30000000
10000000
30000000
3.53
84986
53594979
10000000
63459000
3438803
15491
75000000
5.42
53594979
0.001
2507446
5000000
53610470
0.001
1366000
631000
19267000
4906000
19799000
825000
1600000
281726000
19063000
1640000
10366000
-261936000
70502000
90301000
20000000
54000
2100000
30410000
427000
2000
9707000
2899000
21900000
1338000
90301000
3013000
4821000
2132000
4412000
584000
47000
80161000
2715000
3815000
69393000
6512000
874000
247000
34000
0.02
55000000
236000
0
308000
542000
0.0895
0.005
0.0275
30000000
1000000
20000000
460000
200000
53000
580000
5219000
0
150000
1600000
2093155
2093155
2000
4581338
8.34
53610470
54000
-261936000
-47000
281726000
70472000
3397529
15491
75000000
5.42
52715308
0.001
5000000
52730799
0.001
1917000
476000
22168000
4471000
31696000
825000
1900000
274891000
19501000
1875000
10177000
-243203000
71076000
102772000
20000000
53000
2014000
28083000
431000
2000
6707000
1216000
443000
102772000
3256000
2558000
2488000
4262000
899000
47000
92539000
2715000
3933000
83560000
6276000
584000
65000
6000000
317000
183000
880000
460000
200000
53000
580000
4983000
1700000
2093155
2093155
2000
4298154
10.23
52730799
53000
-243203000
-47000
274891000
400000
20100000
513221
200000
50000000
1300000
300000
10000000
20000000
59700000
50000000
15000000
-5005000
-0.16
9459110
51908844
2001000
144000
-8193000
13054000
269000
-177000
-7800000
722000
27000
-109000
11408000
194000
677000
3507000
-499000
-7013000
19730000
420000
-144000
-1864000
6549000
162000
127000
131000
13181000
242000
85000
1124000
6000
775000
2655000000
852000000
800000
1000000
Q1
-16656000
P6Y
2016
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>1.            Organization,
basis of presentation and summary of significant policies:</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt">
<b><i>Overview</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
BioDelivery Sciences International Inc., together with its
subsidiaries (collectively, the “Company” or
“BDSI”) is a specialty pharmaceutical company that is
leveraging its novel and proprietary patented drug delivery
technologies to develop and commercialize, either on its own or in
partnerships with third parties, new applications of proven
therapeutics. The Company is focusing on developing products
to meet unmet patient needs in the areas of pain management and
addiction.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The accompanying unaudited condensed consolidated financial
statements include all adjustments (consisting of normal and
recurring adjustments) necessary for a fair presentation of these
financial statements. The condensed consolidated balance sheet at
December 31, 2015 has been derived from the Company’s
audited consolidated financial statements included in its annual
report on Form 10-K for the year ended December 31, 2015.
Certain footnote disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) have
been condensed or omitted pursuant to the Securities and Exchange
Commission (“SEC”) rules and regulations. It is
suggested that these condensed consolidated financial statements be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s annual report on
Form 10-K for the year ended December 31, 2015. The
Company has made certain reclassifications in a footnote table for
the year ending December 31, 2015 to conform to the current
period presentation. This reclassification had no effect on the
measurement of total expenses, loss from operations, or net
loss.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Operating results for the three month period ended March 31, 2016
are not necessarily indicative of results for the full year or any
other future periods.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As used herein, the Company’s common stock, par value $.001
per share, is referred to as the “Common Stock.”</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Principles of consolidation</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The condensed consolidated financial statements include the
accounts of the Company, Arius Pharmaceuticals, Inc.
(“Arius”), Arius Two, Inc. (“Arius Two”)
and Bioral Nutrient Delivery, LLC (“BND”). For each
period presented BND has been an inactive subsidiary. All
significant inter-company balances and transactions have been
eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Use of estimates in financial statements</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The preparation of the accompanying condensed consolidated
financial statements requires management to make certain estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the condensed consolidated financial statements, and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates and
assumptions.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Inventory</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Inventories are stated at the lower of cost or market value with
costs determined on the first-in, first-out method. Inventory
consists of raw materials, work in process and finished goods. Raw
materials include active pharmaceutical ingredient for a product to
be manufactured, work in process includes the bulk inventory of
laminate prior to being packaged for sale, and finished goods
include pharmaceutical products ready for commercial sale.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On a quarterly basis, the Company analyzes its inventory levels and
records allowances for inventory that has become obsolete,
inventory that has a cost basis in excess of the expected net
realizable value and inventory that is in excess of expected demand
based upon projected product sales. There were no allowances
recorded as of March 31, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Deferred revenue</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Consistent with the Company’s revenue recognition policy,
deferred revenue represents cash received in advance for licensing
fees, consulting, research and development services, related supply
agreements and product sales. Such payments are reflected as
deferred revenue until recognized under the Company’s revenue
recognition policy. Deferred revenue is classified as current if
management believes the Company will be able to recognize the
deferred amount as revenue within twelve months of the balance
sheet date.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b><i>Revenue recognition</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Net Product Sales</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Product Sales</i>- The Company generally recognizes revenue from
its product sales upon transfer of title, which occurs when product
is received by its customers. For products that it commercializes
on its own (currently only the Company’s BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> product), the
Company sells such products primarily to large national
wholesalers, which have the right to return the products they
purchase. The Company is required to reasonably estimate the amount
of future returns at the time of revenue recognition. The Company
recognizes product sales net of estimated allowances for rebates,
price adjustments chargebacks and prompt payment discounts. When
the Company cannot reasonably estimate the amount of future product
returns, it defers revenues until the risk of product return has
been substantially eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As of March 31, 2016 and December 31, 2015, the Company had $1.6
million and $1.9 million, respectively, of deferred revenue related
to sales to wholesalers for which future returns could not be
reasonably estimated at the time of sale. Deferred revenue is
recognized when the product is sold to the end user, based upon
prescriptions filled. To estimate product sold to end users, the
Company relies on third-party information, including prescription
data and information obtained from significant distributors with
respect to their inventory levels and sales to customers. Deferred
revenue is recorded net of estimated allowances for rebates, price
adjustments, chargebacks, prompt payment and other discounts.
Estimated allowances are recorded and classified as accrued
expenses in the accompanying balance sheets as of March 31,
2016 and December 31, 2015 (Note 4).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Product Returns</i>- Consistent with industry practice, the
Company offers contractual return rights that allow its customers
to return the products within an 18-month period that begins six
months prior to and ends twelve months subsequent to the expiration
of the products. The Company does not believe it has sufficient
experience with BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> to estimate its
returns at time of ex-factory sales. When the Company cannot
reasonably estimate the amount of future product returns, it
records revenues when the risk of product return has been
substantially eliminated, which is at the time the product is sold
through to the end user.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Rebates</i>- The liability for government program rebates is
calculated based on historical and current rebate redemption and
utilization rates contractually submitted by each program’s
administrator.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Price Adjustments and Chargebacks-</i> The Company’s
estimates of price adjustments and chargebacks are based on its
estimated mix of sales to various third-party payers, which are
entitled either contractually or statutorily to discounts from the
Company’s listed prices of its products. In the event that
the sales mix to third-party payers is different from the
Company’s estimates, the Company may be required to pay
higher or lower total price adjustments and/or chargebacks than it
had estimated and such differences may be significant.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company, from time to time, offers certain promotional
product-related incentives to its customers. These programs include
certain product incentives to pharmacy customers and other sales
stocking allowances. The Company has voucher programs for
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> whereby the
Company offers a point-of-sale subsidy to retail consumers. The
Company estimates its liabilities for these voucher programs based
on the actual redemption rates as reported to the Company by a
third-party claims processing organization and actual redemption
rates for the Company’s completed programs. The Company
accounts for the costs of these special promotional programs as
price adjustments, which are a reduction of gross revenue.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Prompt Payment Discounts-</i> The Company typically offers its
wholesale customers a prompt payment discount of 2% as an incentive
to remit payments within the first 30 to 37 days after the invoice
date depending on the customer and the products purchased.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Gross to Net Accruals</i>- A significant majority of the
Company’s gross to net accruals are the
result of its voucher program and Medicaid rebates, with the
majority of those programs having an accrual to payment cycle of
anywhere from one to three months. In addition to this relatively
short accrual to payment cycle, the Company receives daily
information from its wholesalers regarding their sales of
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> and actual on
hand inventory levels. During the quarter ended March 31,
2016, the three large wholesalers accounted for approximately 90%
of the Company voucher and Medicaid accruals. The Company
believes that consistently working with these three large
wholesalers enables the Company to execute more accurate
provisioning procedures. Consistent with pharmaceutical industry
practice, the accrual to payment cycle for returns is longer and
can take several years depending on the expiration of the related
products. However, since the Company does not have sufficient
experience with measuring returns, at the time of ex-factory sales,
the Company records revenue when the risk of product return has
been substantially eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
Once the Company has adequate experience with measuring returns, it
will then be able to record sales ex-factory.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Deferred Cost of Sales</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company defers its cost of sales in connection with
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> sales at time of
ex-factory sales. These costs are recognized when the product is
sold through to the end user. The Company has $1.6 million and $1.7
million of deferred costs of sales as of March 31, 2016 and
December 31, 2015, respectively. These costs are included in
other current assets in the accompanying balance sheet.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Cost of Sales</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
For BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>, cost of sales
includes raw materials, production costs at the Company’s two
contract manufacturing sites, quality testing directly related to
the product, and depreciation on equipment that we have purchased
to produce BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>. It also
includes any batches not meeting specifications and raw material
yield loss. Yield losses and batches not meeting
specifications are expensed as incurred. Cost of sales is
recognized as actual product is sold through to the end user.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The cost of sales also includes the direct costs attributable to
the production of the Company’s BREAKYL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">™</sup> products, which
are not self-commercialized by the Company. It includes all costs
related to creating the product at the Company’s
contract manufacturing locations in the U.S. and Germany. The
Company’s contract manufacturers bill the Company for the
final product, which includes materials, direct labor costs, and
certain overhead costs as outlined in applicable supply agreements.
Cost of sales also includes royalty expenses that the Company owes
to third parties.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Recent accounting pronouncements</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update 2014-09,
<i>“</i><i>Revenue from Contracts with
Customers,</i><i>”</i> which supersedes the revenue
recognition requirements of Accounting Standards Codification
(“ASC”) Topic 605, “Revenue Recognition”
and most industry-specific guidance on revenue recognition
throughout the ASC. The new standard is principles-based and
provides a five step model to determine when and how revenue is
recognized. The core principle of the new standard is that revenue
should be recognized when a company transfers promised goods or
services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those
goods or services. The new standard also requires disclosure of
qualitative and quantitative information surrounding the amount,
nature, timing and uncertainty of revenues and cash flows arising
from contracts with customers. In July 2015, the FASB agreed to
defer the effective date of the standard from January 1, 2017
to January 1, 2018, with an option that permits companies to
adopt the standard as early as the original effective date. Early
application prior to the original effective date is not permitted.
