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Form 10-Q Pacira BioSciences, Inc. For: Jun 30

August 3, 2022 3:48 PM EDT

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

For the Quarterly Period Ended June 30, 2022
 
OR

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

pcrx-20220630_g1.jpg

PACIRA BIOSCIENCES, INC.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware51-0619477
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
 Identification No.)

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.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 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 such files.)  Yes   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”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

As of August 1, 2022, 45,824,210 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.


PACIRA BIOSCIENCES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS
  Page #
 
 
 
 
 
 
 
   
 

Pacira BioSciences, Inc. | Q2 2022 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)
June 30,
2022
December 31,
2021
ASSETS
Current assets:  
     Cash and cash equivalents$122,061 $585,578 
     Short-term available-for-sale investments194,332 70,831 
     Accounts receivable, net91,105 96,318 
     Inventories, net100,588 98,550 
     Prepaid expenses and other current assets18,124 14,771 
          Total current assets526,210 866,048 
Fixed assets, net191,279 188,401 
Right-of-use assets, net72,082 76,410 
Goodwill146,132 145,175 
Intangible assets, net595,324 623,968 
Deferred tax assets167,149 153,364 
Investments and other assets35,812 21,987 
          Total assets$1,733,988 $2,075,353 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
     Accounts payable$13,983 $10,543 
     Accrued expenses77,275 127,555 
     Lease liabilities8,134 7,891 
     Convertible senior notes, net 350,466 
Current portion of long-term debt, net33,776 24,234 
     Income taxes payable11 429 
          Total current liabilities133,179 521,118 
Convertible senior notes, net403,534 339,267 
Long-term debt, net318,344 335,263 
Lease liabilities67,575 71,727 
Contingent consideration35,247 57,598 
Other liabilities19,473 19,972 
          Total liabilities977,352 1,344,945 
Commitments and contingencies (Note 16)
Stockholders’ equity:  
Preferred stock, par value $0.001; 5,000,000 shares authorized; none issued and outstanding at June 30, 2022 and December 31, 2021
  
Common stock, par value $0.001; 250,000,000 shares authorized; 45,801,578 and 44,734,308 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
46 45 
     Additional paid-in capital895,151 942,091 
     Accumulated deficit(137,956)(211,895)
     Accumulated other comprehensive (loss) income(605)167 
          Total stockholders’ equity756,636 730,408 
          Total liabilities and stockholders’ equity$1,733,988 $2,075,353 
See accompanying notes to condensed consolidated financial statements.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 4

PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Revenues:    
Net product sales$168,581 $134,863 $326,003 $253,601 
Royalty revenue830 602 1,399 891 
Collaborative licensing and milestone revenue 125  125 
          Total revenues169,411 135,590 327,402 254,617 
Operating expenses:    
Cost of goods sold50,627 35,248 86,701 66,597 
Research and development26,282 12,573 47,887 28,453 
Selling, general and administrative65,003 50,813 129,263 99,335 
Amortization of acquired intangible assets14,322 1,967 28,644 3,933 
Acquisition-related (gains) charges, product discontinuation and other(18,058)146 (13,721)2,019 
          Total operating expenses138,176 100,747 278,774 200,337 
Income from operations31,235 34,843 48,628 54,280 
Other (expense) income:    
Interest income252 224 523 639 
Interest expense(8,833)(7,023)(19,079)(13,994)
Other, net(647)(2,396)(771)(2,554)
          Total other expense, net(9,228)(9,195)(19,327)(15,909)
Income before income taxes22,007 25,648 29,301 38,371 
Income tax expense(2,131)(6,567)(2,597)(8,921)
Net income$19,876 $19,081 $26,704 $29,450 
Net income per share:    
     Basic net income per common share$0.44 $0.43 $0.59 $0.67 
     Diluted net income per common share$0.40 $0.42 $0.55 $0.64 
Weighted average common shares outstanding:  
     Basic45,501 44,145 45,185 43,989 
     Diluted52,478 45,592 52,262 45,779 
 
See accompanying notes to condensed consolidated financial statements.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 5

PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Net income$19,876 $19,081 $26,704 $29,450 
Other comprehensive (loss) income:  
Net unrealized (loss) gain on investments, net of tax(160)12 (893)(138)
Foreign currency translation adjustments82 (3)121 1 
Total other comprehensive (loss) income(78)9 (772)(137)
Comprehensive income$19,798 $19,090 $25,932 $29,313 
 
See accompanying notes to condensed consolidated financial statements.



Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 6

PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2022 AND 2021

(In thousands)
(Unaudited)
 Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other Comprehensive (Loss) Income 
 SharesAmountTotal
Balance at March 31, 202245,064 $45 $867,890 $(157,832)$(527)$709,576 
Exercise of stock options307 1 10,856 — — 10,857 
Vested restricted stock units292 — — — —  
Common stock issued under employee stock
purchase plan
37 — 1,821 — — 1,821 
Stock-based compensation— — 11,544 — — 11,544 
Issuance of common stock upon conversion of 2022 convertible senior notes (Note 9)102 — 3,040 — — 3,040 
Other comprehensive loss (Note 11)— — — — (78)(78)
Net income— — — 19,876 — 19,876 
Balance at June 30, 202245,802 $46 $895,151 $(137,956)$(605)$756,636 

Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other Comprehensive (Loss) Income
SharesAmountTotal
Balance at March 31, 202143,958 $44 $894,108 $(243,506)$172 $650,818 
Exercise of stock options162 — 5,225 — — 5,225 
Vested restricted stock units286 — — — —  
Common stock issued under employee stock
purchase plan
31 — 1,574 — — 1,574 
Stock-based compensation— — 10,461 — — 10,461 
Other comprehensive income (Note 11)— — — — 9 9 
Net income— — — 19,081 — 19,081 
Balance at June 30, 202144,437 $44 $911,368 $(224,425)$181 $687,168 

See accompanying notes to condensed consolidated financial statements.

Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 7

PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(In thousands)
(Unaudited)
 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 (Note 2)— — (96,468)47,235 — (49,233)
Exercise of stock options630 1 21,934 — — 21,935 
Vested restricted stock units299 — — — —  
Common stock issued under employee stock
purchase plan
37 — 1,821 — — 1,821 
Stock-based compensation— — 22,733 — — 22,733 
Issuance of common stock upon conversion of 2022 convertible senior notes (Note 9)102 — 3,040 — — 3,040 
Other comprehensive loss (Note 11)— — — — (772)(772)
Net income— — — 26,704 — 26,704 
Balance at June 30, 202245,802 $46 $895,151 $(137,956)$(605)$756,636 

Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other Comprehensive (Loss) Income
SharesAmountTotal
Balance at December 31, 202043,637 $44 $873,201 $(253,875)$318 $619,688 
Exercise of stock options479 — 16,022 — — 16,022 
Vested restricted stock units290 — — — —  
Common stock issued under employee stock
purchase plan
31 — 1,574 — — 1,574 
Stock-based compensation— — 20,571 — — 20,571 
Other comprehensive loss (Note 11)— — — — (137)(137)
Net income— — — 29,450 — 29,450 
Balance at June 30, 202144,437 $44 $911,368 $(224,425)$181 $687,168 

See accompanying notes to condensed consolidated financial statements.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 8

PACIRA BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
(Unaudited)
Six Months Ended
June 30,
 20222021
Operating activities:  
Net income$26,704 $29,450 
Adjustments to reconcile net income to net cash provided by operating activities:  
     Deferred taxes 2,193 7,613 
     Depreciation of fixed assets and amortization of intangible assets40,897 9,748 
     Amortization of debt issuance costs2,053 1,310 
     Amortization of debt discount1,412 11,401 
     Loss (gain) on disposal of fixed assets193 (10)
     Stock-based compensation22,733 20,571 
     Changes in contingent consideration(22,351)(988)
     Loss on investment108 2,601 
Changes in operating assets and liabilities:  
     Accounts receivable, net5,213 (15,312)
     Inventories, net(2,038)(615)
     Prepaid expenses and other assets(3,233)(944)
     Accounts payable5,258 2,156 
     Accrued expenses and income taxes payable(19,038)(18,140)
     Other liabilities479 (964)
     Payment of contingent consideration (5,662)
          Net cash provided by operating activities60,583 42,215 
Investing activities:  
     Purchases of fixed assets(19,403)(23,624)
     Purchases of available-for-sale investments(187,641)(318,132)
     Sales of available-for-sale investments62,936 294,288 
     Payment of contingent consideration(32,000) 
     Purchases of equity and debt investments(12,750)(14,220)
     Sale of equity investment 9,057 
          Net cash used in investing activities(188,858)(52,631)
Financing activities:  
     Proceeds from exercises of stock options21,881 15,997 
     Proceeds from shares issued under employee stock purchase plan1,821 1,574 
     Repayment of 2022 convertible senior notes(156,960) 
     Repayment of 2024 convertible senior notes(192,609) 
     Repayment of Term loan B facility maturing December 2026(9,375) 
     Payment of contingent consideration to MyoScience, Inc. securityholders (1,338)
          Net cash (used in) provided by financing activities(335,242)16,233 
Net (decrease) increase in cash and cash equivalents(463,517)5,817 
Cash and cash equivalents, beginning of period585,578 99,957 
Cash and cash equivalents, end of period$122,061 $105,774 
Supplemental cash flow information: 
     Cash paid for interest$14,686 $3,586 
     Cash paid for income taxes, net of refunds$4,104 $1,447 
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$2,454 $8,096 
See accompanying notes to condensed consolidated financial statements.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 9

