advanced Therapy, or RMAT, designation. PCRX-201 was added to our portfolio as part of the Flexion Acquisition.

pMVL-Based Clinical Programs

Given the proven safety, flexibility and customizability of our pMVL drug delivery technology platform for acute, sub-acute and chronic pain applications, we have several pMVL-based products in clinical development. Following data readouts from preclinical and feasibility studies for these candidates, we have prioritized three programs for clinical development: (i) PCRX-401, a dexamethasone-pMVL for low back pain; (ii) PCRX-501, a high potency bupivacaine-pMVL for longer-lasting pain relief (20.0 mg/mL) and (iii) EXPAREL for intrathecal analgesia (13.3 mg/mL). We initiated a second Phase 1 study of EXPAREL for intrathecal analgesia in June 2023.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 34
External Innovation

In parallel to our internal clinical programs, our business development team is pursuing innovative acquisition targets that are complementary to EXPAREL, ZILRETTA and iovera° and are of great interest to the surgical and anesthesia audiences we are already calling on today. We are also evaluating other potential DepoFoam compoundsusing a combination of strategic investments, in-licensing and formulation work is underway foracquisition transactions to buildout a numberpipeline of innovation to improve patients’ journeys along the neural pain pathway. The strategic investments we have made to support promising early stage platforms are summarized below:

CompanyDevelopment StageDescription of Platform TechnologyPotential Therapeutic Areas
CarthroniX, Inc.Phase 1-ReadyCX-011, a small molecule modulator of gp130 formulated as an intra-articular injection designed to slow joint degeneration by mediating IL-6 cytokinesKnee OA
Genascence CorporationPhase 1bAdeno-associated virus (AAV) based gene therapy engineered to deliver Interleukin-1 Receptor Antagonist (IL-1Ra) to target cells in joint(s)Knee OA
GQ Bio Therapeutics GmbHPreclinicalHigh capacity adenovirus (HCAd) based gene therapy engineered to deliver DNA to target cells in joint(s) and intervertebral disc(s)Knee OA and degenerative disc disease (DDD)
Spine BioPharma, LLCPhase 3SB-01, a 7-amino acid chain peptide that binds to and induces down regulation of transforming growth factor, beta 1 (TGFβ1)Degenerative disc disease (DDD)

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 35
Product Portfolio and Internal Pipeline

Our current product portfolio and internal product candidate pipeline, candidates.

DepoTranexamic Acid

Tranexamic Acid, or TXA, is currently used off-label as a systemic injection or as a topical application, and is usedalong with anticipated milestones over the next 12 to treat or prevent excessive blood loss during surgery by preventing the breakdown of a clot. However, the current formulation of TXA has a short-lived effect consisting of only a few hours, while the risk of bleeding continues for two to three days after surgery. We believe DepoTXA, a long-acting local antifibrinolytic agent combining immediate and extended release TXA, could address the unmet, increasing need for rapid ambulation and discharge18 months, are summarized in the ambulatory surgery environment for jointtable below:


surgery (primarily orthopedic surgery, including spinePCRXProductPipeline2023Q3.jpg
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 36
Pacira Training Facilities

We maintain and trauma proceduresoperate two training facilities—one in Tampa, Florida and cardiothoracic surgery). Designed for single-dose local administration into the surgical site, DepoTXA could provide enhanced hemostabilization and improved safety and tolerability for patients over the systemic use of TXA byone in Houston, Texas. These sites were constructed with a singular goal in mind: to advance education on best practice techniques to effectively manage acute pain while reducing bleeding,or eliminating the need for blood transfusions, swelling, soft tissue hematomasopioids. These facilities provide clinicians with flexible, state-of-the-art environments for interactive, hands-on instruction on the latest and the needmost innovative local, regional and field block approaches for post-operative drains, thereby increasing vigor in patients while decreasing overall costsmanaging pain, improving patient care and enabling patient migration to the hospital system.23-hour stay environment.


DepoTXATampa, Florida

In October 2020, we opened the Pacira Innovation and Training, or PIT, Center of Tampa. We designed this facility to help advance clinician understanding of the latest local, regional and field block approaches for managing pain. The PIT of Tampa provides an unparalleled training environment for healthcare providers working to reduce or eliminate patient exposure to opioids. The PIT of Tampa supports a full range of educational events to advance clinician understanding of the latest local, regional, and field block approaches for managing pain and reducing or eliminating exposure to opioids. Our principal executive offices and corporate headquarters are also located at the PIT of Tampa.

The PIT of Tampa consists of approximately 13,000 square-feet of fully adaptable space and is currently in Phase 2 clinical development.

DepoMeloxicam

Our preclinical product candidate, DepoMLX, isequipped with state-of-the-art technology and audio/visual capabilities and features several distinct training spaces including a long-acting NSAID,simulation lab equipped with seven ultrasound scanning stations; a lecture hall featuring a 4½-foot tall by 24-foot wide liquid crystal display video wall to support live, virtual and even global presentations; and a green-screen broadcast studio designed to treat moderatelivestream content with single or multiple hosts.

In addition to severe acute postsurgical painour EXPAREL programs, we are hosting ongoing workshops to train new users on best practice techniques for iovera° administration at the PIT of Tampa. Led by healthcare professionals, these labs include didactic lectures and hands-on trainings including live model nerve scanning and identification using ultrasound and peripheral nerve stimulation.

At no fee to the organization, the PIT of Tampa also serves as parta venue for national anesthesia provider organizations to host their own workshops and training sessions to educate healthcare providers.

Houston, Texas

In January 2023, we opened our second training facility, the Houston Pacira Innovation and Training Center, in Houston, Texas. This 19,000 square-foot state-of-the-art facility features a 125-seat adaptive lecture hall featuring the same liquid crystal display video wall that the PIT of Tampa has, a non-opioid multimodal regimen.broadcast studio and both wet and dry lab space for cadaver and other interactive workshops. A product designed for single-dose local administration such as DepoMLX could provide a longer durationsimulation lab is equipped with eight advanced ultrasound machines equipped with artificial intelligence and 3-D training software in addition to professional medical lighting and in-ceiling cameras. The PIT of pain relief at a significantly lower concentration of systemic NSAIDs, which are knownHouston is core to cause dose-dependent gastrointestinal side effects. Meloxicam, which is currently available as an oral formulation, is a commonly used NSAIDdeveloping both our physician champions and community-based clinicians who want to stay on the market today. We expectforefront of opioid-sparing pain management. With this new training facility, we have doubled our customer audience for this drugcapacity and ability to be similar to the targethost programs for EXPAREL, infiltration.ZILRETTA and iovera°.
We expect to submit an Investigational New Drug application for DepoMLX in 2017 and subsequently initiate a Phase 1 clinical trial.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 37
Results of Operations
Comparison of the Three and Nine Months Ended September 30, 20172023 and 2016
2022
Revenues

Our net productTotal revenues consist of sales include sales of (i) EXPAREL in the United StatesU.S., E.U., and DepoCyt(e)U.K.; (ii) ZILRETTA in the United StatesU.S.; (iii) iovera° in the U.S., Canada and Europe through June 2017. We also earnthe E.U. and (iv) sales of, and royalties on, sales by commercial partners of our bupivacaine liposome injectable suspension product for use in animal health indications and DepoCyt(e) and license fees and milestone payments from third parties.
veterinary use.
The following table provides information regarding our revenues during the periods indicated, including percent changes (dollars(dollar amounts in thousands):
Three Months Ended 
 September 30,		   % Increase / (Decrease) Nine Months Ended 
 September 30,		   % Increase / (Decrease)Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
 
2017 2016 2017 2016 2023202220232022
Net product sales:          Net product sales:
EXPAREL$66,780
 $64,869
 3% $204,254
 $194,374
 5%EXPAREL$128,667 $132,642 (3)%$394,202 $398,854 (1)%
DepoCyt(e) and other product sales171
 1,250
 (86)% 1,261
 3,935
 (68)%
ZILRETTAZILRETTA28,798 26,494 9%82,393 77,546 6%
iovera°iovera°5,260 4,467 18%13,645 10,694 28%
Bupivacaine liposome injectable suspensionBupivacaine liposome injectable suspension858 2,957 (71)%2,241 5,469 (59)%
Total net product sales66,951
 66,119
 1% 205,515
 198,309
 4%Total net product sales163,583 166,560 (2)%492,481 492,563 (0)%
Collaborative licensing and milestone revenue26
 1,357
 (98)% 361
 3,069
 (88)%
Royalty revenue358
 879
 (59)% 1,676
 2,091
 (20)%Royalty revenue343 906 (62)%1,253 2,305 (46)%
Total revenues$67,335
 $68,355
 (1)% $207,552
 $203,469
 2%Total revenues$163,926 $167,466 (2)%$493,734 $494,868 (0)%
EXPAREL revenue grewdecreased 3% and 5%1% in the three and nine months ended September 30, 2017,2023 versus 2022, respectively, compared to the same periods in 2016, primarily due to respective increased sales volumesdecreases of 4% in net selling price per unit in each period related to enrolling EXPAREL in the 340B drug pricing program and 6%,expanding other contracting activities, partially offset by an increasea January 2023 price increase. EXPAREL revenue was also impacted by increases in volume rebatesgross vial volumes of 2% and chargebacks of 1%. The demand for EXPAREL has continued to increase as a result of new accounts and growth within existing accounts due to the continued adoption of EXPAREL in soft tissue and orthopedic procedures.