The standard permits the use of either the retrospective or
cumulative effect transition method. In April 2016, the FASB
issued ASU 2016-10, “<i>Revenue from Contracts with
Customers</i> (Topic 606): Identifying Performance Obligations
and Licensing.” ASU 2016-10 clarifies the implementation
guidance on identifying performance obligations. These ASUs apply
to all companies that enter into contracts with customers to
transfer goods or services. These ASUs are effective for public
entities for interim and annual reporting periods beginning after
December 15, 2017. Early adoption is permitted, but not before
interim and annual reporting periods beginning after
December 15, 2016. Entities have the choice to apply these
ASUs either retrospectively to each reporting period presented or
by recognizing the cumulative effect of applying these standards at
the date of initial application and not adjusting comparative
information. The Company is currently evaluating the requirements
of these standards and has not yet determined the impact on our
condensed consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The FASB’s new leases standard ASU 2016-02 <i>Leases</i>
(Topic 842) was issued on February 25, 2016. ASU 2016-02 is
intended to improve financial reporting about leasing transactions.
The ASU affects all companies and other organizations that lease
assets such as real estate, airplanes, and manufacturing equipment.
The ASU will require organizations that lease assets referred to as
“Lessees” to recognize on the balance sheet the assets
and liabilities for the rights and obligations created by those
leases. An organization is to provide disclosures designed to
enable users of financial statements to understand the amount,
timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements
concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be
required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current GAAP, the
recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its
classification as a finance or operating lease. However, unlike
current GAAP which requires only capital leases to be recognized on
the balance sheet the new ASU will require</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
both types of leases (i.e. operating and capital) to be recognized
on the balance sheet. The FASB lessee accounting model will
continue to account for both types of leases. The capital lease
will be accounted for in substantially the same manner as capital
leases are accounted for under existing GAAP. The operating lease
will be accounted for in a manner similar to operating leases under
existing GAAP, except that lessees will recognize a lease liability
and a lease asset for all of those leases. The leasing standard
will be effective for calendar year-end public companies beginning
after December 15, 2018. Public companies will be
required to adopt the new leasing standard for fiscal years, and
interim periods within those fiscal years, beginning after
December 15, 2018. Early adoption will be permitted for all
companies and organizations upon issuance of the standard. For
calendar year-end public companies, this means an adoption date of
January 1, 2019 and retrospective application to previously
issued annual and interim financial statements for 2018 and 2017.
Lessees with a large portfolio of leases are likely to see a
significant increase in balance sheet assets and liabilities. The
Company is currently in the process of evaluating the impact that
this new leasing ASU will have on its financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In March 2016, the FASB issued ASU
2016-09, <i>Improvements to Employee Share-Based Payment
Accounting</i>, which amends Accounting Standards Codification
(“ASC”) Topic 718, Compensation – Stock
Compensation. ASU 2016-09 simplifies several aspects of the
accounting for share-based payment transactions, including the
income tax consequences, classification of awards as either equity
or liabilities, and classification on the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after
December 15, 2016, and interim periods within those fiscal years
and early adoption is permitted. The Company is currently in the
process of evaluating the impact of adoption of the ASU on its
condensed consolidated financial statements.</p>
</div>
false
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Restricted stock activity during the three months ended March 31,
2016 was as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="74%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number of<br />
Restricted<br />
Shares</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted<br />
Average Fair<br />
Market Value<br />
Per RSU</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,298,154</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">   $</td>
<td valign="bottom" align="right">10.23</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Executive officers</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">913,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.80</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Directors</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="center">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="center">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Employees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">30,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.60</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vested</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(104,025)</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.89</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeitures</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(555,791)</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">12.56</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at March 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
    4,581,338</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">   $</td>
<td valign="bottom" align="right">
            8.34</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b><i>Revenue recognition</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Net Product Sales</i></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Product Sales</i>- The Company generally recognizes revenue from
its product sales upon transfer of title, which occurs when product
is received by its customers. For products that it commercializes
on its own (currently only the Company’s BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> product), the
Company sells such products primarily to large national
wholesalers, which have the right to return the products they
purchase. The Company is required to reasonably estimate the amount
of future returns at the time of revenue recognition. The Company
recognizes product sales net of estimated allowances for rebates,
price adjustments chargebacks and prompt payment discounts. When
the Company cannot reasonably estimate the amount of future product
returns, it defers revenues until the risk of product return has
been substantially eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As of March 31, 2016 and December 31, 2015, the Company had $1.6
million and $1.9 million, respectively, of deferred revenue related
to sales to wholesalers for which future returns could not be
reasonably estimated at the time of sale. Deferred revenue is
recognized when the product is sold to the end user, based upon
prescriptions filled. To estimate product sold to end users, the
Company relies on third-party information, including prescription
data and information obtained from significant distributors with
respect to their inventory levels and sales to customers. Deferred
revenue is recorded net of estimated allowances for rebates, price
adjustments, chargebacks, prompt payment and other discounts.
Estimated allowances are recorded and classified as accrued
expenses in the accompanying balance sheets as of March 31,
2016 and December 31, 2015 (Note 4).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Product Returns</i>- Consistent with industry practice, the
Company offers contractual return rights that allow its customers
to return the products within an 18-month period that begins six
months prior to and ends twelve months subsequent to the expiration
of the products. The Company does not believe it has sufficient
experience with BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> to estimate its
returns at time of ex-factory sales. When the Company cannot
reasonably estimate the amount of future product returns, it
records revenues when the risk of product return has been
substantially eliminated, which is at the time the product is sold
through to the end user.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Rebates</i>- The liability for government program rebates is
calculated based on historical and current rebate redemption and
utilization rates contractually submitted by each program’s
administrator.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Price Adjustments and Chargebacks-</i> The Company’s
estimates of price adjustments and chargebacks are based on its
estimated mix of sales to various third-party payers, which are
entitled either contractually or statutorily to discounts from the
Company’s listed prices of its products. In the event that
the sales mix to third-party payers is different from the
Company’s estimates, the Company may be required to pay
higher or lower total price adjustments and/or chargebacks than it
had estimated and such differences may be significant.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company, from time to time, offers certain promotional
product-related incentives to its customers. These programs include
certain product incentives to pharmacy customers and other sales
stocking allowances. The Company has voucher programs for
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> whereby the
Company offers a point-of-sale subsidy to retail consumers. The
Company estimates its liabilities for these voucher programs based
on the actual redemption rates as reported to the Company by a
third-party claims processing organization and actual redemption
rates for the Company’s completed programs. The Company
accounts for the costs of these special promotional programs as
price adjustments, which are a reduction of gross revenue.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Prompt Payment Discounts-</i> The Company typically offers its
wholesale customers a prompt payment discount of 2% as an incentive
to remit payments within the first 30 to 37 days after the invoice
date depending on the customer and the products purchased.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<i>Gross to Net Accruals</i>- A significant majority of the
Company’s gross to net accruals are the
result of its voucher program and Medicaid rebates, with the
majority of those programs having an accrual to payment cycle of
anywhere from one to three months. In addition to this relatively
short accrual to payment cycle, the Company receives daily
information from its wholesalers regarding their sales of
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> and actual on
hand inventory levels. During the quarter ended March 31,
2016, the three large wholesalers accounted for approximately 90%
of the Company voucher and Medicaid accruals. The Company
believes that consistently working with these three large
wholesalers enables the Company to execute more accurate
provisioning procedures. Consistent with pharmaceutical industry
practice, the accrual to payment cycle for returns is longer and
can take several years depending on the expiration of the related
products. However, since the Company does not have sufficient
experience with measuring returns, at the time of ex-factory sales,
the Company records revenue when the risk of product return has
been substantially eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
Once the Company has adequate experience with measuring returns, it
will then be able to record sales ex-factory.</p>
</div>
36814
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>9.            Note
Payable (MidCap Loan):</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On May 29, 2015, the Company entered into a $30 million
secured loan facility (the “Loan”) with MidCap
Financial Trust, as agent and lender (“MidCap”),
pursuant to the terms and conditions of that certain Amended and
Restated Credit and Security Agreement, dated as of May 29,
2015 (the “Credit Agreement”), between the Company and
MidCap. The Credit Agreement is a restatement, amendment and
modification of a prior Credit and Security Agreement, dated as of
July 5, 2013 (the “Prior Agreement”) between the
Company, MidCap Financial SBIC, LLP, a predecessor to MidCap, and
certain lenders thereto. The Credit Agreement restructures, renews,
extends and modifies the obligations under the Prior Agreement and
the other financing documents executed in connection with the Prior
Agreement (the “Prior Loan”). The Company received net
Loan proceeds in the aggregate amount of approximately $20.1
million and will use the Loan proceeds for general corporate
purposes or other activities of the Company permitted under the
Credit Agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Loan has a term of 42 months, with interest only payments for
the first 12 months. The interest rate is 8.45% plus a LIBOR floor
of 0.5% (total of 8.95% at March 31, 2016), with straight line
amortization of principal payments commencing on June 1, 2016,
in an amount equal to $1 million per month. Upon execution of the
Credit Agreement, the Company paid to MidCap a closing fee from the
prior loan of approximately $0.4 million. Upon repayment in full of
the Loan, the Company is obligated to make a final payment fee
equal to 2.75% of the aggregate Loan amount. The 2.75% exit fee has
been recorded as deferred loan costs, the current portion of which
is included in notes payable, current maturities, net and the
long-term portion is in note payable, less current maturities, net,
being amortized over the life of the loan. The amounts payable are
recorded as other long-term liabilities.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt">
In addition, the Company may prepay all or any portion of the Loan
at any time subject to a prepayment premium of: (i) 5% of the
Loan amount prepaid in the first year following the execution of
the Credit Agreement and (ii) 3% of the Loan amount prepaid in
each year thereafter.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt">
The obligations of the Company under the Credit Agreement are
secured by a first priority lien in favor of MidCap on
substantially all of the Company’s existing and
after-acquired assets, but excluding certain intellectual property
and general intangible assets of the Company (but not any proceeds
thereof). The obligations of the Company under the Credit Agreement
are also secured by a first priority lien on the equity interests
held by the Company. The Company entered into and reaffirmed, as
applicable, customary pledge and intellectual property security
agreements to evidence the security interest in favor of
MidCap.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt">
Under the Credit Agreement, the Company is subject to affirmative
covenants which are customary for financings of this type,
including, but not limited to, the obligations of the Company to:
(i) maintain good standing and governmental authorizations,
(ii) provide certain information and notices to MidCap,
(iii) deliver quarterly and annual financial statements to
MidCap, (iv) maintain insurance, property and books and
records, (v) discharge all taxes, (vi) protect their
intellectual property and (vii) generally protect the
collateral granted to MidCap.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt">
The Company is also subject to negative covenants customary for
financings of this type, including, but not limited to, that they
may not: (i) enter into a merger or consolidation or certain
change of control events without complying with the terms of the
Credit Agreement, (ii) incur liens on the collateral,
(iii) incur additional indebtedness, (iv) dispose of any
property, (v) amend material agreements or organizational
documents, (vi) change their business, jurisdictions of
organization or their organizational structures or types,
(vii) declare or pay dividends (other than dividends payable
solely in Common Stock), (viii) make certain investments or
acquisitions except under certain circumstances as set forth in the
Credit Agreement, or (ix) enter into certain transactions with
affiliates, in each case subject to certain exceptions provided for
in the Credit Agreement. Notwithstanding the foregoing, the Credit
Agreement amends certain negative covenants contained in the Prior
Agreement such that (i) licensing and acquisitions are added
as permitted business activities of the Company and (ii) the
Company is no longer required to obtain the prior written consent
of MidCap for any in-licensing, product or entity acquisitions by
the Company by way of merger or consolidation, so long as no event
of default has occurred and certain financial metrics are adhered
to.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt">
The Credit Agreement provides for several events of default under
the Loan. Upon the occurrence of any event of default, the
Company’s obligations under the Credit Agreement will bear
interest at a rate equal to the lesser of: (i) 4% above the
rate of interest applicable to such obligations immediately prior
to the occurrence of the event of default and (ii) the maximum
rate allowable under law.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The debt discount is related to warrants on the Prior Loan, which
was amended in 2015. The discount is being amortized to interest
expense over the life of the amended loan.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt">
The balance of the Loan as of March 31, 2016 is $30.0 million,
and is recorded in the accompanying condensed consolidated balance
sheet, net of unamortized discount of $1.0 million.</p>
</div>
-0.36
P3Y
10113296
10-Q
0001103021
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Inventory</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Inventories are stated at the lower of cost or market value with
costs determined on the first-in, first-out method. Inventory
consists of raw materials, work in process and finished goods. Raw
materials include active pharmaceutical ingredient for a product to
be manufactured, work in process includes the bulk inventory of
laminate prior to being packaged for sale, and finished goods
include pharmaceutical products ready for commercial sale.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On a quarterly basis, the Company analyzes its inventory levels and
records allowances for inventory that has become obsolete,
inventory that has a cost basis in excess of the expected net
realizable value and inventory that is in excess of expected demand
based upon projected product sales. There were no allowances
recorded as of March 31, 2016.</p>
</div>
11.98
Accelerated Filer
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Deferred revenue</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Consistent with the Company’s revenue recognition policy,
deferred revenue represents cash received in advance for licensing
fees, consulting, research and development services, related supply
agreements and product sales. Such payments are reflected as
deferred revenue until recognized under the Company’s revenue
recognition policy. Deferred revenue is classified as current if
management believes the Company will be able to recognize the
deferred amount as revenue within twelve months of the balance
sheet date.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b>4.            Accounts
payable and accrued liabilities:</b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The following table represents the components of accounts payable
and accrued liabilities as of:</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="92%"></td>
<td valign="bottom" width="1%"></td>
<td style="WIDTH: 23pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 23pt"></td>
<td valign="bottom" width="6%"></td>
