License Agreements	6 Months Ended
Jun. 30, 2020
License Agreements
License Agreements	4. License Agreements The Company periodically enters into license agreements to develop and commercialize products. During the three and six months ended June 30, 2020 and 2019, the only products sold by the Company under a license agreement were the Nucynta Products. Prior to February 13, 2020, the Company sold the Nucynta Products pursuant to the rights licensed and acquired under the Nucynta Commercialization Agreement. Effective February 13, 2020, the Company sold the Nucynta Products pursuant to the rights licensed and acquired under the Nucynta Purchase Agreement, including certain intellectual property and manufacturing rights that it did not previously own under the Commercialization Agreement (see Note 8). Nucynta Commercialization Agreement On January 9, 2018 (the “Nucynta Commercialization Closing Date”), the Company consummated the transactions contemplated by the Nucynta Commercialization Agreement, pursuant to which Assertio agreed to grant a sublicense of certain of its intellectual property related to the Nucynta Products for commercialization in the United States. The Company began recording revenues from sales of the Nucynta Products on the Nucynta Commercialization Closing Date and began commercial promotion of the Nucynta Products in February 2018. Pursuant to the Nucynta Commercialization Agreement, the Company paid a one-time, non-refundable license fee of $10,000 to Assertio on the Nucynta Commercialization Closing Date, $6,223 for transferred inventory and $1,987 as reimbursement for prepaid expenses. The Company also assumed the existing liabilities of the Nucynta Products, including $22,660 related to sales of Nucynta Products that occurred prior to the Nucynta Commercialization Closing Date. The Nucynta Commercialization Agreement initially required the Company to pay a guaranteed minimum royalty of $135,000 per year through December 2021, payable in quarterly payments of $33,750, prorated in 2018 for the Nucynta Commercialization Closing Date, as well as a variable royalty based on annual net sales over $233,000. Beginning January 2022 and for each year of the Nucynta Commercialization Agreement term thereafter, the Company was required to pay a variable royalty on annual net sales of the Nucynta Products, but without a guaranteed minimum. Effective August 2018, the Company entered into a Second Amendment to the Nucynta Commercialization Agreement to clarify the mechanism for transferring title of products to be sold by the Company pursuant to the agreement and various related matters. The Second Amendment did not have an impact on the Company’s financial statements. Effective November 2018, the Company entered into the Third Amendment to the Nucynta Commercialization Agreement to adjust the royalty structure and termination clauses. Pursuant to the amended Nucynta Commercialization Agreement, the $135,000 guaranteed minimum annual royalties were eliminated, and the Company was no longer required to secure its royalty payment obligations with a standby letter of credit. Beginning on January 1, 2019 and thereafter, the Company was obligated to make royalty payments to Assertio conditional upon net sales and based on the following royalty structure for the period between January 1, 2019 and December 31, 2021: (i)65% of annual net sales of the Nucynta Products up to $180,000, plus (ii)14% of annual net sales of the Nucynta Products between $180,000 and $210,000, plus (iii)58% of annual net sales of the Nucynta Products between $210,000 and $233,000, plus (iv)20% of annual net sales of the Nucynta Products between $233,000 and $258,000, plus (v)15% of annual net sales of the Nucynta Products in excess of $258,000. The Amendment did not modify the royalties payable on sales of the Nucynta Products on and after January 1, 2022, which remained as contemplated by the Nucynta Commercialization Agreement as in effect on January 9, 2018. In addition, prior to January 1, 2022, the Company was obligated to make royalty payments to Assertio, for ultimate payment to Grünenthal, at a rate of 14% of net sales of the Nucynta Products, subject to a guaranteed royalty of $34,000 when net sales were between $180,000 and $243,000. The Amendment further provided that if annual net sales of the Nucynta Products were less than $180,000 in any 12-month period through January 1, 2022, or if they are less than $170,000 in any 12-month period commencing on January 1, 2022, Assertio had the right to terminate the Nucynta Commercialization Agreement without penalty. The Amendment further provides that the Company did not have a right to terminate the Nucynta Commercialization Agreement prior to December 31, 2021. In connection with execution of the Third Amendment to the Nucynta Commercialization Agreement, the Company issued a warrant to Assertio to purchase 1,041,667 shares of common stock of the Company (the “Warrant”) at an exercise price of $19.20 per share. The Warrant will expire in November 2022 and includes customary adjustments for changes in the Company’s capitalization. Nucynta Purchase Agreement On February 6, 2020, the Company entered into the Nucynta Purchase Agreement with Assertio, pursuant to which the Company agreed to acquire from Assertio certain intellectual property and manufacturing rights related to the Nucynta Products for an aggregate purchase price of $375,000, subject to certain closing and post-closing adjustments as described in the Nucynta Purchase Agreement. In connection with the Nucynta Purchase Agreement, the Company also agreed to assume certain regulatory and supply chain contracts and obligations related to Nucynta Products. The Nucynta Purchase Agreement contains customary representations, warranties and covenants, and indemnification provisions subject to specified limitations. After the closing of the Nucynta Purchase Agreement, for the years 2020 and 2021, the Company will pay conditional royalties directly to Grünenthal at a rate of 14% of net sales of the Nucynta Products. This royalty payment obligation will replace the Company’s previous obligation to pay a royalty rate of 14% of net sales of the Nucynta Products to Grünenthal, subject to a guaranteed royalty of $34,000 when net sales are between $180,000 and $243,000. On February 13, 2020, the Company closed the Nucynta Acquisition in accordance with the Nucynta Purchase Agreement. Upon the closing, the Nucynta Commercialization Agreement was terminated, with the exception of certain provisions thereof which survived pursuant to the terms of the Nucynta Purchase Agreement, and the Company’s royalty payment obligations to Assertio thereunder ceased. The assets acquired, liabilities assumed, and equity interests issued by the Company in connection with the Nucynta Commercialization Agreement and Nucynta Purchase Agreement are further described in Note 8.