DepoCyt(e) and other product sales decreased 86% and 68%4% in the three and nine months ended September 30, 2017,2023 versus 2022, respectively, comparedand reduced by 1% due to the same periodsa shift in 2016. The decreasesales mix in both periods was primarily due to fewer DepoCyt(e) lots sold to our commercial partners as a result of persistent technical issues specifically related to the DepoCyt(e) manufacturing processperiods.
ZILRETTA revenue increased 9% and the discontinuation of our DepoCyt(e) manufacturing activities in June 2017.

Collaborative licensing and milestone revenue decreased 98% and 88%6% in the three and nine months ended September 30, 2017,2023 versus 2022, respectively, compared to the same periods in 2016, primarily due to milestones earnedincreases of 6% in 2016 under our agreement with Aratana Therapeutics, Inc. forgross kit volume in both periods and increases of 2% and 1% in net selling price per unit during the developmentapplicable periods.
Net product sales of iovera° increased 18% and commercialization of our products in animal health indications28% in the three and nine months ended September 30, 2016.2023 versus 2022, respectively, due to increases of 22% and 31% in Smart Tip volume and increases of 2% and 3% in selling price per Smart Tip, respectively, partially offset by a higher returns allowance.

Royalty revenue primarily reflects royalties earned on collections of end-userBupivacaine liposome injectable suspension net product sales of DepoCyt(e) by our commercial partners. Royalty revenue decreased 59%71% and 20%59% in the three and nine months ended September 30, 2017,2023 versus 2022, respectively. Its related royalties decreased 62% and 46% in the three and nine months ended September 30, 2023 versus 2022, respectively, compared to the same periods in 2016,primarily due to the discontinuationtiming and product mix of orders and related sales made by Aratana Therapeutics, Inc. for veterinary use.
The following tables provide a summary of activity with respect to our DepoCyt(e) manufacturing activitiessales related allowances and accruals related to EXPAREL and ZILRETTA for the nine months ended September 30, 2023 and 2022 (in thousands):
September 30, 2023Returns
Allowances		Prompt
Payment
Discounts		Service
Fees		Volume
Rebates and
Chargebacks		Government
Rebates		Total
Balance at December 31, 2022$1,691 $1,187 $3,193 $5,452 $786 $12,309 
Provision1,710 8,835 13,414 69,982 1,588 95,529 
Payments / Adjustments(1,287)(8,874)(13,218)(68,676)(1,460)(93,515)
Balance at September 30, 2023$2,114 $1,148 $3,389 $6,758 $914 $14,323 
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 38
September 30, 2022Returns
Allowances		Prompt
Payment
Discounts		Service
Fees		Volume
Rebates and
Chargebacks		Government
Rebates		Total
Balance at December 31, 2021$3,361 $1,178 $3,636 $3,494 $761 $12,430 
Provision953 8,213 12,358 30,122 1,162 52,808 
Payments / Adjustments(2,802)(8,286)(13,069)(29,092)(1,181)(54,430)
Balance at September 30, 2022$1,512 $1,105 $2,925 $4,524 $742 $10,808 
Total reductions of gross product sales from sales-related allowances and accruals were $95.5 million and $52.8 million, or 16.3% and 9.7% of gross product sales, for the nine months ended September 30, 2023 and 2022, respectively. The overall 6.6% increase in June 2017.

sales-related allowances and accruals as a percentage of gross product sales was primarily related to accruals as a result of enrolling EXPAREL in the 340B drug pricing program and chargeback-related allowances.
Cost of Goods Sold

Cost of goods sold primarily relates to the costs to produce, package and deliver our products to customers. These expenses include labor, raw materials, manufacturing overhead and occupancy costs, depreciation of facilities, royalty payments, quality control and engineering.
The following table provides information regarding our cost of goods sold and gross margin during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
2023202220232022
 Cost of goods sold$39,750$50,678(22)%$136,977$137,379(0)%
 Gross margin76 %70 %72 %72 %
 Three Months Ended 
 September 30,		   % Increase / (Decrease) Nine Months Ended 
 September 30,		   % Increase / (Decrease)
    
 2017 2016  2017 2016 
 Cost of goods sold$18,228
 $43,152
 (58)% $66,621
 $86,483
 (23)%
 Gross margin73% 37%   68% 57%  

The decreases in cost of goods sold and the corresponding 36 and 11 percentage-point improvements in gross margins for the three and nine months ended September 30, 2017 versus 2016, respectively, were largely due to a $21.9 million charge for inventory and related reserves in the third quarter of 2016 related to a single stability batch for EXPAREL which had fallen out of specification for one of 21 acceptance criteria. The manufacturing issue that existed when this batch was made was subsequently corrected. Gross margins improved by 32 and 11margin increased six percentage-points for the three and nine months ended September 30, 2017, respectively, as a result of this 2016 event. In addition, gross margins increased by 2 and 3 percentage-points as a result of lower unplanned manufacturing shutdown and other charges in the three and nine months ended September 30, 2017, respectively. There were no scrapped lots related to DepoCyt(e) in the three months ended September 30, 2017, improving gross margins2023 versus 2022, mainly due to lower royalty expense due to no longer owing royalties for EXPAREL made under the 45-liter manufacturing process (as further discussed below) and lower inventory reserves. These increases were partially offset by 2 percentage points versusan increase in sales-related allowances and accruals as a result of enrolling EXPAREL in the same period340B drug pricing program which resulted in 2016. Thea lower net selling price in the period. Also offsetting were higher ZILRETTA product cost sold in the period.
Gross margin remained flat in the nine months ended September 30, 20172023 versus 2016 included scrapped lots for DepoCyt(e)2022, mainly due to higher EXPAREL product cost and sales-related allowances and accruals as a result of enrolling EXPAREL in the first half340B drug pricing program, which resulted in a lower net selling price in the period. This was offset by higher costs in 2022 for the transition of 2017 beforeiovera° manufacturing sites and next-generation handheld devices.
On August 8, 2023, the manufactureUnited States District Court, District of Nevada, concluded we are no longer obligated to pay royalties to the product was discontinued, decreasing gross margins by 3 percentage points.Research and Development Foundation for EXPAREL made under the 45-liter manufacturing process. For more information, see Note 15, Commitments and Contingencies, to our condensed consolidated financial statements included herein.
Research and Development Expenses
Research and development expenses primarily consist primarily of costs related to clinical trials and related outside services, product development and other research and development costs, including trials that we are conducting to generate new data for EXPAREL, ZILRETTA and iovera° and stock-based compensation expenses.expense. Clinical and preclinical development expenses include costs for clinical personnel, clinical trials performed by third-party contract research organizations,third-parties, toxicology studies, materials and supplies, database management and other third-party fees. Product development and other research and developmentmanufacturing capacity expansion expenses include development costs for our products, and medical information expenses, which include personnel, equipment, materials and contractor costs for process development and product candidates, toxicology studies, expensesdevelopment costs related to a significant scale-upscale-ups of our manufacturing capacity and facility costs for our research space. Regulatory and other expenses include regulatory activities related to unapproved products and indications, medical information expenses, registry expenses and related personnel. Stock-based compensation expense relates to the costs of stock option grants, to employees and non-employees, awards of restricted stock units, or RSUs, and our employee stock purchase plan, or ESPP.