<td style="WIDTH: 27pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 27pt"></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="4" align="center">
<b>March 31,      <br />
<u>    2016       </u></b></td>
<td valign="bottom">    </td>
<td valign="bottom" colspan="4" align="center">
<b>December 31,  <br />
<u>      2015        </u></b></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accounts payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">10,366  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">10,177   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued price adjustments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">236  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">317   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued rebates</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,906  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,471   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued chargebacks</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">34  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">65   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued compensation and benefits</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,366  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,917   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued royalties</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">427  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">431   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued clinical trial costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">247  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">584   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued manufacturing costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">308  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">183   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued sales and marketing costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">542  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">880   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">631  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">476   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total accounts payable and accrued expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">19,063  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">19,501   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<br class="Apple-interchange-newline" /></div>
P3Y
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The following table represents the components of accounts payable
and accrued liabilities as of:</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="92%"></td>
<td valign="bottom" width="1%"></td>
<td style="WIDTH: 23pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 23pt"></td>
<td valign="bottom" width="6%"></td>
<td style="WIDTH: 27pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 27pt"></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="4" align="center">
<b>March 31,      <br />
<u>    2016       </u></b></td>
<td valign="bottom">    </td>
<td valign="bottom" colspan="4" align="center">
<b>December 31,  <br />
<u>      2015        </u></b></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accounts payable</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">10,366  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">10,177   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued price adjustments</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">236  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">317   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued rebates</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,906  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,471   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued chargebacks</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">34  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">65   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued compensation and benefits</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,366  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,917   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued royalties</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">427  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">431   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued clinical trial costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">247  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">584   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued manufacturing costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">308  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">183   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued sales and marketing costs</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">542  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">880   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Accrued other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">631  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">476   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total accounts payable and accrued expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">19,063  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">19,501   </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">    </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<br class="Apple-interchange-newline" />
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>8.       Other license
agreements and acquired product rights:</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 10pt">
<b><i>TTY License and Supply Agreement</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On October 7, 2010, the Company announced a license and supply
agreement with TTY Biopharm Co., Ltd. (“TTY”) for the
exclusive rights to develop and commercialize BEMA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> Fentanyl in the
Republic of China, Taiwan. The agreement results in potential
milestone payments to the Company of up to $1.3 million, which
include an upfront payment of $0.3 million that was received in
2010. In addition, the Company will receive an ongoing royalty
based on net sales. TTY will be responsible for the regulatory
filing of BEMA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> Fentanyl in
Taiwan as well as future commercialization in that territory. The
term of the agreement with TTY is for the period from
October 4, 2010 until the date fifteen years after first
commercial sale unless the agreement is extended in writing or
earlier terminated as provided for in the agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On July 29, 2013, the Company announced the regulatory
approval of BEMA<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> Fentanyl in
Taiwan, where the product will be marketed under the brand name
PAINKYL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">™</sup>. The approval
in Taiwan resulted in a milestone payment of $0.3 million to the
Company, which was received in the third quarter 2013, and recorded
as contract revenue in the accompanying condensed consolidated
statement of operations for the year ended December 31,
2013.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On February 4, 2016, the Company received a payment of $0.2 million
from TTY, which related to royalties based on product purchased in
Taiwan by TTY of PAINKYL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">™</sup>.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b>5.            Property
and Equipment:</b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Property and equipment, summarized by major category, consist of
the following as of:</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="60%" align="center" border="0">
<tr>
<td width="92%"></td>
<td valign="bottom" width="1%"></td>
<td style="WIDTH: 19pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 19pt"></td>
<td valign="bottom" width="1%"></td>
<td style="WIDTH: 31pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 31pt"></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="4" align="center">
<b>March 31,  <br />
<u>    2016    </u></b></td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="4" align="center">
<b>December 31,  <br />
<u>      2015        </u></b></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Machinery & equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">580</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">580</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Computer equipment & software</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">460</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">460</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Office furniture & equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">200</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">200</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Leasehold improvements</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">53</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">53</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Idle equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,219</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,983</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,512</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,276</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Less accumulated depreciation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,100</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,014</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total property, plant & equipment, net</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">4,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">4,262</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 14pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Depreciation expense was approximately $0.09 million for both the
three month periods ended March 31, 2016 and 2015.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Deferred Cost of Sales</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company defers its cost of sales in connection with
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> sales at time of
ex-factory sales. These costs are recognized when the product is
sold through to the end user. The Company has $1.6 million and $1.7
million of deferred costs of sales as of March 31, 2016 and
December 31, 2015, respectively. These costs are included in
other current assets in the accompanying balance sheet.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Principles of consolidation</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The condensed consolidated financial statements include the
accounts of the Company, Arius Pharmaceuticals, Inc.
(“Arius”), Arius Two, Inc. (“Arius Two”)
and Bioral Nutrient Delivery, LLC (“BND”). For each
period presented BND has been an inactive subsidiary. All
significant inter-company balances and transactions have been
eliminated.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Property and equipment, summarized by major category, consist of
the following as of:</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="60%" align="center" border="0">
<tr>
<td width="92%"></td>
<td valign="bottom" width="1%"></td>
<td style="WIDTH: 19pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 19pt"></td>
<td valign="bottom" width="1%"></td>
<td style="WIDTH: 31pt"></td>
<td></td>
<td></td>
<td style="WIDTH: 31pt"></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="4" align="center">
<b>March 31,  <br />
<u>    2016    </u></b></td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="4" align="center">
<b>December 31,  <br />
<u>      2015        </u></b></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Machinery & equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">580</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">580</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Computer equipment & software</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">460</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">460</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Office furniture & equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">200</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">200</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Leasehold improvements</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">53</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">53</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Idle equipment</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">5,219</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,983</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,512</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">6,276</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Less accumulated depreciation</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,100</td>
<td valign="bottom" nowrap="nowrap">)</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(2,014</td>
<td valign="bottom" nowrap="nowrap">)</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total property, plant & equipment, net</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">4,412</td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> $</td>
<td valign="bottom" align="right">4,262</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: rgb(0,0,0) 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<br class="Apple-interchange-newline" />
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company’s stock-based compensation expense is allocated
between research and development and selling, general and
administrative as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0">
<tr>
<td width="78%"></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="3" align="center">
<b>Three months ended,  </b></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"><b>   Stock-based compensation
expense</b></td>
<td valign="bottom">  </td>
<td valign="bottom" align="center"><b>March 31,<br />
2016</b></td>
<td valign="bottom">    </td>
<td valign="bottom" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,  </b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2015  </b></p>
</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom" colspan="5">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
  Research and Development</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" align="center">$   1,128</td>
<td valign="bottom">    </td>
<td valign="bottom" align="center">
$   852    </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
  Selling, General and Administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" align="center">$  2,983</td>
<td valign="bottom">    </td>
<td valign="bottom" align="center">
$ 2,655    </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The following table represents the components of inventory as
of:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt; MARGIN-TOP: 0pt">
 </p>
<table style="MARGIN-BOTTOM: -1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse; PADDING-BOTTOM: 2pt" cellspacing="0" cellpadding="0" width="60%" align="center" border="0">
<tr>
<td width="96%"></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>    March 31,  <br />
    2016  </b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<b>December 31,  <br />
2015  </b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom" colspan="5">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Raw materials & supplies</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right"> $1,338</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
 $   443 </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Work-in-process</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,899</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,216 </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Finished goods</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<u>     584</u></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<u>     899</u> </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total inventories</p>
</td>
<td valign="bottom">  </td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="right"><u style="BORDER-BOTTOM: 1pt double; PADDING-BOTTOM: 1pt"> $4,821</u></p>
</td>
<td valign="top" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
  </p>
</td>
<td valign="bottom"> </td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="right"><u style="BORDER-BOTTOM: 1pt double; PADDING-BOTTOM: 1pt"> $2,558</u> </p>
</td>
<td valign="top" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
  </p>
</td>
</tr>
</table>
</div>
0.00
4.42
--12-31
BIODELIVERY SCIENCES INTERNATIONAL INC
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>3.            Inventory:</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The following table represents the components of inventory as
of:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 18pt; MARGIN-TOP: 0pt">
 </p>
<table style="MARGIN-BOTTOM: -1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse; PADDING-BOTTOM: 2pt" cellspacing="0" cellpadding="0" width="60%" align="center" border="0">
<tr>
<td width="96%"></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="1%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2" align="center">
<b>    March 31,  <br />
    2016  </b></td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" colspan="2" align="center">
<b>December 31,  <br />
2015  </b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom" colspan="5">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Raw materials & supplies</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right"> $1,338</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
 $   443 </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Work-in-process</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,899</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,216 </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Finished goods</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<u>     584</u></td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"> </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
<u>     899</u> </td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Total inventories</p>
</td>
<td valign="bottom">  </td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="right"><u style="BORDER-BOTTOM: 1pt double; PADDING-BOTTOM: 1pt"> $4,821</u></p>
</td>
<td valign="top" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
  </p>
</td>
<td valign="bottom"> </td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="right"><u style="BORDER-BOTTOM: 1pt double; PADDING-BOTTOM: 1pt"> $2,558</u> </p>
</td>
<td valign="top" nowrap="nowrap">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 1pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
  </p>
</td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Cost of Sales</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
For BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>, cost of sales
includes raw materials, production costs at the Company’s two
contract manufacturing sites, quality testing directly related to
the product, and depreciation on equipment that we have purchased
to produce BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>. It also
includes any batches not meeting specifications and raw material
yield loss. Yield losses and batches not meeting
specifications are expensed as incurred. Cost of sales is
recognized as actual product is sold through to the end user.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The cost of sales also includes the direct costs attributable to
the production of the Company’s BREAKYL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">™</sup> products, which
are not self-commercialized by the Company. It includes all costs
related to creating the product at the Company’s
contract manufacturing locations in the U.S. and Germany. The
Company’s contract manufacturers bill the Company for the
final product, which includes materials, direct labor costs, and
certain overhead costs as outlined in applicable supply agreements.