PACIRA BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
NOTE 1—DESCRIPTION OF BUSINESS

Pacira BioSciences, Inc. and its subsidiaries (collectively, the “Company” or “Pacira”) is the industry leader in its commitment to non-opioid pain management and providing a non-opioid option 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 long-acting, local analgesic, EXPAREL® (bupivacaine liposome injectable suspension), was commercially launched in the United States, or U.S., in April 2012 and approved in select European countries and the United Kingdom, or U.K. in November 2021. EXPAREL utilizes the Company’s proprietary multivesicular liposome 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, and added ZILRETTA® (triamcinolone acetonide extended-release injectable suspension) to its product portfolio. ZILRETTA is the first and only extended-release, intra-articular (meaning in the joint) injection indicated for the management of osteoarthritis, or OA, knee pain. For more information, see Note 4, Flexion Acquisition. In April 2019, the Company added iovera°® to its commercial offering with the acquisition of MyoScience, Inc., or MyoScience (the “MyoScience Acquisition”). The iovera° system is a handheld cryoanalgesia device used to deliver a precise, controlled application of cold temperature to only targeted nerves.
Pacira is subject to risks common to companies in similar industries and stages, including, but not limited to, competition from larger companies, reliance on revenue from three products, reliance on a limited number of wholesalers, reliance on a limited number of manufacturing sites, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology, compliance with government 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 and Chairman manages and allocates resources at a consolidated level. Accordingly, the Company views its business as one reportable segment to evaluate performance, allocate resources, set operational targets and forecast its future financial results.
Coronavirus (COVID-19) Pandemic and Global Economic Conditions
Since early 2020, the Company’s revenues have been impacted by COVID-19 pandemic-related challenges that included the significant postponement or suspension in the scheduling of elective surgical procedures due to public health guidance and government directives. While the degree of impact has diminished during the course of the pandemic due to the introduction of vaccines and therapeutics, as well as the lessening of elective surgery restrictions, certain pandemic-related operational and staffing challenges persist. It remains unclear how long it will take the elective surgery market to normalize or if restrictions on elective procedures will recur due to future COVID-19 variants or otherwise. Direct effects of the pandemic and global economic conditions may negatively impact the Company’s business, financial condition and results of operations. Such impacts may include the effect of prolonged periods of inflation on the Company’s customers and suppliers and longer lead-times or the inability to secure a sufficient supply of materials. The situation remains dynamic and subject to rapid and possibly material changes. Additional negative impacts may also arise that the Company is unable to foresee. The nature and extent of such impacts will depend on future developments, which are highly uncertain and cannot be predicted.
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 (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, 2021.
The condensed consolidated financial statements at June 30, 2022, and for the three and six-month periods ended June 30, 2022 and 2021, are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 10

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, 2021 is derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated financial statements as presented reflect certain reclassifications from previously issued financial statements to conform to the current year 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 these interim periods are not necessarily indicative of results that may be expected for any other interim periods or for the full year.
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 a specialty pharmacy, 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 iovera° directly to end users and its bupivacaine liposome injectable suspension for veterinary use to a third-party licensee in the U.S.
The table below includes the percentage of revenues comprised by the Company’s three largest wholesalers in each period presented:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
 Largest wholesaler32%31%31%31%
 Second largest wholesaler23%29%23%29%
 Third largest wholesaler22%26%22%26%
     Total77%86%76%86%
The percentage of revenues from the Company’s three largest wholesalers have shifted in the current year with the addition of ZILRETTA sales.
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 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), which limits the number of convertible instruments that require separate accounting to (i) those with embedded conversion features that are not clearly and closely related to the debt, that meet the definition of a derivative and that do not qualify for the scope exception from derivative accounting and (ii) convertible debt instruments issued with substantial premiums for which the premiums were recorded as paid in capital. In addition, the new guidance requires diluted earnings per share calculations be prepared using the if-converted method instead of the treasury stock method. The Company elected to adopt the new guidance using a modified retrospective method of transition, which applied to transactions outstanding at January 1, 2022. As a result, the Company does not separately present in equity an embedded conversion feature for its convertible debt. Instead, the Company accounts for its convertible debt instruments wholly as debt. In addition, effective on January 1, 2022, the Company did not record interest expense on the previously recorded discount on its convertible debt. The impact on the condensed consolidated balance sheet at January 1, 2022 increased net debt by approximately $64.9 million, reduced accumulated deficit by $47.2 million, reduced additional paid-in capital by $96.5 million and decreased deferred tax liabilities by $15.7 million.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 11