The following table provides information regardinga breakout of our research and development expenses during the periods indicated, including percent changes (dollar amounts in thousands):
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 39
Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
Three Months Ended 
 September 30,		   % Increase / (Decrease) Nine Months Ended 
 September 30,		   % Increase / (Decrease)
 2023202220232022
2017 2016 2017 2016 
Clinical development$6,301
 $5,665
 11% $29,738
 $14,576
 104%
Product development and other4,650
 3,399
 37% 15,396
 11,435
 35%
Clinical and preclinical developmentClinical and preclinical development$6,808$8,384(19)%$17,263$39,558(56)%
Product development and manufacturing capacity expansionProduct development and manufacturing capacity expansion9,4197,24530%26,39617,31852%
Regulatory and otherRegulatory and other2,3831,99320%7,3185,65529%
Stock-based compensation824
 690
 19% 2,128
 2,598
 (18)%Stock-based compensation2,2201,78325%5,8174,76122%
Total research and development expense$11,775
 $9,754
 21% $47,262
 $28,609
 65%Total research and development expense$20,830$19,4057%$56,794$67,292(16)%
% of total revenues17% 14% 23% 14%  % of total revenues13 %12 %12 %14 %

ResearchTotal research and development expense increased 21%7% and 65%decreased 16% in the three and nine months ended September 30, 2017, respectively, compared to the same periods in 2016.2023 versus 2022, respectively.

The increase in clinicalClinical and preclinical development expense in the three months ended September 30, 2017 reflects costs for our ongoing Phase 4 EXPAREL infiltration trialsdecreased 19% and increased research grants. These increases were partially offset by the completion of our two Phase 3 trials evaluating EXPAREL as a single-dose nerve block for prolonged regional analgesia. Enrollment56% in these studies began in the second quarter of 2016 and concluded in June 2017.

In the nine months ended September 30, 2017, the increase in clinical development expense includes costs for our two Phase 3 EXPAREL nerve block trials which concluded in June 2017, as well as our ongoing Phase 4 EXPAREL infiltration trials and increased research grants. These increases were partially offset by the completion of our Phase 4 EXPAREL infiltration trial in TKA, which concluded enrollment in January 2017.

Product development and other expenses increased in both the three and nine months ended September 30, 20172023 versus 2016,2022, respectively, primarily due to expenses related to a significant scale-upthe completion of our manufacturing capacitytwo EXPAREL lower extremity nerve block trials in Swindon, England,bunionectomy and TKA in partnership with Patheon, running test batchesthe third quarter of 2022, toxicology studies that are near completion for DepoMLX and developing a new EXPAREL DepoFoam spray manufacturing process. These increases wereproduct candidates, partially offset by a reductionstart-up costs for both ZILRETTA shoulder and iovera° spasticity trials.
Product development and manufacturing capacity expansion expense increased 30% and 52% in spend for preclinical DepoFoam toxicology trials.

In the three and nine months ended September 30, 20172023 versus 2016, stock-based compensation decreased 18%2022, respectively, mainly attributable to the continued scale-up activities of our EXPAREL manufacturing capacity at our Science Center Campus in San Diego, California (for which a prior approval supplement was submitted to the FDA in October 2023 with an anticipated PDUFA action date in February 2024), as expenses fromwell as new awards were more than offset by the decreasedproduct development costs related to gene therapy.
Regulatory and other expense on mark-to-market non-employee awards that became fully vested in mid-2016. The 19% increaseincreased 20% and 29% in the three and nine months ended September 30, 20172023 versus 2016 is2022, respectively, due to newincreased enrollment and additional sites related to an observational iovera° registry study which tracks patients’ symptoms and experience with pain management related to OA of the knee, and increased medical information publications.
Stock-based compensation increased 25% and 22% in the three and nine months ended September 30, 2023 versus 2022, respectively, primarily due to greater equity awards granted in mid- to-late 2016outstanding for research and 2017.

development personnel, partially offset by a lower fair value of newer equity awards granted.
Selling, General and Administrative Expenses

Sales and marketing expenses primarily consist of compensation and benefits for our sales force and personnel that support our sales, marketing, and medical and scientific affairs operations, commission payments to our commercial partners for the promotion and sale of EXPAREL, expenses related to communicating the health outcome benefits of EXPARELour products, investments in provider-level market access and patient reimbursement support and educational programs for our customers. General and administrative expenses consist of compensation and benefits for legal, finance, regulatory activities related to approved products and indications, compliance, information technology, human resources, business development, executive management and other supporting personnel. It also includes professional fees for legal, audit, tax and consulting services. Stock-based compensation expense relates to the costs of stock option grants, RSU awards and our ESPP.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 40
The following table provides information regarding our selling, general and administrative expenses during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
2023202220232022
 Sales and marketing$38,261$33,70614%$117,302$109,0008%
 General and administrative20,64818,27713%61,11255,32110%
 Stock-based compensation9,0389,300(3)%25,22626,225(4)%
Total selling, general and administrative expense$67,947$61,28311%$203,640$190,5467%
 % of total revenues41 %37 %41 %39 %
 Three Months Ended 
 September 30,		   % Increase / (Decrease) Nine Months Ended 
 September 30,		   % Increase / (Decrease)
    
 2017 2016  2017 2016 
 Sales and marketing$24,557
 $21,490
 14% $72,344
 $69,437
 4%
 General and administrative9,750
 9,780
 0% 32,965
 32,371
 2%
 Stock-based compensation6,337
 5,044
 26% 17,007
 16,132
 5%
    Total selling, general and administrative
expenses		$40,644
 $36,314
 12% $122,316
 $117,940
 4%
 % of total revenues60% 53%   59% 58%  
Selling,Total selling, general and administrative expensesexpense increased 12% for11% and 7% in the three months ended September 30, 2017 and 4% for the nine months ended September 30, 2017, compared to the same periods in 2016.

2023 versus 2022, respectively.
Sales and marketing expensesexpense increased by 14% forand 8% in the three months ended September 30, 2017 and 4% in the nine months ended September 30, 20172023 versus the same periods in 2016. Increases in these respective periods were2022, respectively, driven by higher costs for salaries, benefits and other personnel related costs resulting from an increase in the number of field-based medical and sales professionals to better support and educatemarketing investments in our customers. We spent more money on marketing for EXPAREL in both the three and nine month periods ended September 30, 2017 versus 2016 onproducts, including educational initiatives and programs to create product awareness within key surgical markets. This spending increase also included other selling and promotional activities to the support the growth of EXPAREL, including initiatives related to our co-promotion agreement with DePuy Synthes Sales, Inc.,

or DePuy Synthes. We also supported multiple educational programs related to the impact of opioids and postsurgical pain management along withand our “Choices Matter”national advocacy campaign which educatesdesigned to educate patients onabout non-opioid treatment options. In 2023, we also invested in strategic partnerships with sports organizations, such as the Ladies Professional Golf Association (LPGA) and National Football League Alumni Association (NFLA), to increase awareness of the availability and benefits of non-opioid options to manage acute and chronic pain for athletes, including postsurgical pain and knee OA. We also expanded our investment in clinician training in the use of EXPAREL and iovera° at our training facility in Tampa, as well as the opening of a second training facility in Houston, Texas in January 2023. We also announced a new grant to the ASA’s Charitable Foundation to advance the medical specialty of anesthesiology and pain medicine, facilitate best in-class clinician education and improve patient care.

General and administrative expenses remained consistentexpense increased 13% and 10% in the three months and increased 2% in the nine months ended September 30, 2017,2023 versus 2022, respectively, versus the same periods in 2016. Inprimarily driven by legal fees attributable to ongoing litigation. For more information, see Note 15, Commitments and Contingencies, to our condensed consolidated financial statements included herein.
Stock-based compensation decreased 3% and 4% for the three months ended September 2017 versus 2016, legal expenditures increased, offset by a decrease in compliance related activities. In theand nine months ended September 30, 20172023 versus 2016, there was an increase in regulatory expenses in preparation for a European Medicines Agency Marketing Authorization Application for EXPAREL commercialization in the E.U. We also increased spending to support our investor relations and information technology functions. These increases were partially offset by lower legal and compliance expenses, primarily related to a DOJ subpoena received in April 2015.

Stock-based compensation increased $1.3 million in the three month period ended September 30, 2017, compared to the same period in 2016,2022, respectively, primarily due to newa decrease in the number of equity awards granted in mid-to-late 2016outstanding for selling, general and 2017 and accelerated stock-based compensation expense. In the nine months ended September 30, 2017 versus 2016, there was a $0.9 million increase in stock-based compensation primarily due to new awards granted in mid-to-late 2016 and 2017.administrative personnel.