Cost of sales also includes royalty expenses that the Company owes
to third parties.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 20pt">
Option activity during the three months ended March 31, 2016 was as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="64%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>  Number of  </b><br />
<b>   Shares   </b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted</b><br />
<b>Average</b><br />
<b>Exercise</b><br />
<b>Price</b><br />
<b>  Per Share  </b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>   Aggregate   </b><br />
<b>Intrinsic</b><br />
<b>Value</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,397,529</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">  $</td>
<td valign="bottom" align="right">5.42</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">190,513</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4.42</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercised</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(112,425</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.00</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeitures</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(36,814</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">11.98</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at March 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">  3,438,803</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">  $</td>
<td valign="bottom" align="right">
     5.42</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">  $</td>
<td valign="bottom" align="right">
         874</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
</div>
190513
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b>11.          Commitments
and contingencies:</b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Litigation Related To ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup></i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On November 2, 2010, MonoSol Rx, LLC (“MonoSol”)
filed an action against the Company and its commercial partners for
ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> in the Federal District Court
of New Jersey (the DNJ) for alleged patent infringement and false
marking. The Company was formally served in this matter on
January 19, 2011. MonoSol claims that the Company’s
manufacturing process for ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>, which has
never been disclosed publicly and which the Company and its
partners maintain as a trade secret, infringes its patent (United
States Patent No. 7,824,588) (the ’588 Patent).</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In November 2011, the United States Patent and Trademark
Office (“USPTO”) rejected all 191 claims of
MonoSol’s ’588 Patent. On January 20, 2012, the
Company filed requests for reexamination before the USPTO of
MonoSol’s US patent No 7,357,891 (the ’891 Patent), and
No 7,425,292 (the ’292 Patent), the two additional patents
asserted by MonoSol, demonstrating that all claims of those two
patents were anticipated by or obvious in the light of prior art
references, including prior art references not previously
considered by the USPTO, and thus invalid. The USPTO granted the
requests for reexamination with respect to MonoSol’s
’292 and ’891 Patents. In its initial office action in
each, the USPTO rejected every claim in each patent.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Importantly, in the case of MonoSol’s ’588 Patent, at
the conclusion of the reexamination proceedings (and its appeals
process), on April 17, 2014, the Patent Trial and Appeal Board
(PTAB) issued a Decision on Appeal affirming the Examiner’s
rejection (and confirming the invalidity) of all the claims of the
’588 Patent. MonoSol did not request a rehearing by the
May 17, 2014 due date for making such a request and did not
further appeal the Decision to the Federal Court of Appeals by the
June 17, 2014 due date for making such an appeal.
Subsequently, on August 5, 2014, the USPTO issued a
Certificate of Reexamination cancelling the ‘588 Patent
claims.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Based on the Company’s original assertion that its
proprietary manufacturing process for ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> does not infringe on patents
held by MonoSol, and the denial and subsequent narrowing of the
claims on the two reissued patents MonoSol has asserted against the
Company while the third has had all claims rejected by the USPTO,
the Company remains very confident in its original stated position
regarding this matter. Thus far, the Company has proven that the
“original” ’292 and ’891 patents in light
of their reissuance with fewer and narrower claims were indeed
invalid and the third and final patent, the ’588 patent, was
invalid as well with all its claims cancelled. Given the outcomes
of the ‘292, ‘891 and ‘588 reexamination
proceedings, at a January 22, 2015 status meeting, the Court
decided to lift the stay and grant the Company’s request for
the case to proceed on an expedited basis with a Motion for Summary
Judgment to dismiss the action. On September 25, 2015, the
Honorable Freda L. Wolfson granted the Company’s motion for
summary judgment and ordered the case closed. The Company was found
to be entitled to absolute intervening rights as to both patents in
suit, the ‘292 and ‘891 patents, and its
ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> product is not liable for
infringing the patents prior to July 3, 2012 and
August 21, 2012, respectively. In October 2015, MonoSol
appealed the decision of the court to the Federal Circuit. The
Company had no reason to believe the outcome would be different and
would vigorously defend the appeal. MonoSol filed an appeal with
the Federal Circuit and has subsequently decided to withdraw the
appeal.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On February 25, 2016, MonoSol filed an Unopposed Motion For
Voluntary Dismissal Of Appeal, which was granted by the court on
February 26, 2016 and the case was dismissed. Thus, the
district court’s grant of the Summary Judgement of
Intervening Rights will stand. The possibility exists, however,
that MonoSol could file another suit alleging infringement of the
‘292 and ’891 patents. The Company believes
ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> and its other products relying
on the BEMA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> technology, including
BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> and BELBUCA™, do not
infringe any amended, reexamined claim from either patent after
those dates.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Litigation Related To BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup></i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On October 29, 2013, Reckitt Benckiser, Inc. RB
Pharmaceuticals Limited, and MonoSol (collectively, the “RB
Plaintiffs”) filed an action against the Company relating to
the Company’s BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> product in the United States
District Court for the Eastern District of North Carolina for
alleged patent infringement. BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> is a method of treatment for
opioid dependence. The RB Plaintiffs claim that the formulation for
BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>, which has
never been disclosed publicly, infringes its patent (United States
Patent No. 8,475,832).</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On September 20, 2014, based upon the Company’s position
and belief that its BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> product does not infringe any
patents owned by the RB Plaintiffs, the Company proactively filed a
declaratory judgment action in the United States District Court for
the Eastern District of North Carolina, requesting the Court to
make a determination that the Company’s BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> product does not infringe the
RB Plaintiffs’ ‘832 Patent, US Patent
No. 7,897,080 (‘080 Patent) and US Patent
No. 8,652,378 (‘378 Patent). With the declaratory
judgment, there is an automatic stay in proceedings. The RB
Plaintiffs may request that the stay be lifted, but they have the
burden of showing that the stay should be lifted. For the
‘832 Patent, the January 15, 2014 Inter Partes Review
(IPR) was instituted and in June 2015, all challenged claims were
rejected for both anticipation and obviousness. In August 2015, the
RB Plaintiffs filed an appeal to the Federal Circuit. The Company
will vigorously defend this appeal at the Federal Circuit. For the
‘080 Patent, all claims have been rejected in an inter partes
reexamination and the rejection of all claims as invalid over the
prior art has been affirmed on appeal by the Patent Trial and
Appeal Board (PTAB) in a decision dated March 27, 2015. In May
2015, the RB Plaintiffs filed a response after the decision to
which the Company filed comments. The Company is awaiting a further
decision from the Board, which the Company has no reason to believe
will be inconsistent with the original decision rendered in March
2015. For the ‘378 Patent, an IPR was filed on June 1,
2014, but an IPR was not instituted. However, in issuing its
November 5, 2014 decision not to institute the IPR, the PTAB
construed the claims of the ‘378 Patent narrowly. As in prior
litigation proceedings, the Company believes these IPR and the
reexamination filings will provide support for maintaining the stay
until the IPR and reexamination proceedings conclude.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Indeed, given the PTAB’s narrow construction of the claims of
the ‘378 Patent, the Company filed a motion to withdraw the
‘378 Patent from the case on December 12, 2014. In
addition, the Company also filed a joint motion to continue the
stay (with RB Plaintiffs) in the proceedings on the same day. Both
the motion to withdraw the ‘378 Patent from the proceedings
and motion to continue the stay were granted.</p>
<p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On September 22, 2014, the RB Plaintiffs filed an action
against the Company (and the Company’s commercial partner)
relating to its BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup> product in the
United States District Court for the District of New Jersey for
alleged patent infringement. The RB Plaintiffs claim that
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>, whose
formulation and manufacturing processes have never been disclosed
publicly, infringes its patent U.S. Patent No. 8,765,167
(‘167 Patent). As with prior actions by the RB Plaintiffs,
the Company believes this is another anticompetitive attempt by the
RB Plaintiffs to distract the Company’s efforts from
commercializing BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>. The Company
strongly refutes as without merit the RB Plaintiffs’
assertion of patent infringement and will vigorously defend the
lawsuit. On December 12, 2014, the Company filed motions to
transfer the case from New Jersey to North Carolina and to dismiss
the case against the Company’s commercial partner. The Court
issued an opinion on July 21, 2015 granting the
Company’s motion to transfer the venue to the Eastern
District of North Carolina (EDNC), but denying the Company’s
motion to dismiss the case against the Company’s commercial
partner as moot. The Company has also filed a Joint Motion to Stay
the case in North Carolina at the end of April 2016, which was
granted by the court on May 5, 2016. Thus, the case is now stayed
until a final resolution of the ‘167 IPRs in the USPTO. The
Company will continue to vigorously defend this case in the
EDNC.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In a related matter, on October 28, 2014, the Company filed
multiple IPR requests on the ’167 Patent demonstrating that
certain claims of such patent were anticipated by or obvious in
light of prior art references, including prior art references not
previously considered by the USPTO, and thus, invalid. The USPTO
instituted three of the four IPR requests and the Company filed a
request for rehearing for the non-instituted IPR. The final
decisions finding all claims patentable were issued in March 2016
and the Company filed a Request for Reconsideration in the USPTO in
April 2016. While the claims were upheld in the opinion,
BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> does not infringe the claims
of the ‘167 patent.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On January 22, 2014, MonoSol filed a Petition for IPR on US
Patent No. 7,579,019 (the ‘019 Patent). The Petition
asserted that the claims of the ‘019 Patent are alleged to be
unpatentable over certain prior art references. The IPR was
instituted on August 6, 2014. An oral hearing was held in
April 2015 and a decision upholding all seven claims was issued
August 5, 2015. In September 2015, MonoSol requested that the
USPTO rehear the IPR. The Company will continue to vigorously
defend its ‘019 patent. The Company expects the USPTO to
issue a decision in the second half of 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Actavis</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On February 8, 2016, the Company received a purported notice
relating to a Paragraph IV certification from Actavis Laboratories
UT, Inc. (“Actavis”) seeking to find invalid three
Orange Book listed patents (the “Patents”) relating
specifically to BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>. The Paragraph
IV certification relates to an Abbreviated New Drug Application
(the “ANDA”) filed by Actavis with the FDA for a
generic formulation of BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>. The Patents
subject to Actavis’ certification are U.S. Patent Nos.