License Agreements

6 Months Ended

Jun. 30, 2020

4. License Agreements

The Company periodically enters into license agreements to develop and commercialize products. During the three and six months ended June 30, 2020 and 2019, the only products sold by the Company under a license agreement were the Nucynta Products. Prior to February 13, 2020, the Company sold the Nucynta Products pursuant to the rights licensed and acquired under the Nucynta Commercialization Agreement. Effective February 13, 2020, the Company sold the Nucynta Products pursuant to the rights licensed and acquired under the Nucynta Purchase Agreement, including certain intellectual property and manufacturing rights that it did not previously own under the Commercialization Agreement (see Note 8).

Nucynta Commercialization Agreement

On January 9, 2018 (the “Nucynta Commercialization Closing Date”), the Company consummated the transactions contemplated by the Nucynta Commercialization Agreement, pursuant to which Assertio agreed to grant a sublicense of certain of its intellectual property related to the Nucynta Products for commercialization in the United States. The Company began recording revenues from sales of the Nucynta Products on the Nucynta Commercialization Closing Date and began commercial promotion of the Nucynta Products in February 2018. Pursuant to the Nucynta Commercialization Agreement, the Company paid a one-time, non-refundable license fee of $10,000 to Assertio on the Nucynta Commercialization Closing Date, $6,223 for transferred inventory and $1,987 as reimbursement for prepaid expenses. The Company also assumed the existing liabilities of the Nucynta Products, including $22,660 related to sales of Nucynta Products that occurred prior to the Nucynta Commercialization Closing Date. The Nucynta Commercialization Agreement initially required the Company to pay a guaranteed minimum royalty of $135,000 per year through December 2021, payable in quarterly payments of $33,750, prorated in 2018 for the Nucynta Commercialization Closing Date, as well as a variable royalty based on annual net sales over $233,000. Beginning January 2022 and for each year of the Nucynta Commercialization Agreement term thereafter, the Company was required to pay a variable royalty on annual net sales of the Nucynta Products, but without a guaranteed minimum.