Product Discontinuation Expenses

In June 2017, we discontinued all future productionAmortization of DepoCyt(e) due to persistent technical issues specific to the DepoCyt(e) manufacturing process. In the three months ended September 30, 2017, we recorded a charge of $0.3 million related to the discontinuation of our DepoCyt(e) manufacturing activities, including $0.1 million for related inventory which was recorded in cost of goods sold. The remaining $0.2 million related to asset retirement obligations and other estimated exit costs.
In the nine months ended September 30, 2017, the total charge was $5.3 million, of which $0.6 million was for related inventory recorded in cost of goods sold, $1.9 million for lease costs less an estimate of potential sub-lease income, $1.9 million for the write-off of fixed assets and $0.9 million relating to employee severance, asset retirement obligations and other product discontinuation costs.
Other Income (Expense)Acquired Intangible Assets
The following table provides a summary of the componentsamortization of other income (expense)acquired intangible assets during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
2023202220232022
Amortization of acquired intangible assets$14,322 $14,322 —%$42,966 $42,966 —%
As part of the Flexion Acquisition and the MyoScience Acquisition, we acquired intangible assets consisting of developed technology intangible assets and customer relationships, with estimated useful lives between 9 and 14 years. For more information, see Note 7, Goodwill and Intangible Assets, to our condensed consolidated financial statements included herein.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 41
 Three Months Ended 
 September 30,		   % Increase / (Decrease) Nine Months Ended 
 September 30,		   % Increase / (Decrease)
    
 2017 2016  2017 2016 
 Interest income$1,068
 $346
 209% $2,805
 $923
 204%
 Interest expense(5,127) (1,601) 220% (12,942) (5,203) 149%
 Loss on early extinguishment of debt—
 —
 N/A (3,732) —
 N/A
 Other, net79
 (8) N/A 169
 (8) N/A
      Total other expense, net$(3,980) $(1,263) 215% $(13,700) $(4,288) 219%
Contingent Consideration Charges (Gains), Restructuring Charges and Other

The following table provides a summary of the costs related to the contingent consideration, acquisition-related charges and restructuring charges during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
2023202220232022
Contingent consideration2,793 (1,043)N/A(3,847)(23,394)(84)%
Acquisition-related charges$390 $1,532 (75)%$1,588 $10,162 (84)%
Restructuring charges173 — N/A1,109 — N/A
Total contingent consideration charges (gains), restructuring charges and other$3,356 $489 100% +$(1,150)$(13,232)(91)%
Total contingent consideration charges (gains), restructuring charges and other increased by more than 100% in the three months ended September 30, 2023 versus 2022 and decreased 91% in the nine months ended September 30, 2023 versus 2022.
During the three months ended September 30, 2023, we recognized contingent consideration charges (gains), restructuring charges and other of $3.4 million in charges, which were primarily driven by an increase in the contingent consideration milestones for the Flexion Acquisition due to market volatility which affects the liability’s present value.
During the nine months ended September 30, 2023, we recognized contingent consideration charges (gains), restructuring charges and other of $1.2 million in gains. These gains were primarily due to adjustments to long-term forecasts which reduced the probability of meeting the sales-based contingent consideration milestones for the Flexion Acquisition by December 31, 2030, the expiration date for achieving the milestones. The contingent consideration gain was partially offset by a decrease in the assumed discount rate that is utilized in calculating the liability’s present value, based on a significant improvement in our incremental borrowing rate. Partially offsetting these gains were acquisition-related charges primarily related to vacant and underutilized Flexion leases. In addition, in June 2023, we implemented a restructuring plan in an effort to improve our operational efficiencies and recognized one-time employee termination benefits through a reduction of headcount.
During the three months ended September 30, 2022, we recognized contingent consideration charges (gains), restructuring charges and other of $0.5 million in charges. These charges are primarily related to severance and other employee related costs, legal and other professional fees, third-party services and other one-time charges associated with the Flexion Acquisition, which were partially offset by gains from changes in the fair value of contingent consideration related to the Flexion Acquisition and MyoScience Acquisition.
During the nine months ended September 30, 2022, we recognized contingent consideration charges (gains), restructuring charges and other of $13.2 million in gains. These gains were primarily driven by reductions in acquisition contingent consideration liabilities due to adjustments to near-term forecasts for the applicable period during which the Flexion contingent consideration may be achieved under the Flexion merger agreement and due to the reduced probability of meeting the MyoScience contingent consideration milestones by December 31, 2023, the expiration date for achieving those milestones. These gains were partially offset by severance and other employee related costs, legal and other professional fees, third-party services and other one-time charges associated with the Flexion Acquisition.
For more information, see Note 9, Financial Instruments and Note 14, Contingent Consideration Charges (Gains), Restructuring Charges and Other, to our condensed consolidated financial statements included herein.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 42
Other Expense, Net
The following table provides information regarding other expense, net during the periods indicated, including percent changes (dollar amounts in thousands):
Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
2023202220232022
 Interest expense$(3,464)$(9,856)(65)%$(16,918)$(28,935)(42)%
 Interest income2,766 1,234 100% +8,019 1,757 100%+
 Loss on early extinguishment of debt— — N/A(16,926)— N/A
 Other, net(422)(10,598)(96)%(701)(11,369)(94)%
Total other expense, net$(1,120)(19,220)(94)%$(26,526)$(38,547)(31)%
Total other expense, net increased by 215%decreased 94% and 219%31% in the three and nine months ended September 30, 2017,2023 versus 2022, respectively.
The 65% and 42% decrease in interest expense during the three and nine months ended September 30, 2023, respectively, comparedwas primarily driven by entering into the TLA Term Loan (as defined below) in March 2023 in order to retire our term loan B and related credit agreement (the “TLB Term Loan”), and, to a lesser extent, the same periods in 2016, almost entirely due to the March 2017 issuanceabsence of $345.0 million ofour 2.375% convertible senior notes due 2022, or 2022 Notes, and the repurchase of $118.2that matured in April 2022. Retiring our TLB Term Loan is expected to significantly further reduce our 2023 full-year interest expense as our new TLA Term Loan carries approximately $140.0 million of our 3.25% convertible senior notes due 2019, or 2019 Notes, which resulted in a $3.7 million loss on early extinguishment of debtless principal and an increaseinterest rate that is 400 basis points lower than the interest rate applicable under the retired TLB Term Loan.
The increases in interest expense of $3.5 million and $7.7 millionincome in the three and nine months ended September 30, 20172023 versus 2016, respectively. There was also an increasethe comparable periods in 2022 were due to higher interest incomerates and overall investment balances.
In conjunction with the entry into the TLA Credit Agreement (as defined below), we incurred a $16.9 million loss on early extinguishment of $0.7 million and $1.9 million in the same respective periodsdebt recognized as a result of additional investments from the retirement of $287.5 million aggregate principal of our TLB Term Loan in the nine months ended September 30, 2023. For more information, see Note 8, Debt, to our condensed consolidated financial statements included herein.
Other, net proceeds ofexpense during the three and nine months ended September 30, 2022 Notes.

included a $10.0 million impairment related to an equity investment.
Income Tax Expense
The following table provides information regarding our income tax expense during the periods indicated, including percent changes (dollar amounts in thousands):

Three Months Ended
September 30,		% Increase / (Decrease)Nine Months Ended
September 30,		% Increase / (Decrease)
2023202220232022
 Income tax expense$5,743 $2,762 100% +$10,896 $5,359 100% +
 Effective tax rate35 %133 %39 %17 %
 Three Months Ended 
 September 30,		   % Increase / (Decrease) Nine Months Ended 
 September 30,		   % Increase / (Decrease)
    
 2017 2016  2017 2016 
 Income tax expense$45
 $36
 25% $105
 $126
 (17)%
 Effective tax rate0% 0%   0% 0%  

IncomeThe effective tax expense was less than $0.1 million inrates were 35% and 39% for the three months ended September 30, 2017 and 2016. Income tax expense was $0.1 million in the nine months ended September 30, 20172023, respectively. The effective tax rates were 133% and 2016. The17% for the three and nine months ended September 30, 2022, respectively. Income tax expense reflects current state income taxes. Duerepresents the estimated annual effective tax rate applied to net losses in both periods, no current federal incomethe year-to-date domestic operating results adjusted for certain discrete tax expense was recorded. Since our deferreditems.
The effective tax assets are fullyrate for the three and nine months ended September 30, 2023 include costs related to non-deductible stock-based compensation and non-deductible executive compensation, partially offset by credits and a fair value adjustment for the Flexion contingent consideration.
The effective tax rates for the three and nine months ended September 30, 2022 include costs related to non-deductible executive compensation, valuation allowance, income tax expense does not reflect deferred tax expenses.allowances recorded against non-U.S. operating results and U.S. capital losses, partially offset by benefits for a first quarter milestone payment to SkyePharma Holding, Inc. (now a subsidiary of Vectura Group plc),

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 43
or Skyepharma, a fair value adjustment for Flexion contingent consideration and the impact of stock-based compensation adjustments.
Liquidity and Capital Resources
Since our inception in December 2006, we have devoted most of our cash resources to manufacturing, research and development and selling, general and administrative activities related to the development and commercialization of EXPAREL. In addition, we acquired ZILRETTA as part of the Flexion Acquisition in November 2021 and iovera° as part of the MyoScience Acquisition in April 2019. We are highlyprimarily dependent on the commercial success of EXPAREL which we launched in April 2012.and ZILRETTA. We have financed our operations primarily with cash generated from product sales, the proceeds from the sale of equityconvertible senior notes and other debt, securities, borrowings under debt facilitiescommon stock, product sales and collaborative licensing and milestone revenue. As of September 30, 2017,2023, we had an accumulated deficit of $393.7$131.7 million, cash and cash equivalents short-term investments and long-termavailable-for-sale investments of $374.9$235.2 million and working capital of $313.5$353.6 million.