NOTE 3—REVENUE
Revenue from Contracts with Customers
The 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, and royalties on, its bupivacaine liposome injectable suspension for veterinary use. Royalty revenues are from the Company’s collaborative licensing agreements. 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 only relates to revenue associated with net EXPAREL and ZILRETTA product sales.
Net Product Sales
The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers based on orders of the product placed by end-users, namely hospitals, ambulatory surgery centers and healthcare provider offices. EXPAREL is delivered directly to the end-user without the wholesaler ever taking physical possession of the product. The Company primarily sells ZILRETTA to specialty distributors and a specialty pharmacy, 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 consideration the Company expects to be entitled to in exchange for transferring those goods. EXPAREL and ZILRETTA revenue is recorded at the time the product is 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 the sale, using the most likely amount method, except for returns, which is based on the expected value method. The Company includes these estimated amounts in the transaction price to the extent 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. The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts, statutory requirements and other related information that may become known in the future.
Accounts Receivable
The majority of accounts receivable arise from product sales and represent amounts due from wholesalers, hospitals, ambulatory surgery centers, specialty distributors, specialty pharmacy, GPOs and doctors. Payment terms generally range from zero to 97 days from the date of the transaction, and accordingly, there is no significant financing component.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Codification, or ASC, 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
At contract inception, the Company assesses the goods promised in its contracts with customers and identifies a performance obligation for each promise to transfer 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 customary 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 time, which transfers control upon delivery of EXPAREL and ZILRETTA to its customers. The Company considers control to have transferred upon delivery because the customer has legal title to the asset, physical possession of the asset has been transferred, the customer has significant risks and rewards of ownership of the asset, and the Company has a present right to payment at that time.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 12

Disaggregated Revenue
The following table represents disaggregated net product sales in the periods presented as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net product sales:
   EXPAREL$137,007 $130,058 $266,212 $244,736 
   ZILRETTA27,417  51,052  
   iovera°3,201 3,813 6,227 7,081 
   Bupivacaine liposome injectable suspension956 992 2,512 1,784 
      Total net product sales$168,581 $134,863 $326,003 $253,601 

NOTE 4—FLEXION ACQUISITION
On November 19, 2021, the Company acquired Flexion (the “Flexion Acquisition”), a biopharmaceutical company focused on the discovery, development, and commercialization of novel, local therapies for the treatment of patients with musculoskeletal conditions, beginning with osteoarthritis, the most common form of arthritis. Upon consummation of the Flexion Acquisition, Flexion became a wholly-owned subsidiary of the Company and was renamed Pacira Therapeutics, Inc.
The total consideration for the Flexion Acquisition was approximately $578.8 million consisting of: (i) $448.5 million of cash paid to former Flexion stockholders and to settle restricted stock units and in-the-money stock options; (ii) an $85.1 million cash payment to repay Flexion debt that was not assumed by the Company and (iii) $45.2 million of estimated contingent consideration related to contingent value rights, or CVRs, that were issued to Flexion shareholders and certain equity award holders in conjunction with the Flexion Acquisition. The consideration is subject to adjustments based on the achievement of certain potential milestone payments. Up to an additional $380.2 million in the aggregate may be payable to holders of the CVRs if each of the applicable milestones are achieved. No contingent consideration milestones were achieved in the six months ended June 30, 2022. See Note 10, Financial Instruments, for information regarding the methodology and key assumptions used in the fair value measurements of contingent consideration and for more information regarding the changes in fair value.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 13

