15.

Subsequent events:

Termination Agreement with Endo

On December 7, 2016, the Company entered into an agreement (the “Termination Agreement”) with Endo terminating Endo’s licensing of rights for BELBUCA^®. The closing of the Termination Agreement, and the formal termination of the BELBUCA^® license to Endo and closing of the transactions further described below to be undertaken in connection therewith (the “Closing”), occurred on January 6, 2017.

Upon Closing, the Company will purchase from Endo the following assets (the “Assets”): (i) current BELBUCA^® product inventory and work-in-progress, (ii) material manufacturing contracts related to BELBUCA^®, (iii) BELBUCA^®-related domain names and trademarks (including the BELBUCA^® trademark), (iv) BELBUCA^®-related manufacturing equipment, and (v) all pre-approval regulatory submissions, including any Investigational New Drug Applications and New Drug Applications, regulatory approvals and post-approval regulatory submissions concerning BELBUCA^®. The purchase price for the Assets (the “Asset Purchase Price”) will be equal to the sum of (i) the aggregate book value of the portion of the transferred product inventory forecasted to be used or sold by the Company, (ii) the aggregate book value of work-in-progress inventory, and (iii) the assumption of any assumed liabilities. Upon Closing, the Company will accept transfer of the Assets and assume and agree to discharge when due all applicable liabilities assumed by the Company, which consist of post-Closing obligations for liabilities and payments associated with the Assets, the assumed contracts related to the Assets and applicable taxes (with the obligation for pre-Closing and other certain liabilities resulting from the acts or omissions of Endo being retained by Endo).

The Asset Purchase Price, together with all other payments (including a non-compete covenant payment) due to Endo under the Termination Agreement, will be paid to Endo in cash in four quarterly installments on the last calendar day of each quarter in 2017. The Company is currently evaluating the financial impact of the Termination Agreement in accordance with US GAAP. Furthermore, the Company will not be responsible for future royalties or milestone payments to Endo and Endo will not be obligated to any future milestone payments to the Company. The Termination Agreement contains customary representations and warranties and mutual releases and indemnification.

At the Closing, the Company and Endo entered into a Transition Services Agreement which governed the post-Closing rights and responsibilities of the Company and Endo in connection with the license termination and the transfer of the Assets to the Company. Under this agreement, the Company and Endo agreed to the handling of transition matters such as managing customer contracts, BELBUCA^® price reporting, payments, returns and rebates, and customer and managed care relations. In connection therewith, Endo has agreed to provide to the Company an agreed upon number of work hours to be provided by Endo personnel during the transition for certain of these transition services and other assistance with respect to the transition of BELBUCA^® to the Company.

Agreement with Par Pharmaceuticals

In conjunction with the aforementioned Endo Termination Agreement, on December 7, 2016, the Company also entered into a distribution agreement (the “Distribution Agreement”) with Par Pharmaceuticals, Inc. (“Par”) for the distribution of an authorized generic BELBUCA^®product (the “Generic Product”) after the launch of a generic BELBUCA^® product by a third party. The Distribution Agreement covers distribution within the entire United States, has an initial term of three years (the “Initial Term”) after the launch of a generic BELBUCA^®product by a third party, an initial automatic renewal period of two years, and additional automatic one-year renewal periods thereafter (such two-year period and each one-year period, a “Renewal Term”), which will occur unless either party provides written notice of termination an agreed upon period of time prior to the expiration of the Initial Term or any Renewal Term. In exchange for distribution rights of the Generic Product, Par will pay to the Company an agreed upon base purchase price and a deferred purchase price equal to a percentage of profit (as such term is specifically agreed to in the Distribution Agreement) with respect to units of each dosage strength of Generic Product. During the term of the Distribution Agreement, Par is precluded from manufacturing for sale in the United States, or distributing in the United States, any equivalent product, provided that nothing prohibits Par from continuing or undertaking to develop any equivalent product or selling such equivalent product outside of the U.S. The Distribution Agreement contains customary termination provisions for bankruptcy, withdrawal of product from the market, and regulatory and legislative changes, as well as a termination right for insufficient profits or Par’s acquisition by or of a party challenging the Company’s patents with respect to BELBUCA^®.

Term Loan Agreement with CRG

On February 21, 2017 (the “Closing Date”), the Company and its wholly-owned subsidiaries, Arius Pharmaceuticals, Inc. (“Arius”) and Arius Two, Inc. (“Arius Two” and collectively with Arius, the “Subsidiary Guarantors”) entered into a Term Loan Agreement (the “Loan Agreement”) with CRG Servicing LLC (“CRG”), as administrative agent and collateral agent, and the lenders named in the Loan Agreement (the “Lenders”).