We expect that our cash and available-for-sale investments on hand will be adequate to cover our short-term liquidity needs, and that we would be able to access other sources of financing should the need arise.
Summary of Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands):
  Nine Months Ended 
 September 30,
Condensed Consolidated Statement of Cash Flows Data: 2017 2016
 Net cash provided by (used in):    
 Operating activities $854
 $16,104
 Investing activities (232,464) (54,837)
 Financing activities 221,882
 6,191
    Net decrease in cash and cash equivalents $(9,728) $(32,542)
Nine Months Ended
September 30,
Condensed Consolidated Statements of Cash Flows Data:20232022
 Net cash provided by (used in):
 Operating activities$107,065 $103,237 
 Investing activities69,167 (236,374)
 Financing activities(181,252)(343,017)
Net decrease in cash and cash equivalents$(5,020)$(476,154)
Operating Activities
During the nine months ended September 30, 2017, our2023, net cash provided by operating activities was $0.9$107.1 million, compared to $16.1$103.2 million during the nine months ended September 30, 2016.2022. The decreaseincrease of $15.3$3.8 million was driven by an increase in our net loss, primarily from higher clinical trial expenses relatedattributable to our two Phase 3 EXPAREL nerve block trials, our Phase 4 EXPAREL infiltration trials, payments related to a termination fee related to a master distribution agreement with CrossLink BioScience, LLCincreased interest income and additional investments in inventory,lower interest expense, partially offset by higher collections from EXPAREL net product sales.

the payment of a $13.0 million termination fee relating to a licensing agreement.
Investing Activities
During the nine months ended September 30, 2017, our2023, net cash used inprovided by investing activities was $232.5$69.2 million, which reflected $212.1proceeds from $89.3 million of short-term and long-termavailable-for-sale investment purchasessales (net of maturities) primarily from the net proceeds of the 2022 Notes,purchases), partially offset by purchases of fixed assets of $14.2$13.4 million for fill lines for our products and contingent consideration payments of $6.2 million related to the March 2007 acquisition of Skyepharma Holding, Inc., or Skyepharma. Major fixed asset purchases included continuing expendituresequipment for expanding ouran EXPAREL manufacturing capacity in Swindon, England in partnership with Patheon and facility upgradesexpansion project at our Science Center Campus in San Diego, California.
California and purchases of equity and debt investments of $6.8 million.
During the nine months ended September 30, 2016, our2022, net cash used in investing activities was $54.8$236.4 million, which reflected $21.2$166.8 million of short-termavailable-for-sale investment purchases (net of maturities), a $32.0 million contingent consideration milestone payment that had been achieved in the fourth quarter of 2021 associated with our 2007 acquisition of Pacira Pharmaceuticals, Inc. from Skyepharma, purchases of fixed assets of $19.8$24.6 million for fill lines for our products and contingent consideration paymentsequipment for an EXPAREL capacity expansion project at our Science Center Campus in San Diego, California and purchases of $13.8 million related to the March 2007 acquisitionequity and debt investments of Skyepharma, including an $8.0 million milestone payment in connection with achieving $250.0 million of EXPAREL net sales collected on an annual basis.

Major fixed asset purchases included continuing expenditures for expanding our manufacturing capacity in Swindon, England in partnership with Patheon.

$13.0 million.
Financing Activities
During the nine months ended September 30, 2017, our2023, net cash provided byused in financing activities was $221.9$181.3 million, which consisted of proceeds froma $296.9 million repayment of TLB Term Loan principal as well as a $5.8 million prepayment penalty in connection with the issuanceretirement of the 2022 NotesTLB Term Loan facility and $30.6 million repayments of $345.0 million,TLA Term Loan principal, partially offset by $11.0 million of debt issuance and financing costs. In addition, a portion of the net proceeds from the 2022 Notes was used to retire $118.2TLA Term Loan of $149.6 million, in principal of the 2019 Notes and for $0.3 million in related costs. Proceeds from the exercise of stock options were $5.3 million and proceeds from the issuance of shares under our ESPP were $1.1 million.

In the nine months ended September 30, 2016, net cash provided by financing activities consisted of proceeds from the exercise of stock options of $5.2$1.9 million and $1.0$1.7 million from the issuance of shares undercommon stock through our ESPP.

2022 Convertible Senior Notes

On March 13, 2017, we completed a private placement of $345.0 million in aggregate principal amount of our 2022 Notes, and entered into an indenture agreement, or 2022 Indenture, with respect to the 2022 Notes. The 2022 Notes accrue interest at a fixed rate of 2.375% per annum, payable semiannually in arrears on April 1 and October 1 of each year. The 2022 Notes mature on April 1, 2022. At September 30, 2017, the outstanding principal on the 2022 Notes was $345.0 million.

On or after October 1, 2021, until the close of business on the second scheduled trading day immediately preceding April 1, 2022, holders may convert their 2022 Notes at any time. Upon conversion, holders will receive the principal amount of their 2022 Notes and any excess conversion value. For both the principal and excess conversion value, holders may receive cash, shares of our common stock or a combination of cash and shares of our common stock, at our option. The initial conversion rate for the 2022 Notes is 14.9491 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $66.89 per share of our common stock. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

Prior to the close of business on the business day immediately preceding October 1, 2021, holders may convert the 2022 Notes under certain circumstances, including if during any given calendar quarter, our stock price closes at or above 130% of the conversion price then applicable during a period of at least 20 out of the last 30 consecutive trading days of the previous quarter.

While the 2022 Notes are currently classified on our consolidated balance sheet at September 30, 2017 as long-term debt, the future convertibility and resulting balance sheet classification of this liability will be monitored at each quarterly reporting date and will be analyzed dependent upon market prices of our common stock during the prescribed measurement periods. In the event that the holders of the 2022 Notes have the election to convert the 2022 Notes at any time during the prescribed measurement period, the 2022 Notes would then be considered a current obligation and classified as such.

Prior to April 1, 2020, we may not redeem the 2022 Notes. On or after April 1, 2020, we may redeem for cash all or part of the 2022 Notes if the last reported sale price (as defined in the 2022 Indenture) of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending within five trading days prior to the date on which we provide notice of redemption.

See Note 6, 8, Debt, to our condensed consolidated financial statements included herein for further discussion on the TLA Term Loan and TLB Term Loan.
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 44
During the nine months ended September 30, 2022, net cash used in financing activities was $343.0 million, which primarily consisted of a $192.6 million principal repayment of the 2022 Notes.