7,579,019 (“the ’019 Patent”), 8,147,866 and
8,703,177.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company believes that Actavis’ claims of invalidity of
the Patents are wholly without merit and, as the Company has done
in the past, intends to vigorously defend its intellectual
property. The Company is highly confident that the Patents are
valid, as evidenced in part by the fact that the ‘019 Patent
has already been the subject of an unrelated IPR before the USPTO
under which the Company prevailed and all claims of the ‘019
Patent survived. Although there is a pending request for rehearing
of the final IPR decision regarding the ‘019 Patent pending
at the USPTO, the Company believes the USPTO’s decision will
be upheld. Under the Food Drug and Cosmetic Act, as amended by the
Drug Price Competition and Patent Term Restoration Act of 1984, as
amended (the “Hatch-Waxman Amendments”), after receipt
of a valid Paragraph IV notice, the Company may, and in this case
plans to, bring a patent infringement suit in federal district
court against Actavis within 45 days from the date of receipt of
the certification notice. On March 18, 2016 the Company filed a
complaint in Delaware against Actavis, thus the Company is entitled
to receive a 30 month stay on FDA’s ability to give final
approval to any proposed products that reference
BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>.
The 30 month stay is expected to preempt any final approval by FDA
on Actavis’s ANDA until at least August of 2018. In addition,
given the FDA approval of BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>, the Company is
entitled to three years of market exclusivity for
BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> ending in June 2017. Given
this timeframe, Actavis’s action is not unexpected. In
addition, the Company has additional pending intellectual property
which, if issued, would be capable of extending the patent life of
all three of our BEMA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>-related
products, including BUNAVAIL<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>, and
potentially be listed in the Orange Book.</p>
</div>
2.00
52230648
2016-03-31
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>10.          Stockholders’
Equity:</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Stock-based compensation</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During the three months ended March 31, 2016, a total of 190,513
options to purchase Common Stock, with an aggregate fair market
value of approximately $0.8 million, were granted to Company
employees and contractors. The options granted have a term of
10 years from the grant date and vest ratably over a three
year period. The fair value of each option is amortized as
compensation expense evenly through the vesting period.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The Company’s stock-based compensation expense is allocated
between research and development and selling, general and
administrative as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="60%" align="center" border="0">
<tr>
<td width="78%"></td>
<td valign="bottom" width="2%"></td>
<td></td>
<td valign="bottom" width="7%"></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="3" align="center">
<b>Three months ended,  </b></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"><b>   Stock-based compensation
expense</b></td>
<td valign="bottom">  </td>
<td valign="bottom" align="center"><b>March 31,<br />
2016</b></td>
<td valign="bottom">    </td>
<td valign="bottom" align="center">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>March 31,  </b></p>
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center"><b>2015  </b></p>
</td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom" colspan="5">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
  Research and Development</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" align="center">$   1,128</td>
<td valign="bottom">    </td>
<td valign="bottom" align="center">
$   852    </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
  Selling, General and Administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" align="center">$  2,983</td>
<td valign="bottom">    </td>
<td valign="bottom" align="center">
$ 2,655    </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The fair value of each option award is estimated on the grant date
using the Black-Scholes valuation model that uses assumptions for
expected volatility, expected dividends, expected term, and the
risk-free interest rate. Expected volatilities are based on implied
volatilities from historical volatility of the Common Stock, and
other factors estimated over the expected term of the options. The
expected term of options granted is derived using the
“simplified method” which computes expected term as the
average of the sum of the vesting term plus contract term. The
risk-free rate is based on the U.S. Treasury yield curve in effect
at the time of grant for the period of the expected term. The
weighted average for key assumptions used in determining the fair
value of options granted during the three months ended March 31,
2016 follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 4pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="64%" align="center" border="0">
<tr>
<td width="71%"></td>
<td valign="bottom" width="3%"></td>
<td width="9%"></td>
<td valign="bottom" width="3%"></td>
<td width="14%"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" rowspan="5" align="center">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center">        </p>
</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected price volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="WHITE-SPACE: nowrap">72.15% -82.71%</font></td>
<td valign="bottom">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free interest rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="WHITE-SPACE: nowrap">1.22% - 1.70%</font></td>
<td valign="bottom">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Weighted average expected life in years</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
6 years</td>
<td valign="bottom">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">—</td>
<td valign="bottom">  </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 20pt">
Option activity during the three months ended March 31, 2016 was as
follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="84%" align="center" border="0">
<tr>
<td width="64%"></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="5%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>  Number of  </b><br />
<b>   Shares   </b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted</b><br />
<b>Average</b><br />
<b>Exercise</b><br />
<b>Price</b><br />
<b>  Per Share  </b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center">
<b>   Aggregate   </b><br />
<b>Intrinsic</b><br />
<b>Value</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,397,529</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">  $</td>
<td valign="bottom" align="right">5.42</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">190,513</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4.42</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Exercised</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(112,425</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2.00</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeitures</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(36,814</td>
<td valign="bottom" nowrap="nowrap">) </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">11.98</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at March 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">  3,438,803</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">  $</td>
<td valign="bottom" align="right">
     5.42</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">  $</td>
<td valign="bottom" align="right">
         874</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 8pt; MARGIN-TOP: 0pt">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 24pt">
As of March 31, 2016, options exercisable totaled 2,507,446. There
was approximately $21.9 million of unrecognized compensation cost
related to non-vested share-based compensation awards, including
options and restricted stock units (“RSUs”) granted.
These costs will be expensed through 2019.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Earnings Per Share</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During the three months ended March 31, 2016 and 2015, outstanding
stock options, RSUs, warrants and convertible preferred stock of
10,113,296 and 9,459,110, respectively, were not included in the
computation of diluted earnings per share, because to do so would
have had an antidilutive effect.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 6px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b><i>Restricted Stock Units</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
During the three months ended March 31, 2016, 943,000 restricted
stock units (“RSUs”) were granted to members of the
Company’s executive officers and employees, with a fair
market value of approximately $3.6 million. The fair value of
restricted units is determined using quoted market prices of the
Common Stock and the number of shares expected to vest. These RSUs
were issued under the Company’s 2011 Equity Incentive Plan,
as amended, and vest in equal installments over three years.
Restricted stock activity during the three months ended March 31,
2016 was as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="74%" align="center" border="0">
<tr>
<td width="68%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Number of<br />
Restricted<br />
Shares</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>Weighted<br />
Average Fair<br />
Market Value<br />
Per RSU</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at January 1, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">4,298,154</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">   $</td>
<td valign="bottom" align="right">10.23</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Granted:</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom"></td>
<td valign="bottom"></td>
<td valign="bottom"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Executive officers</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">913,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.80</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Directors</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="center">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="center">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Employees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">30,000</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.60</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Vested</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(104,025)</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3.89</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Forfeitures</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">(555,791)</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">12.56</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 1px solid; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Outstanding at March 31, 2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">
    4,581,338</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">   $</td>
<td valign="bottom" align="right">
            8.34</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; BORDER-TOP: #000000 3px double; MARGIN-TOP: 0pt">
 </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Common Stock</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
On December 16, 2015, the Company and Dr. Andrew Finn
entered into a retirement agreement (the “Retirement
Agreement”) setting forth their mutual understandings
regarding Dr. Finn’s retirement from the Company.
Pursuant to the Retirement Agreement, all unvested RSUs previously
issued under the Company’s equity incentive plans and held by
Dr. Finn as of the retirement date were cancelled and, in lieu
thereof, Dr. Finn was awarded a one-time issuance of shares of
Common Stock based upon a net present valuation of the cancelled
RSUs as set forth in the Retirement Agreement (which resulted in an
issuance of 513,221 shares of Common Stock which were issued in
January 2016).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In early 2016, following its review of the Company’s
corporate performance for 2015, the Compensation Committee approved
equity awards in the form of RSUs to its named executive officers
(including Dr. Finn) and other senior executives in amounts at or
below the 25th% percentile of the Company’s peer group.
Dr. Finn, who retired on December 31, 2015, received an
immediate award of 150,000 shares of Common Stock in fulfillment of
the Company’s contractual obligation to him under the
Retirement Agreement, which shares were issued in March 2016.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Use of estimates in financial statements</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The preparation of the accompanying condensed consolidated
financial statements requires management to make certain estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the condensed consolidated financial statements, and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates and
assumptions.</p>
</div>
112425
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b><i>Recent accounting pronouncements</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update 2014-09,
<i>“</i><i>Revenue from Contracts with
Customers,</i><i>”</i> which supersedes the revenue
recognition requirements of Accounting Standards Codification
(“ASC”) Topic 605, “Revenue Recognition”
and most industry-specific guidance on revenue recognition
throughout the ASC. The new standard is principles-based and
provides a five step model to determine when and how revenue is
recognized. The core principle of the new standard is that revenue
should be recognized when a company transfers promised goods or
services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for those
goods or services. The new standard also requires disclosure of
qualitative and quantitative information surrounding the amount,
nature, timing and uncertainty of revenues and cash flows arising
from contracts with customers. In July 2015, the FASB agreed to
defer the effective date of the standard from January 1, 2017
to January 1, 2018, with an option that permits companies to
adopt the standard as early as the original effective date. Early
application prior to the original effective date is not permitted.
The standard permits the use of either the retrospective or
cumulative effect transition method. In April 2016, the FASB
issued ASU 2016-10, “<i>Revenue from Contracts with
Customers</i> (Topic 606): Identifying Performance Obligations
and Licensing.” ASU 2016-10 clarifies the implementation
guidance on identifying performance obligations. These ASUs apply
to all companies that enter into contracts with customers to
transfer goods or services. These ASUs are effective for public
entities for interim and annual reporting periods beginning after
December 15, 2017. Early adoption is permitted, but not before
interim and annual reporting periods beginning after
December 15, 2016. Entities have the choice to apply these
ASUs either retrospectively to each reporting period presented or
by recognizing the cumulative effect of applying these standards at
the date of initial application and not adjusting comparative
information. The Company is currently evaluating the requirements
of these standards and has not yet determined the impact on our
condensed consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The FASB’s new leases standard ASU 2016-02 <i>Leases</i>
(Topic 842) was issued on February 25, 2016. ASU 2016-02 is
intended to improve financial reporting about leasing transactions.
The ASU affects all companies and other organizations that lease
assets such as real estate, airplanes, and manufacturing equipment.
The ASU will require organizations that lease assets referred to as
“Lessees” to recognize on the balance sheet the assets
and liabilities for the rights and obligations created by those
leases. An organization is to provide disclosures designed to
enable users of financial statements to understand the amount,
timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements
concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be
required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current GAAP, the
recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its
classification as a finance or operating lease. However, unlike
current GAAP which requires only capital leases to be recognized on
the balance sheet the new ASU will require</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
both types of leases (i.e. operating and capital) to be recognized
on the balance sheet. The FASB lessee accounting model will
continue to account for both types of leases. The capital lease
will be accounted for in substantially the same manner as capital
leases are accounted for under existing GAAP. The operating lease
will be accounted for in a manner similar to operating leases under
existing GAAP, except that lessees will recognize a lease liability
and a lease asset for all of those leases. The leasing standard
will be effective for calendar year-end public companies beginning
after December 15, 2018. Public companies will be
required to adopt the new leasing standard for fiscal years, and
interim periods within those fiscal years, beginning after
December 15, 2018. Early adoption will be permitted for all
companies and organizations upon issuance of the standard. For
calendar year-end public companies, this means an adoption date of
January 1, 2019 and retrospective application to previously
issued annual and interim financial statements for 2018 and 2017.