Effective August 2018, the Company entered into a Second Amendment to the Nucynta Commercialization Agreement to clarify the mechanism for transferring title of products to be sold by the Company pursuant to the agreement and various related matters. The Second Amendment did not have an impact on the Company’s financial statements.

Effective November 2018, the Company entered into the Third Amendment to the Nucynta Commercialization Agreement to adjust the royalty structure and termination clauses. Pursuant to the amended Nucynta Commercialization Agreement, the $135,000 guaranteed minimum annual royalties were eliminated, and the Company was no longer required to secure its royalty payment obligations with a standby letter of credit. Beginning on January 1, 2019 and thereafter, the Company was obligated to make royalty payments to Assertio conditional upon net sales and based on the following royalty structure for the period between January 1, 2019 and December 31, 2021:

(i)65% of annual net sales of the Nucynta Products up to $180,000, plus

(ii)14% of annual net sales of the Nucynta Products between $180,000 and $210,000, plus

(iii)58% of annual net sales of the Nucynta Products between $210,000 and $233,000, plus

(iv)20% of annual net sales of the Nucynta Products between $233,000 and $258,000, plus

(v)15% of annual net sales of the Nucynta Products in excess of $258,000.

The Amendment did not modify the royalties payable on sales of the Nucynta Products on and after January 1, 2022, which remained as contemplated by the Nucynta Commercialization Agreement as in effect on January 9, 2018. In addition, prior to January 1, 2022, the Company was obligated to make royalty payments to Assertio, for ultimate payment to Grünenthal, at a rate of 14% of net sales of the Nucynta Products, subject to a guaranteed royalty of $34,000 when net sales were between $180,000 and $243,000. The Amendment further provided that if annual net sales of the Nucynta Products were less than $180,000 in any 12-month period through January 1, 2022, or if they are less than $170,000 in any 12-month period commencing on January 1, 2022, Assertio had the right to terminate the Nucynta Commercialization Agreement without penalty. The Amendment further provides that the Company did not have a right to terminate the Nucynta Commercialization Agreement prior to December 31, 2021.

In connection with execution of the Third Amendment to the Nucynta Commercialization Agreement, the Company issued a warrant to Assertio to purchase 1,041,667 shares of common stock of the Company (the “Warrant”) at an

exercise price of $19.20 per share. The Warrant will expire in November 2022 and includes customary adjustments for changes in the Company’s capitalization.

Nucynta Purchase Agreement

On February 6, 2020, the Company entered into the Nucynta Purchase Agreement with Assertio, pursuant to which the Company agreed to acquire from Assertio certain intellectual property and manufacturing rights related to the Nucynta Products for an aggregate purchase price of $375,000, subject to certain closing and post-closing adjustments as described in the Nucynta Purchase Agreement. In connection with the Nucynta Purchase Agreement, the Company also agreed to assume certain regulatory and supply chain contracts and obligations related to Nucynta Products. The Nucynta Purchase Agreement contains customary representations, warranties and covenants, and indemnification provisions subject to specified limitations. After the closing of the Nucynta Purchase Agreement, for the years 2020 and 2021, the Company will pay conditional royalties directly to Grünenthal at a rate of 14% of net sales of the Nucynta Products. This royalty payment obligation will replace the Company’s previous obligation to pay a royalty rate of 14% of net sales of the Nucynta Products to Grünenthal, subject to a guaranteed royalty of $34,000 when net sales are between $180,000 and $243,000.

On February 13, 2020, the Company closed the Nucynta Acquisition in accordance with the Nucynta Purchase Agreement. Upon the closing, the Nucynta Commercialization Agreement was terminated, with the exception of certain provisions thereof which survived pursuant to the terms of the Nucynta Purchase Agreement, and the Company’s royalty payment obligations to Assertio thereunder ceased.

The assets acquired, liabilities assumed, and equity interests issued by the Company in connection with the Nucynta Commercialization Agreement and Nucynta Purchase Agreement are further described in Note 8.