2019 Convertible Senior Notes

On January 23, 2013, we completed a private offering of $120.0 million in aggregate principal of 3.25%3.375% convertible senior notes due 2019, or 20192024 (the “Flexion 2024 Notes”) as part of a repurchase offer to the holders of the Flexion 2024 Notes that was triggered by the Flexion Acquisition, $157.0 million to settle the 2022 Notes that matured on April 1, 2022 and $18.8 million of scheduled repayments of Term Loan principal, partially offset by $23.5 million of proceeds from the exercise of stock options and $1.8 million from the issuance of common stock through our ESPP.
Debt
2028 Term Loan A Facility
On March 31, 2023, we entered into a credit agreement (the “TLA Credit Agreement”) to refinance the indebtedness outstanding under our TLB Credit Agreement (as defined and discussed below). The term loan issued under the TLA Credit Agreement (the “TLA Term Loan”) was issued at a 0.30% discount and provides for a single-advance term loan A facility in the principal amount of $150.0 million, which is secured by substantially all of our and any subsidiary guarantor’s assets and matures on March 31, 2028. We may elect to borrow either (i) alternate base rate borrowings or (ii) term benchmark borrowings or daily simple SOFR (as defined in the TLA Credit Agreement) borrowings. Each term loan borrowing which is an indenture agreement, or 2019 Indenture, with respect to the 2019 Notes. The 2019 Notes accruealternate base rate borrowing bears interest at a rate of 3.25% per annum payable semiannuallyequal to (i) the Alternate Base Rate (as defined in arrearsthe TLA Credit Agreement), plus (ii) a spread based on February 1our Senior Secured Net Leverage Ratio ranging from 2.00% to 2.75%. Each term loan borrowing which is a term benchmark borrowing or daily simple SOFR borrowing bears interest at a rate per annum equal to (i) the Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR (as each is defined in the TLA Credit Agreement), plus (ii) a spread based on our Senior Secured Net Leverage Ratio ranging from 3.00% to 3.75%. During the nine months ended September 30, 2023, we made a scheduled principal payment of $2.8 million as well as $27.8 million of voluntary principal prepayments. Due to voluntary principal prepayments of $27.8 million made during the three months ended September 30, 2023, we are not required to make further principal payments for the remainder of 2023 and August 1 of each year, and mature on February 1, 2019.2024. As of September 30, 2017,2023, borrowings under the outstanding principal onTLA Term Loan consisted entirely of term benchmark borrowings at a rate of 8.47%.
The TLA Credit Agreement requires us to, among other things, maintain (i) a Senior Secured Net Leverage Ratio (as defined in the 2019 Notes was approximately $0.3 million.

Credit Agreement), determined as of the last day of each fiscal quarter, of no greater than 3.00 to 1.00 and (ii) a Fixed Charge Coverage Ratio (as defined in the TLA Credit Agreement), determined as of the last day of each fiscal quarter, of no less than 1.50 to 1.00. The TLA Credit Agreement also contains customary affirmative and negative covenants, financial covenants, representations and warranties, events of default and other provisions. As of September 30, 2023, we were in compliance with all financial covenants under the TLA Credit Agreement. See Note 6, 8, Debt, to our condensed consolidated financial statements included herein for further discussiondiscussion.
2026 Term Loan B Facility
In December 2021, we entered into the $375.0 million TLB Term Loan which was secured by substantially all of our and any subsidiary guarantor’s assets and was scheduled to mature on December 7, 2026, subject to certain exceptions set forth in the TLB Credit Agreement.
On March 31, 2023, we used the $149.6 million of net borrowings under the TLA Credit Agreement and cash on hand to repay the indebtedness outstanding under the TLB Credit Agreement and concurrently terminated the TLB Credit Agreement. We incurred a prepayment fee of 2.00% of the 2019outstanding principal balance of the TLB Term Loan in connection with the termination. During the nine months ended September 30, 2023, we made a scheduled principal payment of $9.4 million and repaid the outstanding $287.5 million principal on the TLB Term Loan, which resulted in a $16.9 million loss on early extinguishment of debt. See Note 8, Debt, to our condensed consolidated financial statements included herein for further discussion.
2025 Convertible Senior Notes
In July 2020, we completed a private placement of $402.5 million in aggregate principal amount of our 0.750% convertible senior notes due 2025, or 2025 Notes, and entered into an indenture with respect to the 2025 Notes. The 2025 Notes accrue interest at a fixed rate of 0.750% per annum, payable semiannually in arrears on February 1st and August 1st of each year. The 2025 Notes mature on August 1, 2025. At September 30, 2023, the outstanding principal on the 2025 Notes was $402.5 million. See Note 8, Debt, to our condensed consolidated financial statements included herein for further discussion.

2024 Convertible Senior Notes

In November 2021, as part of the Flexion Acquisition, we assumed $201.3 million in aggregate principal amount of the Flexion 2024 Notes. The Flexion 2024 Notes have a maturity date of May 1, 2024, are unsecured, and accrue interest at a rate
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 45
of 3.375% per annum, payable semi-annually on May 1st and November 1st of each year. In January 2022, we repurchased $192.6 million aggregate principal amount of the Flexion 2024 Notes. At September 30, 2023, the outstanding principal on the Flexion 2024 Notes was $8.6 million. See Note 8, Debt, to our condensed consolidated financial statements included herein for further discussion.
Future Capital Requirements
We believe that our existing cash and cash equivalents, short-term investments, long-termavailable-for-sale investments and cash received from product sales will be sufficient to enable us to fund our operating expenses, capital expenditure requirements and payment of the interest and principal on any conversions of our outstanding convertible senior notesTLA Term Loan, Flexion 2024 Notes and to service our indebtedness2025 Notes (collectively, the “Notes”) through at least November 8, 2018.the next 12 months. Our future use of operating cash and capital requirements will depend on many forward-looking factors, including, but not limited to, the following:to:
our ability to successfully continue to expand the commercialization of EXPAREL;
•the cost and timing of expandingthe potential milestone payments to former Flexion stockholders, which could be up to an aggregate of $372.3 million if certain regulatory and commercial milestones are met. See Note 9, Financial Instruments, to our manufacturing facilitiescondensed consolidated financial statements included herein for EXPARELmore information;
•the cost and timing of potential remaining milestone payments to former MyoScience security holders, which could be up to an aggregate of $43.0 million if certain regulatory and commercial milestones are met. See Note 9, Financial Instruments, to our condensed consolidated financial statements included herein for more information;
•the impact of global economic conditions—including the impact of inflation—on our product and material costs, supply chain, longer lead-times, an inability to secure a sufficient supply of materials, our operating expenses and our other product candidates, including costs associated with certain technical transfer activities and the construction of manufacturing suites at Patheon’s Swindon, England facility;business strategy;
•the timing of and extent to which the holders of our 2022 Notes elect to convert their notes;Notes, the timing of principal and interest payments on our TLA Term Loan and the timing and impact of increases to the variable interest rate on our TLA Term Loan borrowings in accordance with the terms of the TLA Credit Agreement;
•the costs and our ability to successfully continue to expand the commercialization of EXPAREL, ZILRETTA and iovera°, including markets outside of the U.S.;
•the cost and timing of potential milestone paymentsexpanding and maintaining our manufacturing facilities, including the current EXPAREL capacity expansion project at our Science Center Campus in San Diego, California (for which a prior approval supplement was submitted to Skyepharma, which could be up tothe FDA in October 2023 with an aggregateanticipated PDUFA action date in February 2024) and capital projects at the Thermo Fisher site in Swindon, England;
•the cost and timing of $36.0 million if certain milestones pertaining to net sales of DepoBupivacaine products,additional strategic investments, including EXPAREL, are met;additional investments under existing agreements;
•the costs related to legal and regulatory issues;matters;
•the costs of performing additional clinical trials for EXPAREL,our products, including the additional pediatric trials required by the FDA and EMA as a condition of approval;the approval of EXPAREL;
•the costs for the development and commercialization of other product candidates;
•the costs and timing of future payments under our employee benefit plans, including but not limited to our cash long-term incentive plan and non-qualified deferred compensation plan; and
•the extent to which we acquire or invest in products, businesses and technologies.
We may require additional debt or equity financing to meet our future operating and capital requirements. We have no committed external sources of funds, and additional equity or debt financing may not be available on acceptable terms, if at all. In particular, capital market disruptions or negative economic conditions may hinder our access to capital.

Off-Balance Sheet Arrangements
We do not have any material off-balance sheet arrangements as of September 30, 2017, except for operating leases, nor do we have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities. None of our operating leases have, or are reasonably likely to have, a current or future material effect on our financial condition or changes in financial condition.
Critical Accounting Policies and Use of Estimates
See Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements included herein for a discussion of recently issued accounting pronouncements and their impact or future potential impact on our financial results, if determinable. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our consolidated financial statements, refer to our most recent2022 Annual Report. There have been no significant changes to our critical accounting policies nor any recently issued accounting pronouncements that are expected to have a material impact on Form 10-K for the year endedour financial results since December 31, 2016.2022.
Revenue Recognition
Our principal sources of revenue include (i) sales of EXPAREL in the United States, (ii) sales of DepoCyt(e) to our commercial partners within the United States and Europe and sales of our bupivacaine liposome injectable suspension product for use in animal health indications in the United States, (iii) royalties based on sales by commercial partners of DepoCyt(e) and sales of our bupivacaine liposome injectable suspension product for use in animal health indications and (iv) license fees and milestone payments. We recognize revenue when there is persuasive evidence that an arrangement exists, title has passed, collection is reasonably assured and the price is fixed or determinable.
Net Product Sales
We sell EXPAREL through a drop-ship program under which orders are processed through wholesalers based on orders of the product placed by end-users which include hospitals, ambulatory surgery centers and doctors. EXPAREL is delivered directly to the end-user without the wholesaler ever taking physical possession of the product. We record revenue at the time the product is delivered to the end-user. We also recognize revenue from products manufactured and supplied to commercial partners, such as DepoCyt(e), upon shipment. Prior to the shipment of manufactured products, we conduct initial product release and stability testing in accordance with the FDA’s current Good Manufacturing Practices.

