6.	License and development agreements:

The Company periodically enters into license and development agreements to develop and commercialize 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:

Meda license, development and supply agreements

In August 2006 and September 2007, the Company entered into certain agreements with Meda AB (“Meda”) a subsidiary of Mylan N.V., a Swedish company to develop and commercialize the Company’s ONSOLIS^® product, a drug treatment for breakthrough cancer pain delivered utilizing the Company’s BEMA^® technology. The agreements related 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 date of the last to expire Orange Book listed patents which currently is July 23, 2027.

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 consolidated financial statements.

On March 12, 2012, the Company announced the postponement of the U.S. relaunch of ONSOLIS^® 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^® to address these issues. In August 2015, the Company announced the FDA approval of the new formulation. The Company identified a new supplier and requested guidance from the FDA on specific requirements for obtaining approval to supply product from this new vendor. Based on the Company’s current estimates, the Company will be able to submit the necessary documentation to the FDA for qualification of the new manufacturer in the first quarter of 2018.

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^® in the U.S. and the right to seek marketing authorizations for ONSOLIS^® in Canada and Mexico. In connection with the return to the Company by Meda of the U.S. marketing authorization in January 2015, the remaining U.S.-related deferred revenue of $1.0 million was recorded as contract revenue during the year ended December 31, 2015. On February 27, 2016, the Company entered into an extension of the assignment and revenue sharing agreement to extend the period until December 31, 2016, which terminated on May 11, 2016 upon the signing of the Termination and Revenue Sharing Agreement (“the Agreement”).

Simultaneously on May 11, 2016, the Company and Collegium executed a definitive License and Development Agreement (the “License Agreement”) under which the Company had granted to Collegium the exclusive rights to develop and commercialize ONSOLIS^® in the U.S. See “Collegium License and Development Agreement” below.

Collegium license and development agreement

On May 11, 2016, the Company and Collegium executed a License Agreement under which the Company granted Collegium the exclusive rights to develop and commercialize ONSOLIS^® in the U.S.

Under the terms of the License Agreement, Collegium was responsible for the manufacturing, distribution, marketing and sales of ONSOLIS^® in the U.S. The Company was obligated to use commercially reasonable efforts to continue the transfer of manufacturing to the anticipated manufacturer for ONSOLIS^® and to submit a corresponding Prior Approval Supplement (the “Supplement”) to the FDA with respect to the current NDA for ONSOLIS^®. Following approval of the Supplement, the NDA and manufacturing responsibility for ONSOLIS^® (including the manufacturing relationship with the Company’s manufacturer, subject to the Company entering into an appropriate agreement with such manufacturer that is acceptable and assignable to Collegium) would have been transferred to Collegium.

On December 8, 2017, the Company received the required 90-day notice from Collegium regarding termination of the License Agreement and the effective date of termination was March 8, 2018. The Company is assessing its commercial options for ONSOLIS^®.

Pursuant to the Collegium Agreement, the Company has received the following payments:

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a $2.5 million upfront non-refundable payment, payable to the Company within 30 days of execution of the License Agreement (received June 2016);

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reimbursement to the Company for a pre-determined amount of the remaining expenses associated with the ongoing transfer of the manufacturing of ONSOLIS^®;

ONSOLIS^® was originally licensed to, and launched in the U.S. by, Meda. In January 2015, the Company entered into an assignment and revenue sharing agreement (the “ARS Agreement”) with Meda pursuant to which Meda transferred the marketing authorizations for ONSOLIS^® in the United States back to the Company. Under the ARS Agreement, financial terms were established that enable Meda to share a significant portion of the proceeds of milestone and royalty payments received by the Company from any new North American partnership for ONSOLIS^® that may be executed by the Company. The execution of the License Agreement between the Company and Collegium also required the execution of a definitive termination agreement between the Company and Meda embodying those royalty-sharing terms, returning ONSOLIS^®-related assets and rights in the U.S., Canada, and Mexico to the Company, and including certain other provisions. In addition, the Company’s royalty obligations to CDC IV, LLC (“CDC IV”) and its assignees will remain in effect. CDC IV provided funding for the development of ONSOLIS^® in the past.

Endo license and development agreement

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^® product and to complete U.S. development of such product candidate for purposes of seeking FDA approval (the “Endo Agreement”). BELBUCA^® 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.

Pursuant to the Endo Agreement, Endo had obtained all rights necessary to complete the clinical and commercial development of BELBUCA^® and to sell the product worldwide. Although Endo had 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^® (and to provide clinical trial materials for such trials) necessary to submit a New Drug Application (“NDA”) to the FDA to obtain approval of BELBUCA^® in the U.S. Such NDA was submitted to the FDA in December 2014, was accepted by the FDA February 2015 and was approved by the FDA in 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^® on a worldwide basis. In addition, Endo was responsible for all filings required to obtain regulatory approval of BELBUCA^®.

Pursuant to the Endo Agreement, the Company has received the following recent payments:

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$10 million upon FDA acceptance of filing NDA (earned in February 2015);

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$50 million upon regulatory approval, earned in October 2015 and received in November 2015. Of the $50 million received in November 2015, $20 million related to a patent extension and was recorded as deferred revenue because all or a portion of such $20 million was contingently refundable to Endo if a third party generic product was introduced in the U.S. during the patent extension period from 2020 to 2027. However, due to the Company and Endo entering into a Termination Agreement on December 7, 2016 which terminated the BELBUCA^® license to Endo effective January 6, 2017, the deferred $20 million was recognized as revenue in January 2017. (See note 7, Business Combinations and BELBUCA^® Acquisition).

The Company had 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.

The Company was reimbursed by Endo for certain research and development costs when these costs went beyond set thresholds as outlined in the Endo Agreement. Endo reimbursed the Company for this spending at cost and the Company received no mark-up or profit. During the year ended December 31, 2015, the Company recognized $0.9 million of reimbursable expenses related to the Endo Agreement, which is recorded as research and development reimbursement revenue. There was no research and development reimbursement revenue during the years ended December 31, 2017 or 2016, since the program ended in 2015.

On October 26, 2015, the Company and Endo announced that the FDA approved BELBUCA^® (on October 23, 2015). FDA approval of BELBUCA^® triggered a milestone payment to the Company from Endo of $50 million pursuant to the Endo Agreement, less approximately $6.0 million of the aforementioned cumulative pre-payments received and recorded in deferred revenue, current in the accompanying consolidated balance sheet. The Company received payment of such milestone in November 2015 and deferred $20 million of the $50 million payment because all or a portion of the $20 million was contingently refundable to Endo if a third party generic product was introduced in the U.S. during the patent extension period from 2020 to 2027 at year ended December 31, 2016. The remaining $30 million of the $50 million payment was recognized as revenue during the year ended December 31, 2015. However, due to the Company and Endo entering into a Termination Agreement on December 7, 2016 which terminated the BELBUCA^® license to Endo effective January 6, 2017, the deferred $20 million was recognized as revenue in January 2017. (See note 7, Business Combinations and BELBUCA^® Acquisition).