Lessees with a large portfolio of leases are likely to see a
significant increase in balance sheet assets and liabilities. The
Company is currently in the process of evaluating the impact that
this new leasing ASU will have on its financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
In March 2016, the FASB issued ASU
2016-09, <i>Improvements to Employee Share-Based Payment
Accounting</i>, which amends Accounting Standards Codification
(“ASC”) Topic 718, Compensation – Stock
Compensation. ASU 2016-09 simplifies several aspects of the
accounting for share-based payment transactions, including the
income tax consequences, classification of awards as either equity
or liabilities, and classification on the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after
December 15, 2016, and interim periods within those fiscal years
and early adoption is permitted. The Company is currently in the
process of evaluating the impact of adoption of the ASU on its
condensed consolidated financial statements.</p>
</div>
BDSI
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The weighted average for key assumptions used in determining the
fair value of options granted during the three months ended March
31, 2016 follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 4pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="64%" align="center" border="0">
<tr>
<td width="71%"></td>
<td valign="bottom" width="3%"></td>
<td width="9%"></td>
<td valign="bottom" width="3%"></td>
<td width="14%"></td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td valign="bottom" rowspan="5" align="center">
<p style="MARGIN-BOTTOM: 1pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt" align="center">        </p>
</td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Expected price volatility</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="WHITE-SPACE: nowrap">72.15% -82.71%</font></td>
<td valign="bottom">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Risk-free interest rate</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center"><font style="WHITE-SPACE: nowrap">1.22% - 1.70%</font></td>
<td valign="bottom">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="bottom">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Weighted average expected life in years</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">
6 years</td>
<td valign="bottom">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; MARGIN-TOP: 0pt; TEXT-INDENT: -1em">
Dividend yield</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap" align="center">—</td>
<td valign="bottom">  </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b>12.          Subsequent
events.</b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On May 5, 2016, the Company entered into an amendment to the Credit
Agreement between the Company, MidCap and the lenders thereto (the
“Lenders”) extending the interest only period of the
Loan through the end of 2016. Beginning on January 1, 2017, the
principal amount owed under the Loan will then be amortized over
the remaining 23 months of the Loan. In association with the
extension of the interest only period, the Lenders were issued
warrants to purchase a total of 84,986 shares of Common Stock at an
exercise price of $3.53 per share.</p>
</div>
236000
-18733000
225000
3040000
679000
-118000
-17942000
2263000
-13000
0
-356000
934000
4111000
2102000
4111000
-235000
-14167000
18432000
778000
-236000
2725000
5377000
2460000
99000
40000
-438000
225000
13055000
2900000
243000
86000
2550000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 8pt">
<b><i>Overview</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
BioDelivery Sciences International Inc., together with its
subsidiaries (collectively, the “Company” or
“BDSI”) is a specialty pharmaceutical company that is
leveraging its novel and proprietary patented drug delivery
technologies to develop and commercialize, either on its own or in
partnerships with third parties, new applications of proven
therapeutics. The Company is focusing on developing products
to meet unmet patient needs in the areas of pain management and
addiction.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
The accompanying unaudited condensed consolidated financial
statements include all adjustments (consisting of normal and
recurring adjustments) necessary for a fair presentation of these
financial statements. The condensed consolidated balance sheet at
December 31, 2015 has been derived from the Company’s
audited consolidated financial statements included in its annual
report on Form 10-K for the year ended December 31, 2015.
Certain footnote disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) have
been condensed or omitted pursuant to the Securities and Exchange
Commission (“SEC”) rules and regulations. It is
suggested that these condensed consolidated financial statements be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s annual report on
Form 10-K for the year ended December 31, 2015. The
Company has made certain reclassifications in a footnote table for
the year ending December 31, 2015 to conform to the current
period presentation. This reclassification had no effect on the
measurement of total expenses, loss from operations, or net
loss.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Operating results for the three month period ended March 31, 2016
are not necessarily indicative of results for the full year or any
other future periods.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
As used herein, the Company’s common stock, par value $.001
per share, is referred to as the “Common Stock.”</p>
</div>
0.50
P10Y
$50 million upon regulatory approval, earned in October 2015 and received in November 2015, with the revenue recognition treatment for $20 million of such $50 million payment deferred due to the fact that all or a portion of such $20 million is contingently refundable to Endo based on a third party generic introduction in the U.S. during the patent extension period from 2020 to 2027. Should such introduction occur any time during the 2020 to 2027 period, a refund would be due to Endo based on the number of complete calendar months beyond December 31, 2019 where the first generic was sold over the denominator of 84 months multiplied by $20 million. For example, if a generic product were to be introduced in the U.S. in January of 2026, that would mean that 72 of the 84 months of patent exclusivity would have been earned and 12 months would have to be refunded. The calculation would be 12/84, multiplied by $20 million, for a refund of $2.9 million. The method of the refund payment to Endo would be made first by crediting against milestone payments owed to the Company, second by reducing the royalty by 50% until the $2.9 million is paid back, and third by the Company making a payment in the amount due to Endo. Otherwise, the $20 million will be earned as revenue each month over the patent extension period from 2020 to 2027;
4000
P12M
14400000
8000000
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b>7.            License
Obligations:</b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Arcion License Agreement</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On March 26, 2013, the Company entered into a license
agreement with Arcion Therapeutics, Inc. (the “Arcion
Agreement”) pursuant to which Arcion granted to the Company
an exclusive commercial world-wide license, with rights of
sublicense, under certain patent and other intellectual property
rights related to in-process research and development to develop,
manufacture, market, and sell gel products containing clonidine (or
a derivative thereof) for the treatment of painful diabetic
neuropathy (“PDN”) and other indications (the
“Arcion Products”).</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Pursuant to the Arcion Agreement, the Company is responsible for
using commercially reasonable efforts to develop and commercialize
Arcion Products, including the use of such efforts to conduct
certain clinical trials within certain time frames.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company is required to make the following payments to
Arcion:</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">$2.5 million upon filing and
acceptance by the FDA of an NDA with respect to an Arcion Product,
which will be payable, at the Company’s option, in cash or
unregistered shares of Common Stock (with such shares being subject
to a nine month lock-up and certain limitations on sale
thereafter); and</td>
</tr>
</table>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="4%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">up to a potential $60 million in cash
payments upon achieving certain pre-determined sales thresholds in
the U.S., none of which occur prior to achieving at least $200
million in U.S. net sales.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In addition, the Company shall pay Arcion $35 million in cash on
initial FDA approval of an Arcion Product, unless: (i) the
Company does not receive at least $70 million in FDA
approval-related milestone payments from its US sublicensees (if
any sublicenses are involved) with respect to the Arcion Product,
in which case the Company shall pay Arcion a prorated amount
between $17.5 million and $35 million based on the total amount of
such milestone payments received by the Company and its affiliates
from its sublicenses (if any sublicenses are involved); or
(ii) the FDA requires or recommends the performance of a
capsaicin challenge test (to see if C-fiber function is present in
the skin by determining if subjects experience pain, and to
determine pain intensity if present) as a precondition or precursor
to the prescribing of the Arcion Product (as a condition of
approval, a labeling requirement, or otherwise), in which case such
milestone shall be reduced to $17.5 million, but the first and
second sales threshold payments (as part of the $60 million in cash
payments ) described above shall each be increased by
$8 million.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
All milestone payments due to Arcion under the Arcion Agreement are
payable only once each.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In addition to the milestones set forth above, the Company will pay
royalties to Arcion based upon sales of Arcion Products by the
Company, its affiliate and sub-licensees (if any), all as defined
in the Arcion Agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In addition, in the event the amount due upon FDA approval of the
Arcion Product in the U.S. is less than $35 million for any reason
other than an FDA requirement or recommendation of a capsaicin
challenge test, as described above, the Company shall pay Arcion a
portion of any milestone payments received by the Company and its
affiliates from their sublicensees on the basis of any events
occurring in the U.S. following FDA approval but prior to (and
including) first commercial sale of an Arcion Product in the U.S.,
and certain of the payments to Arcion referred to above shall also
be subject to upward adjustment (with such upward adjustments
payable in the form of cash or unregistered shares of the
Company’s Common Stock, as elected solely by the Company),
until such time as the sum of all such additional payments and
upward adjustments (including the value of any issuances of stock,
if elected by the Company) and the initial amount paid on the
initial FDA approval totals $35 million.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The term of the Arcion Agreement continues, on a country-by-country
and product-by-product basis, until the earlier of (i) the
expiration of the royalty term for a particular Arcion Product in a
particular country or (ii) the effective date of termination
by either party pursuant to customary termination provisions. The
royalty term for any given country is the later of (i) the
first date there are no valid claims against any Arcion patent,
(ii) expiration of patent exclusivity or (iii) tenth
anniversary of the first commercial sale.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On March 30, 2015, the Company announced that the primary
efficacy endpoint in its initial Phase 3 clinical study of
Clonidine Topical Gel compared to placebo for the treatment of PDN
did not meet statistical significance, although certain secondary
endpoints showed statistically significant improvement over
placebo. Final analysis of the study identified a sizeable patient
population with a statistically significant improvement in pain
score vs placebo. Following thorough analysis of the data and
identification of the reasons behind the study results, the Company
initiated a second study. The study incorporated significant
learnings from previously</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
conducted studies and involved tightened and additional inclusion
criteria to improve assay sensitivity, reduce bias and ensure
compliance with enrollment criteria. The final study subject is
expected to complete treatment by the end of 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Evonik Development and Exclusive License Option
Agreement:</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On October 27, 2014, the Company entered into a definitive
Development and Exclusive License Option Agreement (the
“Development Agreement”) with Evonik Corporation,
(“Evonik”) to develop and commercialize an injectable,
extended release, microparticle formulation of buprenorphine for
the treatment of opioid dependence (the “Evonik
Product”). Under the Development Agreement, the Company also
has the right to pursue development of the Evonik Product for pain
management.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Under the Development Agreement, Evonik has also granted to the
Company two exclusive options to acquire exclusive worldwide
licenses, with rights of sublicense, to certain patents and other
intellectual property rights of Evonik to develop and commercialize
certain products containing buprenorphine. If such options are
exercised, such licenses would be memorialized in the Evonik
License Agreement (as defined below).</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Pursuant to the Development Agreement, Evonik is responsible for
using commercially reasonable efforts to develop a formulation for
the Evonik Product in accordance with a work plan mutually agreed
upon by the parties (the “Evonik Project”). Should the
Evonik Project proceed past the formulation stage, Evonik also has
the right to manufacture clinical and commercial supplies of the
Evonik Product, such manufacturing arrangement to be negotiated by
the parties in good faith in a formal License and Supply
Agreement(s) (the “Evonik License Agreement”), with
such Evonik License Agreement covering Evonik’s intellectual
property rights to be entered into between the parties if certain
conditions are met and terms are mutually agreed upon.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Should Evonik and the Company enter into the License Agreement
following the attainment of a Phase 1 ready formulation of the
Evonik Product for one or both of the opioid dependence or pain
management indications, the Company would pay Evonik a
non-refundable, non-creditable one-time payment in conjunction with
certain future regulatory filings and approvals and royalties on
net sales of the Evonik Product.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Development Agreement contains customary termination
provisions, and the Company may additionally terminate the
Development Agreement at any time after the completion of certain
enumerated tasks as provided in the Development Agreement, for any
reason or no reason, by providing written notice of termination to
Evonik. Upon termination of the Development Agreement, Evonik will
be paid any amounts owed to Evonik in accordance with the estimated
budget for work performed under the Development Agreement through
the effective date of termination, including any reasonable,
documented, non-cancelable third party costs and any reasonable,
documented wind-down costs reasonably incurred by Evonik in
connection with the Evonik Project. Should the Company terminate
for reasons other than for a material, uncured breach by Evonik or
Evonik’s bankruptcy, Evonik shall have the right to use any
and all data and intellectual property generated under the Evonik
Project for any purpose.</p>
</div>
P6M
4
2019
P18M
<div>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b>6.