Revenues from sales of products are recorded net of returns allowances, prompt payment discounts, wholesaler service fees and volume rebates and chargebacks. The calculation of some of these items requires management to make estimates based on sales data, contracts, inventory data and other related information that may become known in the future. We review the adequacy of our provisions on a quarterly basis.
Returns Allowances
We allow customers to return product that is damaged or received in error. In addition, we allow EXPAREL to be returned beginning six months prior to, and twelve months following, product expiration. We estimate our sales returns reserve based on our historical return rates, which we believe is the best estimate of the anticipated product to be returned. The returns reserve is recorded at the time of sale as a reduction to gross product sales and an increase in accrued expenses.

Our commercial partners can return DepoCyt(e) within contractually specified timeframes if the product does not meet the applicable inspection tests. We estimate our returns reserves based on our experience with historical return rates. Historically, our DepoCyt(e) returns have not been material.
Prompt Payment Discounts
The prompt payment reserve is based upon discounts offered to wholesalers as an incentive to meet certain payment terms. We accrue discounts to wholesalers based on contractual terms of agreements and historical experience. We account for these discounts at the time of sale as a reduction to gross product sales and a reduction to accounts receivable.
Wholesaler Service Fees
Our customers include major and regional wholesalers with whom we have contracted a fee for service based on a percentage of gross product sales. This fee for service is recorded as a reduction to gross product sales and an increase to accrued expenses at the time of sale, and is recorded based on the contracted percentage.
Volume Rebates and Chargebacks
Volume rebates and chargeback reserves are based upon contracted discounts and promotional offers we provide to certain end-users such as members of group purchasing organizations, hospitals and hospital systems. Volume rebates are recorded at the time of sale as a reduction to gross product sales and an increase in accrued expenses. Chargeback reserves are recorded at the time of sale as a reduction to gross product sales and a reduction to accounts receivable.
The following tables provide a summary of activity with respect to our sales related allowances and accruals for the nine months ended September 30, 2017 and 2016 (in thousands):
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 46
September 30, 2017 Returns Allowances Prompt Payment Discounts Wholesaler Service Fees Volume
Rebates and
Chargebacks		 Total
Balance at December 31, 2016 $1,346
 $595
 $735
 $1,124
 $3,800
Provision 536
 4,200
 3,182
 3,015
 10,933
Payments/Credits (923) (4,229) (3,314) (3,265) (11,731)
Balance at September 30, 2017 $959
 $566
 $603
 $874
 $3,002
September 30, 2016 Returns Allowances Prompt Payment Discounts Wholesaler Service Fees Volume
Rebates and
Chargebacks		 Total
Balance at December 31, 2015 $1,733
 $625
 $745
 $797
 $3,900
Provision 506
 3,978
 3,016
 1,587
 9,087
Payments/Credits (1,022) (4,073) (3,202) (1,657) (9,954)
Balance at September 30, 2016 $1,217
 $530
 $559
 $727
 $3,033
Total reductionsTable of gross product sales from sales-related allowances and accruals were $10.9 million and $9.1 million, or 5.1% and 4.4% of gross product sales for the nine months ended September 30, 2017 and 2016, respectively. The overall increase in sales-related allowances and accruals as a percentage of gross product sales was directly related to the increase in EXPAREL sales and an increase in volume related rebates and chargebacks.Contents



Contractual Obligations
In April 2014, we and Patheon enteredExcept for entry into a Strategic Co-Productionthe new TLA Credit Agreement and Technical Transfer and Service Agreement to collaborate in the manufacture of EXPAREL. Under the termstermination of the Technical Transfer and ServiceTLB Credit Agreement Patheon has agreed to undertake certain technical transfer activities and construction services needed to prepare its Swindon, England facility for the manufacture of EXPAREL in two dedicated manufacturing suites. Upon an early termination of this agreement (other than termination by us in the event that Patheon does not meet the construction and manufacturing milestones or for a breach by Patheon), we will pay for the make good costs occasioned by the removal of our manufacturing equipment and for Patheon’s termination costs.
In January 2017, we announced the initiation of a Co-Promotion Agreement with DePuy Synthes to market and promote the use of EXPAREL for orthopedic procedures in the United States. Under the five-year arrangement, DePuy Synthes will be the exclusive third-party distributor to promote and sell EXPAREL for operating room use for orthopedic and spine surgeries (including knee, hip, shoulder, sports and trauma surgeries) in the United States. DePuy Synthes is entitled to a tiered commission ranging from low single-digits to double-digits on sales of EXPAREL, subject to conditions, limitations and adjustments. The initial term of the agreement ends on December 31, 2021, with the option to extend the agreement an additional 12 month increments upon mutual agreement of the parties, subject to certain conditions. We and DePuy Synthes have mutual termination rights under the agreement, subject to certain terms, conditions and advance notice requirements; provided that we or DePuy Synthes generally may not terminate the agreement, without cause, within three years of the effective date of the agreement. We also have additional unilateral termination rights under certain circumstances.
Potential future milestone payments to Skyepharma could be up to an aggregate of $36.0 million if certain milestones pertaining to net sales of DepoBupivacaine products collected, including EXPAREL, are met, including $32.0 million when annual net sales collected reach $500.0 million (measured on a rolling quarterly basis) and $4.0 million upon the first commercial sale in a major E.U. country. This contingency isas described further in Note 5, Goodwill8, Debt, to our condensed consolidated financial statements included herein.herein, there have been no material changes in our contractual obligations relating to our indebtedness, lease obligations and purchase obligations from those reported in our 2022 Annual Report. For more information on our contractual obligations and commercial commitments, see Part II, Item 7 in our 2022 Annual Report.

In October 2017, we made an initial cash investment of $15 million in TELA Bio, a privately-held surgical reconstruction company that markets its proprietary OviTexTM portfolio of products for ventral hernia repair and abdominal wall reconstruction. We may be required to invest up to an additional $10 million in TELA Bio under certain performance scenarios or upon our own election.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our cash cash equivalentequivalents and investment activities is to preserve principal while at the same time maximizing the income that we receive from our investments without significantly increasing risk. We invest in corporate bonds, commercial paper, and asset-backed securities and U.S. Treasury and other government agency notes, which are reported at fair value. These securities are subject to interest rate risk and credit risk. This means that a change in prevailing interest rates may cause the principal amountfair value of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the interest rate later rises, we expect that the fair value of our investment will decline. A hypothetical 100 basis point increase in interest rates would have reduced the fair value of our available-for-sale securities at September 30, 20172023 by approximately $1.9$0.7 million.

In January 2013, we issued $120.0 million in aggregate principal amount of 3.25% convertible senior notes, which mature in February 2019. Holders may convert their 2019 Notes prior to maturity under certain circumstances. Upon conversion, holders will receive cash up to the principal amount of the 2019 Notes and, with respect to any excess conversion value, cash, sharesThe fair values of our common stock or a combination of cash and shares, at our option. The fair value of the 2019 Notes isare impacted by both the fair value of our common stock and interest rate fluctuations. As of September 30, 2017,2023, the estimated fair value of the 20192025 Notes was $1,505$909 per $1,000 principal amount. See Note 6, 8, Debt, to our condensed consolidated financial statements included herein for further discussion of the 2019 Notes.our Notes, which bear interest at a fixed rate. At September 30, 2017, approximately $0.32023, all $402.5 million of principal remains outstanding on the 20192025 Notes and $8.6 million of principal remains outstanding on the Flexion 2024 Notes.