Pursuant to the Loan Agreement, the Company borrowed $45.0 million from the Lenders as of the Closing Date, and may be eligible to borrow up to an additional $30.0 million in two tranches of $15.0 million each contingent upon achievement of certain conditions, including: (i) in the case of the first tranche, representing the second potential draw under the Loan Agreement (the “Second Draw”), satisfying both (a) certain minimum net revenue thresholds on or before September 30, 2017 or December 31, 2017 and (b) a certain minimum market capitalization threshold for a period of time prior to the funding of the Second Draw (provided, that if the Company does not achieve the minimum net revenue thresholds necessary for the Second Draw but does achieve a certain minimum market capitalization threshold for a period of time prior to December 31, 2017, the Company would be eligible for a Second Draw funding in the amount of $5.0 million); and (ii) in the case of the second tranche, representing the third potential draw under the Loan Agreement (the “Third Draw”), satisfying both (a) certain minimum net revenue thresholds on or before June 30, 2018 or September 30, 2018 and (b) a certain minimum market capitalization threshold for a period of time prior to the funding of the Third Draw.

The Company utilized approximately $29.4 million of the initial loan proceeds to repay all of the amounts owed by the Company under its existing Amended and Restated Loan and Security Agreement, dated May 29, 2015, with MidCap (the “Prior Agreement”). Upon the repayment of all amounts owed by the Company under the Prior Agreement, all commitments under the Prior Agreement have been terminated and all security interests granted by the Company and the Subsidiary Guarantors to the lenders under the Prior Agreement have been released. The Company intends to use the remainder of the initial loan proceeds (after deducting loan origination costs and broker and other fees) of approximately $14.0 million, plus any additional amounts that may be borrowed in the future, for general corporate purposes and working capital.

The Loan Agreement has a six-year term with three years of interest-only payments (which can be extended to four years if the Company achieves certain net revenue and market capitalization thresholds prior to December 31, 2019), after which quarterly principal and interest payments will be due through the December 31, 2022 maturity date. Interest on the amounts borrowed under the Loan Agreement accrues at an annual fixed rate of 12.50%, 3.5% of which (i.e., a resultant 9.0% rate) may be deferred during the interest-only period by adding such amount to the aggregate principal loan amount. On each borrowing date (including the Closing Date), the Company is required to pay CRG a financing fee based on the loan drawn on that date. The Company is also required to pay the Lenders a final payment fee upon repayment of the Loans in full, in addition to prepayment amounts described below.

The Company may prepay all or a portion of the outstanding principal and accrued unpaid interest under the Loan Agreement at any time upon prior notice to the Lenders subject to a certain prepayment fees during the first five years of the term (which fees are lowered over time) and no prepayment fee thereafter. In certain circumstances, including a change of control and certain asset sales or licensing transactions, the Company is required to prepay all or a portion of the loan, including the applicable prepayment premium of on the amount of the outstanding principal to be prepaid.

As security for its obligations under the Loan Agreement, on the funding date of the initial borrowing, the Company and the Subsidiary Guarantors entered into a security agreement with CRG whereby the Company and the Subsidiary Guarantors granted to CRG, as collateral agent for the Lenders, a lien on substantially all of its assets including intellectual property (subject to certain exceptions). The Loan Agreement requires the Company to maintain minimum cash and cash equivalents balance and, each year through the end of 2022, to meet a minimum net annual revenue threshold. In the event that the Company does not meet the minimum net annual revenue threshold, then the Company can satisfy the requirement for that year by raising two (2) times the shortfall by way of raising equity or subordinated debt.

The Loan Agreement also contains customary affirmative and negative covenants for a credit facility of this size and type, including covenants that limit or restrict the Company’s ability to, among other things (but subject in each case to negotiated exceptions), incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends or make distributions, license intellectual property rights on an exclusive basis or repurchase stock.

The Loan Agreement includes customary events of default that include, among other things, non-payment, inaccuracy of representations and warranties, covenant breaches, a material adverse change (as defined in the Loan Agreement), cross default to material indebtedness or material agreements, bankruptcy and insolvency, material judgments and a change of control. The occurrence and continuance of an event of default could result in the acceleration of the obligations under the Loan Agreement. Under certain circumstances, a default interest rate of an additional 4.00% per annum will apply on all outstanding obligations during the existence of an event of default under the Loan Agreement.

In connection with the initial borrowing made under the Loan Agreement on February 21, 2017, the Company issued to CRG and certain of its affiliates five separate warrants to purchase an aggregate of 1,701,582 shares of the Company’s common stock (the “CRG Warrants”). The CRG Warrants are exercisable any time prior to February 21, 2027 at a price of $2.38 per share, with typical provisions for cashless exercise and stock-based anti-dilution protection. The exercise of the CRG Warrants could have a dilutive effect to the Company’s common stock to the extent that the market price per share of the Company’s common stock, as measured under the terms of the CRG Warrants, exceeds the exercise price of the CRG Warrants. CRG is also entitled to receive a smaller amount of similar warrants concurrently with the funding, if applicable, of the Second Draw and the Third Draw.