            License
and Development Agreements:</b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company has periodically entered into license and development
agreements to develop and commercialize certain of its products.
The arrangements typically are multi-deliverable arrangements that
are funded through upfront payments, milestone payments, royalties
and other forms of payment to the Company. The Company’s most
significant license and development agreements are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Meda License, Development and Supply Agreements</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In August 2006 and September 2007, the Company entered into certain
agreements with Meda AB (“Meda”), a Swedish company to
develop and commercialize the Company’s ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> product, a drug treatment for
breakthrough cancer pain delivered utilizing the Company’s
BEMA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup>technology. The
agreements relate to the United States, Mexico and Canada
(“Meda U.S. Agreements”) and to certain countries in
Europe (“Meda EU Agreements”). They carry license terms
that commenced on the date of first commercial sale in each
respective territory and end on the earlier of the entrance of a
generic product to the market or upon expiration of the patents,
which begin to expire in 2020.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company determined that, upon inception of both the U.S. and EU
Meda arrangements, all deliverables were considered one combined
unit of accounting. As such, all cash payments from Meda that were
related to these deliverables were initially recorded as deferred
revenue. Upon commencement of the license term (the date of first
commercial sale in each territory), the license and certain
deliverables associated with research and development services were
delivered to Meda. The first commercial sale in the U.S. occurred
in October 2009. As a result, $59.7 million of the aggregate
milestones and services revenue was recognized as revenue in fiscal
year 2009.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company has determined that it is acting as a principal under
the Meda Agreements and, as such, will record product supply
revenue, research and development services revenue and other
services revenue amounts on a gross basis in the Company’s
condensed consolidated financial statements.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On March 12, 2012, the Company announced the postponement of
the U.S. re-launch of ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> following the initiation of
the class-wide Risk Evaluation and Mitigation Strategy
(“REMS”) until the product formulation could be
modified to address two appearance-related issues. Such
appearance-related issues involved the formation of microscopic
crystals and a fading of the color in the mucoadhesive layer, and
as previously reported the Company has since worked with FDA to
reformulate ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> to address these issues. In
August 2015, the Company announced the FDA approval of the new
formulation.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On January 27, 2015, the Company announced that it had entered
into an assignment and revenue sharing agreement with Meda to
return to the Company the marketing authorization for
ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> for the U.S. and the right to
seek marketing authorizations for ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> in Canada and Mexico.
Following return of the U.S. marketing authorization from Meda, the
Company submitted a prior approval supplement for the new
formulation to the FDA in March 2015. In connection with the return
of the U.S. marketing authorization by Meda to the Company in
January 2015, the remaining U.S.-related deferred revenue of $1.0
million was recorded as contract revenue during the three months
ended March 31, 2015. There was no remaining U.S.-related contract
revenue to record during the three months ended March 31, 2016. On
February 27, 2016, the Company entered into an extension of
the assignment and revenue sharing agreement to extend the period
of time for a period up to December 31, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Recent efforts to extend the Company’s supply agreement with
its ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> manufacturer, Aveva, which is
now a subsidiary of Apotex, Inc., have been unsuccessful and the
agreement expired. However, the Company has identified an alternate
supplier and requested guidance from the FDA on the specifics
required for obtaining approval to supply product from this new
vendor. This will allow the Company to determine when
ONSOLIS<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> may be available to the
marketplace and assist the Company as in securing a new commercial
partnership. Based on the Company’s current estimates, the
Company believes it will submit the necessary documentation to FDA
for qualification of the new manufacturer by the fourth quarter of
2016 and have approval by the first half of 2017.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
<b><i>Endo License and Development Agreement</i></b></p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
In January 2012, the Company entered into a License and Development
Agreement with Endo Pharmaceuticals, Inc. (“Endo”)
pursuant to which the Company granted Endo an exclusive commercial
world-wide license to develop, manufacture, market and sell the
Company’s BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup>product and to
complete U.S. development of such product candidate for purposes of
seeking FDA approval (the “Endo Agreement”).
BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> is for the management of pain
severe enough to require daily, around-the-clock, long-term opioid
treatment and for which alternative treatment options are
inadequate.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Pursuant to the Endo Agreement, Endo has obtained all rights
necessary to complete the clinical and commercial development of
BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> and to sell the product
worldwide. Although Endo has obtained all such necessary rights,
the Company had agreed under the Endo Agreement to be responsible
for the completion of certain clinical trials regarding
BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> (and to provide clinical trial
materials for such trials) necessary to submit a New Drug
Application (“NDA”) to the FDA, which occurred in
December 2014 and was accepted February 2015, in order to obtain
approval of BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> in the U.S., which occurred
October 2015. The Company was responsible for development
activities through the filing of the NDA in the U.S., while Endo
was responsible for the development following the NDA submission as
well as the manufacturing, distribution, marketing and sales of
BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> on a worldwide basis. In
addition, Endo was responsible for all filings required in order to
obtain regulatory approval of BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup>.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Pursuant to the Endo Agreement, the Company has received (or is
expected to receive upon satisfaction of applicable conditions) the
following payments (some portion(s) of which will be utilized by
the Company to support its development obligations under the Endo
Agreement with respect to BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup>):</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="4%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">$30 million non-refundable upfront
license fee (earned in January 2012);</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 6pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="4%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">$15 million for enhancement of
intellectual property rights (earned in May 2012);</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 6pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="4%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">$20 million for full enrollment in
two clinical trials ($10 million earned in January 2014 and $10
million earned in June 2014);</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 6pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="4%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">$10 million upon FDA acceptance of
filing NDA (earned in February 2015);</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 6pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="4%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">$50 million upon regulatory approval,
earned in October 2015 and received in November 2015, with the
revenue recognition treatment for $20 million of such $50 million
payment deferred due to the fact that all or a portion of such $20
million is contingently refundable to Endo based on a third party
generic introduction in the U.S. during the patent extension period
from 2020 to 2027. Should such introduction occur any time during
the 2020 to 2027 period, a refund would be due to Endo based on the
number of complete calendar months beyond December 31, 2019 where
the first generic was sold over the denominator of 84 months
multiplied by $20 million. For example, if a generic product were
to be introduced in the U.S. in January of 2026, that would mean
that 72 of the 84 months of patent exclusivity would have been
earned and 12 months would have to be refunded. The calculation
would be 12/84, multiplied by $20 million, for a refund of $2.9
million. The method of the refund payment to Endo would be made
first by crediting against milestone payments owed to the Company,
second by reducing the royalty by 50% until the $2.9 million is
paid back, and third by the Company making a payment in the amount
due to Endo. Otherwise, the $20 million will be earned as revenue
each month over the patent extension period from 2020 to 2027;</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 6pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="6%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">up to an aggregate of $55 million
based on the achievement of four separate post-approval sales
thresholds; and</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 6pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="6%"> </td>
<td valign="top" width="3%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">sales-based royalties in a particular
percentage range on U.S. sales of BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup>, and royalties
in a lesser range on sales outside the United States, subject to
certain restrictions and adjustments.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company has assessed its arrangement with Endo and the
Company’s deliverables thereunder at inception to determine:
(i) the separate units of accounting for revenue recognition
purposes, (ii) which payments should be allocated to which of
those units of accounting and (iii) the appropriate revenue
recognition pattern or trigger for each of those payments. The
assessment requires subjective analysis and requires management to
make judgments, estimates and assumptions about whether
deliverables within multiple-element arrangements are separable
and, if so, to determine the amount of arrangement consideration to
be allocated to each unit of accounting.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
At the inception of the Endo arrangement, the Company determined
that the Endo Agreement was a multi-deliverable arrangement with
three deliverables: (1) the license rights related to
BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup>,
(2) services related to obtaining enhanced intellectual
property rights through the issuance of a particular patent and
(3) clinical development services. The Company concluded that
the license delivered to Endo at the inception of the Endo
Agreement has stand-alone value. It was also determined that there
was a fourth deliverable, the provision of clinical trial material
(“CTM”). The amounts involved are, however, immaterial
and delivered in essentially the same time frame as the clinical
development services. Accordingly, the Company did not separately
account for the CTM deliverable, but considers it part of the
clinical development services deliverable.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The initial non-refundable $30 million license fee was allocated to
each of the three deliverables based upon their relative selling
prices using best estimates. The analysis of the best estimate of
the selling price of the deliverables was based on the income
approach, the Company’s negotiations with Endo and other
factors, and was further based on management’s estimates and
assumptions which included consideration of how a market
participant would use the license, estimated market opportunity and
market share, the Company’s estimates of what contract
research organizations would charge for clinical development
services, the costs of clinical trial materials and other factors.
Also considered were entity specific assumptions regarding the
results of clinical trials, the likelihood of FDA approval of the
subject product and the likelihood of commercialization based in
part on the Company’s prior agreements with the
BEMA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">®</sup> technology.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Based on this analysis, $15.6 million of the up-front license fee
was allocated to the license and $14.4 million to clinical
development services (which is inclusive of the cost of CTM).
Although the intellectual property component was considered a
separate deliverable, no distinct amount of the up-front payment
was assigned to this deliverable because the Company determined the
deliverable to be perfunctory. The amount allocated to the license
was recognized as revenue in fiscal year 2012. The portion of the
upfront license fee allocated to the clinical development services
deliverable of $14.4 million is being recognized as those services
are performed. The Company estimated that such clinical development
services would extend into the first half of 2015. Such services
were completed during the three months ended March 31, 2015 and
resulted in the recognition of $0.4 million in the accompanying
condensed consolidated statements of operations. There was no
remaining deferred revenue related to the upfront license fee
recorded during the three months ended March 31, 2016.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The term of the Endo Agreement shall last, on a country-by-country
basis, until the later of: (i) 10 years from the date of the
first commercial sale of BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> in a particular country or
(ii) the date on which the last valid claim of the
Company’s patents covering BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> in a particular country has
expired or been invalidated. The Endo Agreement shall be subject to
termination by Endo, at any time, upon a specific timeframe of
prior written notice to the Company and under certain other
conditions by either party as specified in the Endo Agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The remaining milestone payments are expected to be recognized as
revenue as they are achieved, except that $20 Million of the $50
million regulatory approval milestone received in November for the
Patent Life Extension is contingently refundable from 2020 to 2027
and revenue related to such contingently refundable milestone has
been deferred for future recognition. The $20 million will be
earned over the extended 84 month patent period as it is
contingently refundable pending a generic product commercially
launched in the U.S. during the patent extension period. Sales
threshold payments and sales-based royalties will be recognized as
they accrue under the terms of the Endo Agreement.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
The Company is reimbursed by Endo for certain contractor costs when
these costs go beyond set thresholds as outlined in the Endo
Agreement. Endo reimburses the Company for this spending at cost
and the Company receives no mark-up or profit. The gross amount of
these reimbursed research and development costs are reported as
research and development reimbursement revenue in the accompanying
condensed consolidated statements of operations. The Company acts
as a principal, has discretion to choose suppliers, bears credit
risk and may perform part of the services required in the
transactions. Therefore, these reimbursements are treated as
revenue to the Company. The actual expenses creating the
reimbursements are reflected as research and development
expense.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
Beginning in March 2014, total reimbursable contractor costs
exceeded a set threshold, at which point all such expenses are to
be borne at a rate of 50% by Endo and 50% by the Company. Endo has
continued to reimburse the Company for 100% of such costs, with 50%
thereof to be taken by Endo as a credit against potential future
milestones associated with achievement of certain regulatory
events. During the three months ended March 31, 2016 and 2015, the
Company recognized $0.004 million and $0.8 million, respectively,
of reimbursable expenses related to the Endo Agreement, which is
recorded as research and development reimbursement revenue on the
accompanying condensed consolidated statement of operations.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On December 23, 2014, the Company and Endo announced the
submission of a NDA for BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> to the FDA, which was accepted
February 23, 2015. On October 26, 2015, the Company and
Endo announced that the FDA approved BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> (on October 23, 2015).