The Company is finalizing its valuation of liabilities and tax analyses, and anticipates finalizing the purchase price allocation as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date. The following table sets forth the preliminary allocation of the Flexion Acquisition purchase price to the estimated fair value of the net assets acquired at the acquisition date (in thousands):
Amounts Recognized at the Acquisition Date
(as previously
reported) (a)
Measurement Period Adjustments (b)
Amounts Recognized at the Acquisition Date
(as adjusted)
ASSETS ACQUIRED
Cash and cash equivalents$113,562 $— $113,562 
Short-term available-for-sale investments11,153 — 11,153 
Accounts receivable32,838 — 32,838 
Inventories 29,667 — 29,667 
Prepaid expenses and other assets4,852 — 4,852 
Fixed assets 23,307 — 23,307 
Deferred tax assets58,015 — 58,015 
Right-of-use assets6,585 — 6,585 
Identifiable intangible assets 480,000 — 480,000 
In-process research and development (IPR&D) 61,000 — 61,000 
Total assets$820,979 $ $820,979 
LIABILITIES ASSUMED
Accounts payable$9,794 $— $9,794 
Accrued expenses22,746 957 23,703 
Deferred revenue10,000 — 10,000 
Lease liabilities6,585 — 6,585 
Other liabilities1,187 — 1,187 
Long-term debt201,450 — 201,450 
Total liabilities251,762 957 252,719 
Total identifiable net assets acquired569,217 (957)568,260 
Goodwill 9,628 957 10,585 
Total consideration transferred$578,845 $ $578,845 
(a) As previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
(b) Represents pre-acquisition expenses that were paid by the Company in 2022, partially offset by the release of estimated reserves.
Unaudited Pro Forma Summary of Operations

The following table shows the unaudited pro forma summary of operations for the three and six-month periods ended June 30, 2021, as if the Flexion Acquisition had occurred on January 1, 2020. This pro forma information does not purport to represent what the Company’s actual results would have been if the Flexion Acquisition had occurred as of January 1, 2020, and is not indicative of what such results would be expected for any future period (in thousands, except per share amounts):
Three Months Ended
June 30, 2021
Six Months Ended
June 30, 2021
Total revenues$163,765 $307,381 
Net loss$(3,367)$(20,487)
Pro forma basic and diluted net loss per share$(0.08)$(0.47)

The unaudited pro forma financial information was prepared using the acquisition method of accounting and was based on the historical financial information of the Company and Flexion. The summary pro forma financial information primarily reflects the following pro forma adjustments:
Recognition of the income tax benefit resulting from decreasing Flexion’s existing valuation allowance on deferred tax assets for the three and six months ended June 30, 2021;
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 14

Removal of Flexion’s interest expense and associated deferred financing cost amortization related to the $85.1 million of debt not assumed;
Adjustments to the Company’s interest income for the cash used to acquire Flexion;
Additional cost of goods sold related to a step-up value in inventory;
Additional amortization expense from the acquired developed technology intangible assets;
Additional depreciation of Flexion’s fixed assets; and
Additional lease expense on Flexion’s right-of-use, or ROU, assets.
In addition, all of the above adjustments were adjusted for the applicable tax impact.
NOTE 5—INVENTORIES
The components of inventories, net are as follows (in thousands):
June 30,December 31,
20222021
Raw materials$36,301 $36,337 
Work-in-process39,407 35,182 
Finished goods24,880 27,031 
     Total$100,588 $98,550 
NOTE 6—FIXED ASSETS
Fixed assets, net, summarized by major category, consist of the following (in thousands):
June 30,December 31,
20222021
Machinery and equipment$116,364 $117,264 
Leasehold improvements60,155 59,740 
Computer equipment and software13,598 13,197 
Office furniture and equipment2,303 2,883 
Construction in progress94,332 80,557 
        Total286,752 273,641 
Less: accumulated depreciation(95,473)(85,240)
        Fixed assets, net$191,279 $188,401 
For the three months ended June 30, 2022 and 2021, depreciation expense was $6.5 million and $2.9 million, respectively. For the three months ended June 30, 2022 and 2021, there was $1.0 million and $1.1 million of capitalized interest on the construction of manufacturing sites, respectively.
For the six months ended June 30, 2022 and 2021, depreciation expense was $12.2 million and $5.8 million, respectively. For the six months ended June 30, 2022 and 2021, there was $1.8 million and $2.1 million of capitalized interest on the construction of manufacturing sites, respectively.
At June 30, 2022 and December 31, 2021, total fixed assets, net includes leasehold improvements and manufacturing process equipment located in Europe in the amount of $60.0 million and $65.4 million, respectively.
As of June 30, 2022 and December 31, 2021, the Company had asset retirement obligations of $3.1 million and $2.4 million, respectively, included in accrued expenses and other liabilities on its condensed consolidated balance sheet, for costs associated with returning leased spaces to their original condition upon the termination of certain lease agreements.
Pacira BioSciences, Inc. | Q2 2022 Form 10-Q | Page 15

NOTE 7—LEASES
The Company leases all of its facilities, including its EXPAREL and iovera° manufacturing facility in San Diego, California. These leases have remaining terms up to 8.2 years, some of which provide renewal options at the then-current market value. 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.
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 costs are as follows (in thousands):
Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Fixed lease costs$3,542 $2,922 $7,069 $5,843 
Variable lease costs508 424 980