In March 2017, we issued $345.0 millionThe TLB Term Loan provided for a single-advance term loan in aggregate principal amount of 2.375% convertible senior notes, which mature in April 2022. Holders may convert their 2022 Notes prior to maturity under certain circumstances. Upon conversion, holders will receive the principal amount of $375.0 million and was scheduled to mature on December 7, 2026. Each term loan borrowing which was an alternate base rate borrowing bears interest at a variable rate per annum equal to the 2022 NotesAlternate Base Rate (as defined in the TLB Term Loan Credit Agreement) subject to a 1.75% floor, plus 6.00%. Each term loan borrowing which was a term benchmark borrowing bears interest at a variable rate per annum equal to (i) the Adjusted Term SOFR rate (as defined in the TLB Term Loan Credit Agreement) subject to a 0.75% floor plus (ii) 7.00%. We repaid the outstanding principal for TLB Term Loan on March 31, 2023, therefore there were no outstanding borrowings under the TLB Term Loan as of September 30, 2023.
The TLA Term Loan provides for a single-advance term loan in the principal amount of $150.0 million and any excess conversion valueis scheduled to mature on March 31, 2028. Each term loan borrowing that is a term benchmark borrowing or daily simple SOFR borrowing bears interest at a rate per annum equal to (i) the Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR (as each is defined in cash, shares ofthe TLA Credit Agreement), plus (ii) a spread based on our common stock or a combination of cash and shares, at our option. The fair value of the 2022 Notes is impacted by both the fair value of our common stock and interest rate fluctuations.Senior Secured Net Leverage Ratio ranging from 3.00% to 3.75%. As of September 30, 2017,2023, borrowings under the estimated fair valueTLA Term Loan consisted entirely of term benchmark borrowings at a rate of 8.47%. A hypothetical 100 basis point increase in interest rates would have increased interest expense by approximately $0.3 million and $0.7 million for the three and nine months ended September 30, 2023, respectively.
As a result of the 2022 Notes was $973 per $1,000 principal amount. SeeFlexion Acquisition and as discussed in more detail in Note 6, 8, Debt, to our condensed consolidated financial statements included herein, any future conversion rights for further discussionthe Flexion 2024 Notes are subject to the occurrence of any future events giving rise to such conversion rights under the 2022indenture governing the Flexion 2024 Notes. At September 30, 2017, $345.0 million of principal remains outstanding on the 2022 Notes.

Most of ourWe have agreements with certain vendors and partners that operate in foreign jurisdictions. The more significant transactions are conducted in United States dollars. We do have certain agreements with commercial partners located outside the United States which have transactions conducted in Euros. As of September 30, 2017, we did not have any receivables from customersprimarily denominated in Euros. A hypothetical 10% decreasethe U.S. Dollar, subject to an annual adjustment based on changes in the value of the Euro relative to the United States dollar would have decreased our revenue by approximately $10 thousand for the quarter ended September 30, 2017.

currency exchange rates.
Additionally, our accounts receivable are primarily concentrated with threefour large regional wholesalers of pharmaceutical products. In the event of non-performance or non-payment, there may be a material adverse impact on our financial condition, results of operations or net cash flows.flow.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 47
Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chairman and our Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures which are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chairman and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on that evaluation, our Chief Executive Officer and Chairman and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017.2023.
Changes in Internal Control Overover Financial Reporting
There hashave been no changechanges in our internal control over financial reporting that occurred during the quarter ended September 30, 20172023 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls

Our management, including the Chief Executive Officer and Chairman and our Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errorerrors or mistake.mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.



Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 48
PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS


From time to time, we have been and may again become involved in legal proceedings arising in the ordinary course of our business. Except as described below, we are not presently a party to any litigation or legal proceedings that we believe to be material and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect on our business, operating results, financial condition or cash flows.
In April 2015, we received a subpoena from the U.S. Department of Justice, U.S. Attorney’s Office for the District of New Jersey, requiring the production of a broad range of documents pertaining to marketing and promotional practicesFor information related to EXPAREL. We are cooperating with the government’s inquiry. We can make no assurances asItem 1. Legal Proceedings, refer to the time or resources that will needNote 15, Commitments and Contingencies, to be devoted to this inquiry or its final outcome, or the impact, if any, of this inquiry or any proceedings on our business,
condensed consolidated financial condition, results of operations and cash flows.statements included herein.


Item 1A. RISK FACTORS


You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016,, which could materially affect our business, financial condition, cash flows or future results. ThereExcept as described below, there have been no material changes in our risk factors included in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016.Report. The risks described in our 2022 Annual Report on Form 10-K for the year ended December 31, 2016 are not the only risks facing our company.Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.


If we fail to successfully execute the transition of David Stack, our Chief Executive Officer and Chairman, we may not be able to execute our business strategy.

In September 2023, David Stack, our Chief Executive Officer and Chairman, announced that he intends to retire as Chief Executive Officer and as a member of the Board effective immediately upon the appointment of his successor as Chief Executive Officer in order to ensure a smooth transition of leadership. The Board of Directors has engaged an executive search firm to assist in a comprehensive search for the Company’s next Chief Executive Officer.

Our success depends in a large part upon the leadership of our Chief Executive Officer, which is critical to, among other things, our mission, strategic direction, culture, products and technologies. Leadership transitions can be inherently difficult to manage. An inadequate transition to a new Chief Executive Officer may cause disruption within the Company, adversely affecting our financial performance and ability to meet operational goals and strategic plans. Management turnover also inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. In addition, to the extent we experience additional management turnover, competition for top management is high and it may take months to find a candidate that meets our requirements. If we are unable to attract and retain qualified management personnel, our business could suffer. Furthermore, while we have succession plans in place and we have employment arrangements with certain key executives, these do not guarantee the services of these executives will continue to be available to us.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES, AND USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES


None.


Item 3. DEFAULTS UPON SENIOR SECURITIES


None.


Item 4. MINE SAFETY DISCLOSURES


Not applicable.


Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 49
Item 5. OTHER INFORMATION


Rule 10b5-1 Trading Plans

The following table shows the “Rule 10b5-1 trading arrangements” and “non-Rule 10b5-1 trading arrangements” (as each term is defined in Item 408(a) of Regulation S-K) adopted by our directors and executive officers during the quarter ended September 30, 2023. No trading arrangements were terminated by our directors and executive officers during the quarter ended September 30, 2023.
Trading Arrangement
Name and PositionActionDateRule 10b5-1*Non-Rule
10b5-1**		Total Number of
Shares to be Sold		Expiration
Date
Charles A. Reinhart, III
Chief Financial Officer
Adopt (1)
7/5/2023x
To Be Determined (2)
N/A
Kristen Williams
Chief Administrative Officer and Secretary
Adopt (1)
7/27/2023x
To Be Determined (2)
N/A
Roy Winston
Chief Medical Officer and Orthopedic Franchise
Adopt9/13/2023x
To Be Determined (2) (3)
8/9/2024
* Intended to satisfy the affirmative defense of Rule 10b5-1(c).
** Not applicable.intended to satisfy the affirmative defense of Rule 10b5-1(c).


(1) Represents an election made upon acceptance of a grant of restricted stock units made in June 2023 to sell shares to cover tax withholding obligations upon vesting.
(2) The aggregate number of shares to be sold pursuant to each trading arrangement listed above is dependent on the amount of tax withholding required upon the vesting of restricted stock units, and, therefore, is indeterminable at this time.
(3) Dr. Winston’s trading arrangement includes 11,472 long shares to be sold upon the Company’s common stock reaching a specified limit price.


Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 50
Table of Contents
Item 6. EXHIBITS

The exhibits listed below are filed or furnished as part of this report.

Exhibit NumberDescription
Exhibit No.
10.1
DescriptionTransition and Retirement Agreement, dated September 20, 2023, between the Company and David Stack.(1) †
31.1
Certification of Chief Executive Officer and Chairman pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended.*
32.1
Certification of Chief Executive Officer and Chairman pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2
Certification ofand Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101The following materials from the Quarterly Report on Form 10-Q of Pacira Pharmaceuticals,BioSciences, Inc. for the quarter ended September 30, 2017,2023, formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Loss;Income (Loss); (iv) the Condensed Consolidated StatementStatements of Stockholders’ Equity; (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Condensed Notes to Consolidated Financial Statements.*
104Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101).


*Filed herewith.
*Filed herewith.
**Furnished herewith.
†Denotes management contract or compensatory plan or arrangement.
(1)Incorporated by reference to the Company’s Current Report on Form 8-K, filed on September 26, 2023.

Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 51
**Furnished herewith.

SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PACIRA PHARMACEUTICALS,BIOSCIENCES, INC.

(REGISTRANT)
Date:November 2, 2023
Dated:By:November 8, 2017/s/ DAVID STACK
David Stack
Chief Executive Officer and Chairman
(Principal Executive Officer)
Dated:Date:November 8, 20172, 2023By:/s/ CHARLES A. REINHART, III
Charles A. Reinhart, III
Chief Financial Officer
(Principal Financial Officer)



36
Pacira BioSciences, Inc. | Q3 2023 Form 10-Q | Page 52