FDA approval of BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> triggered a milestone payment
to the Company from Endo of $50 million pursuant to the Endo
Agreement, less approximately $6 million of cumulative pre-payments
received and recorded in deferred revenue, current in the
accompanying condensed consolidated balance sheet. The Company
received payment of such milestone in November 2015. The
company deferred $20 million of such $50 million payment having
been deferred under GAAP due to the fact that all or a portion of
such $20 million is contingently refundable to Endo. The $20
million will be earned over the extended 84 month patent extension
period from 2020 to 2027 as it is contingently refundable in the
event a generic product is commercially launched in the U.S.</p>
<p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px">
On February 22, 2016, the Company and Endo announced the
commercial availability of BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup> buccal film.
BELBUCA<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">™</sup>,
distributed and promoted by Endo, is now available nationwide.</p>
</div>
P10Y
15600000
2020
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>2.            Liquidity
and management’s plans:</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
At March 31, 2016, the Company had cash and cash equivalents
of approximately $69.4 million. The Company used $14.2 million of
cash during the three months ended March 31, 2016 and had
stockholders’ equity of $19.8 million, versus $31.7 million
at December 31, 2015. Based on the Company’s current
operational plan and budget, the Company expects that it has
sufficient cash to manage its business into approximately into the
third quarter of 2017, although this estimation assumes that the
Company does not accelerate the development of existing product
candidates, or acquire other drug development opportunities or
otherwise face unexpected events, costs or contingencies, any of
which could affect the Company’s cash requirements.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
Additional capital will likely be required to support the
Company’s ongoing commercialization activities for
BUNAVAIL<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>, the anticipated
commercial relaunch of ONSOLIS<sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">®</sup>, the continued
development of Clonidine Topical Gel and Buprenorphine Depot
Injection, or other products which may be acquired or licensed by
the Company, and for general working capital requirements. Based on
product development timelines and agreements with the
Company’s development partners, the ability to scale up or
reduce personnel and associated costs are factors considered
throughout the product development life cycle. Available resources
may be consumed more rapidly than currently anticipated,
potentially resulting in the need for additional funding.
Additional funding from any source (including, without limitation,
milestone, royalty or other payments from commercialization
agreements as well as equity or debt financings) may be unavailable
on favorable terms, if at all.</p>
</div>
3
0.90
2027
2020
0.50
2460000
40000
0.0845
1000000
P42M
0.0275
0.03
0.05
0.04
2
2500000
The royalty term for any given country is the later of (i) the first date there are no valid claims against any Arcion patent, (ii) expiration of patent exclusivity or (iii) tenth anniversary of the first commercial sale.
35000000
17500000
P15Y
2
2983000000
1128000000
400000
0.50
0.50
1.00
4000
913000
3.80
190513
800000
30000
3.60
2015-12-31
0.0170
0.8271
P37D
P3M
0.0122
0.7215
P30D
P1M
200000000
70000000
0
0
60000000
943000
555791
104025
3.89
12.56
3600000
112425
104025
0
1000
663221
-18733000
0
0
225000
0
4111000
2459000
40000
300000
0001103021
bdsi:TtyLicenseAndSupplyAgreementMember
2013-07-01
2013-09-30
0001103021
us-gaap:AdditionalPaidInCapitalMember
2016-01-01
2016-03-31
0001103021
us-gaap:TreasuryStockMember
2016-01-01
2016-03-31
0001103021
us-gaap:RetainedEarningsMember
2016-01-01
2016-03-31
0001103021
us-gaap:CommonStockMember
2016-01-01
2016-03-31
0001103021
us-gaap:RestrictedStockUnitsRSUMember
2016-01-01
2016-03-31
0001103021
country:US
2016-01-01
2016-03-31
0001103021
us-gaap:SeriesAPreferredStockMember
2016-01-01
2016-03-31
0001103021
us-gaap:MinimumMember
country:US
2016-01-01
2016-03-31
0001103021
us-gaap:MinimumMember
2016-01-01
2016-03-31
0001103021
us-gaap:MaximumMember
2016-01-01
2016-03-31
0001103021
bdsi:FoundingEmployeeMember
2016-01-01
2016-03-31
0001103021
us-gaap:RestrictedStockUnitsRSUMember
bdsi:EmployeeMember
2016-01-01
2016-03-31
0001103021
bdsi:DirectorsAndEmployeesMember
2016-01-01
2016-03-31
0001103021
us-gaap:RestrictedStockUnitsRSUMember
us-gaap:ExecutiveOfficerMember
2016-01-01
2016-03-31
0001103021
bdsi:EndoLicenseAndDevelopmentAgreementMember
2016-01-01
2016-03-31
0001103021
us-gaap:ResearchAndDevelopmentExpenseMember
2016-01-01
2016-03-31
0001103021
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2016-01-01
2016-03-31
0001103021
bdsi:DevelopmentAndExclusiveLicenseOptionAgreementMember
2016-01-01
2016-03-31
0001103021
bdsi:TtyLicenseAndSupplyAgreementMember
2016-01-01
2016-03-31
0001103021
us-gaap:MinimumMember
bdsi:ArcionLicenseAgreementMember
2016-01-01
2016-03-31
0001103021
us-gaap:MaximumMember
bdsi:ArcionLicenseAgreementMember
2016-01-01
2016-03-31
0001103021
bdsi:ArcionLicenseAgreementMember
2016-01-01
2016-03-31
0001103021
bdsi:ClinicalTrialsFullEnrollmentMember
2016-01-01
2016-03-31
0001103021
bdsi:MidCapMember
bdsi:SecuredLoanFacilityMember
2016-01-01
2016-03-31
0001103021
bdsi:SecuredLoanFacilityMember
2016-01-01
2016-03-31
0001103021
2016-01-01
2016-03-31
0001103021
country:US
bdsi:MilestonesMember
2015-01-01
2015-03-31
0001103021
bdsi:EndoLicenseAndDevelopmentAgreementMember
2015-01-01
2015-03-31
0001103021
us-gaap:ResearchAndDevelopmentExpenseMember
2015-01-01
2015-03-31
0001103021
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2015-01-01
2015-03-31
0001103021
2015-01-01
2015-03-31
0001103021
2012-05-01
2012-05-31
0001103021
2015-10-01
2015-10-31
0001103021
country:US
2009-10-01
2009-10-31
0001103021
2015-11-01
2015-11-30
0001103021
2015-02-01
2015-02-28
0001103021
bdsi:TtyLicenseAndSupplyAgreementMember
2010-10-06
2010-10-07
0001103021
2015-10-26
2015-10-26
0001103021
bdsi:TtyLicenseAndSupplyAgreementMember
2016-02-04
2016-02-04
0001103021
bdsi:FoundingEmployeeMember
2015-12-16
2015-12-16
0001103021
bdsi:MidCapMember
bdsi:SecuredLoanFacilityMember
2015-05-29
2015-05-29
0001103021
bdsi:SecuredLoanFacilityMember
2015-05-29
2015-05-29
0001103021
us-gaap:AdditionalPaidInCapitalMember
2015-12-31
0001103021
us-gaap:TreasuryStockMember
2015-12-31
0001103021
us-gaap:RetainedEarningsMember
2015-12-31
0001103021
us-gaap:CommonStockMember
2015-12-31
0001103021
us-gaap:RestrictedStockUnitsRSUMember
2015-12-31
0001103021
us-gaap:SeriesAPreferredStockMember
2015-12-31
0001103021
us-gaap:ConvertiblePreferredStockMember
2015-12-31
0001103021
bdsi:BunavailMember
2015-12-31
0001103021
bdsi:IdleEquipmentMember
2015-12-31
0001103021
us-gaap:MachineryAndEquipmentMember
2015-12-31
0001103021
us-gaap:LeaseholdImprovementsMember
2015-12-31
0001103021
us-gaap:OfficeEquipmentMember
2015-12-31
0001103021
us-gaap:ComputerEquipmentMember
2015-12-31
0001103021
2015-12-31
0001103021
2014-12-31
0001103021
us-gaap:AdditionalPaidInCapitalMember
2016-03-31
0001103021
us-gaap:TreasuryStockMember
2016-03-31
0001103021
us-gaap:RetainedEarningsMember
2016-03-31
0001103021
us-gaap:CommonStockMember
2016-03-31
0001103021
us-gaap:RestrictedStockUnitsRSUMember
2016-03-31
0001103021
us-gaap:SeriesAPreferredStockMember
2016-03-31
0001103021
us-gaap:ConvertiblePreferredStockMember
2016-03-31
0001103021
bdsi:BunavailMember
2016-03-31
0001103021
bdsi:FoundingEmployeeMember
2016-03-31
0001103021
bdsi:EndoLicenseAndDevelopmentAgreementMember
2016-03-31
0001103021
bdsi:IdleEquipmentMember
2016-03-31
0001103021
us-gaap:MachineryAndEquipmentMember
2016-03-31
0001103021
us-gaap:LeaseholdImprovementsMember
2016-03-31
0001103021
us-gaap:OfficeEquipmentMember
2016-03-31
0001103021
us-gaap:ComputerEquipmentMember
2016-03-31
0001103021
bdsi:ClinicalTrialsFullEnrollmentMember
2016-03-31
0001103021
bdsi:MidCapMember
bdsi:SecuredLoanFacilityMember
2016-03-31
0001103021
bdsi:SecuredLoanFacilityMember
2016-03-31
0001103021
2016-03-31
0001103021
2015-03-31
0001103021
bdsi:ClinicalTrialsTwoMember
2014-06-30
0001103021
2016-05-09
0001103021
bdsi:MidCapMember
us-gaap:SubsequentEventMember
2016-05-05
0001103021
bdsi:MidCapMember
bdsi:SecuredLoanFacilityMember
2015-05-29
0001103021
bdsi:ClinicalTrialsOneMember
2014-01-31
0001103021
2012-01-31
iso4217:USD
iso4217:USD
shares
shares
pure
bdsi:Milestone
bdsi:Customer
bdsi:Clinical_Trials
bdsi:Agreement