14.

Commitments and contingencies:

The Company is involved from time to time in routine legal matters incidental to our business. Based upon available information, the Company believes that the resolution of such matters will not have a material adverse effect on its condensed consolidated financial position or results of operations. Except as discussed below, the Company is not the subject of any pending legal proceedings and, to the knowledge of management, no proceedings are presently contemplated against the Company by any federal, state or local governmental agency.

Litigation related to BUNAVAIL^®

RB and Aquestive Therapeutics (formerly MonoSol Rx)

On September 22, 2014, Reckitt Benckiser, Inc., RB Pharmaceuticals Limited, and Aquestive Therapeutics, Inc. (“Aquestive”) (collectively, the “RB Plaintiffs”) the RB Plaintiffs filed an action against the Company (and the Company’s commercial partner) relating to the Company’s BUNAVAIL^® product in the United States District Court for the District of New Jersey for alleged patent infringement. The RB Plaintiffs claim that BUNAVAIL^®, whose formulation and manufacturing processes have never been disclosed publicly, infringes its patent U.S. Patent

No. 8,765,167 (the “‘167 Patent”). The Company believes this is an anticompetitive attempt by the RB Plaintiffs to distract the Company’s efforts from commercializing BUNAVAIL^®. On December 12, 2014, the Company filed a motion to transfer the case from New Jersey to North Carolina and a motion to dismiss the case against its 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 (“ENDC”) 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 United States Patent and Trademark Office (“USPTO”).

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, which was denied in September 2016 and appealed to Court of Appeals for the Federal Circuit (Fed. Cir.) in November 2016. The appeal is currently proceeding in the Federal Circuit with final briefing completed August 7, 2017 and oral argument held February 7, 2018. The Company anticipates receiving a final decision from the Federal Circuit sometime in 2018.

On January 13, 2017, Aquestive filed a complaint in the United States District Court for the District of New Jersey alleging BELBUCA^® infringes the ‘167 patent. In lieu of answering the complaint, the Company filed motions to dismiss the complaint and, in the alternative, to transfer the case to the EDNC. Briefing on the motions was completed on June 21, 2017. On July 25, 2017, the Court administratively terminated the case pending the parties submission of a joint stipulation of transfer because the District of New Jersey was an inappropriate venue. This case has been transferred to Delaware District Court. On October 31, 2017 the Company filed motions to dismiss the complaint and, in the alternative, to transfer the case to the EDNC. Briefing on the motions was completed on December 1, 2017. The Company anticipates receiving a final decision from the District Court in the 2nd quarter of 2018. The Company strongly refutes as without merit Aquestive’s assertion of patent infringement and will vigorously defend the lawsuit.

Litigation related to BELBUCA^®

Teva Pharmaceuticals USA (formerly Actavis)

We received notices regarding Paragraph IV certifications from Teva on November 8, 2016, November 10, 2016, and December 22, 2016, seeking to find invalid two Orange Book listed patents (the “Patents”) relating specifically to BELBUCA^®. The Paragraph IV certifications related to three ANDAs filed by Teva with the FDA for a generic formulation of BELBUCA^®. The Patents subject to Teva’s certification were the ’019 Patent and the ’866 Patent. Under the Hatch-Waxman Amendments, after receipt of a valid Paragraph IV notice, the Company brought a patent infringement suit in federal district court against Teva USA within 45 days from the date of receipt of the certification notice. We filed complaints in Delaware against Teva on December 22, 2016 and February 3, 2017, thus we were entitled to receive a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference BELBUCA^®^. The 30-month stay was expected to preempt any final approval by the FDA on Teva’s ANDA Nos. 209704 and 209772 until at least May of 2019 and for Teva’s ANDA No. 209807 until at least June of 2019.

In February 2018, we announced that we had entered into a settlement agreement with Teva that resolved our BELBUCA^® patent litigation against Teva pending in the U.S. District Court for the District of Delaware. As part of the settlement agreement, which is subject to review by the U.S. Federal Trade Commission and the U.S. Department of Justice, we have granted Teva a non-exclusive license (for which we will receive no current or future payments) that permits Teva to first begin selling the generic version of our BELBUCA^® product in the U.S. on January 23, 2027 or earlier under certain circumstances (including, for example, upon (i) the delisting of the patents-in-suit from the U.S. FDA Orange Book, (ii) the granting of a license by us to a third party to launch another generic form of BELBUCA^® at a date prior to January 23, 2027, or (iii) the occurrence of certain conditions regarding BELBUCA^® market share).

2018 Arkansas Opioid Litigation

On March 15, 2018, the State of Arkansas, and certain counties and cities in that State, filed an action in the Circuit Court of Arkansas, Crittenden County against multiple manufacturers, distributors, retailers, and prescribers of opioid analgesics, including the Company. The Company was served with the complaint on April 27, 2018. The complaint specifically alleges that the Company licensed its branded fentanyl buccal soluble film ONSOLIS^® to Collegium, and Collegium is also named as a defendant in the lawsuit. ONSOLIS^® is not presently sold in the United States and the license agreement with Collegium was terminated prior to Collegium launching ONSOLIS^® in the United States. The lawsuit seeks to recoup the past and prospective public health costs allegedly associated with the abuse of opioids in Arkansas from the defendants and seeks punitive and treble damages, attorneys’ fees, costs and expenses, and pre-and post-judgment interest under a variety of legal theories including negligence/gross negligence, common law public nuisance, civil conspiracy, and violations of Arkansas statutes. The Company denies the allegations in the lawsuit and intends to vigorously defend against them.