10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-36399

ADAMAS PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	42-1560076 (I.R.S. Employer Identification No.)
1900 Powell Street, Suite 1000, Emeryville, CA 94608 (Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (510) 450-3500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Common Stock, par value $0.001 per share Trading Symbol(s) ADMS Name of each exchange on which registered The Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ☐   No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ☐    No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. and just one check box. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ☐    No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates was $60,114,071 computed by reference to the last sales price of $2.56 as reported by the Nasdaq Global Market, as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2020. Shares of common stock held by each officer and director, and each entity affiliated with a director, have been excluded in that such persons may be deemed to be affiliates. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

As of February 16, 2021, the number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 30,568,421.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference to the definitive proxy statement for the registrant’s 2021 Annual Meeting of Stockholders, to be filed within 120 days of the registrant’s fiscal year ended December 31, 2020.

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ADAMAS PHARMACEUTICALS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	4
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	44
Item 2.	Properties	44
Item 3.	Legal Proceedings	44
Item 4.	Mine Safety Disclosures	44
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45
Item 6.	Selected Financial Data	45
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 8.	Financial Statements and Supplementary Data	57
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	92
Item 9A.	Controls and Procedures	92
Item 9B.	Other Information	93
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	94
Item 11.	Executive Compensation	94
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	94
Item 13.	Certain Relationships and Related Transactions, and Director Independence	94
Item 14.	Principal Accountant Fees and Services	94
Part IV
Item 15.	Exhibit and Financial Statement Schedules	95
Item 16.	Form 10-K Summary	98
Signatures		99

“Adamas Pharmaceuticals,” our logo and other trade names, trademarks and service marks of Adamas appearing in this report are the property of Adamas. Other trade names, trademarks and service marks appearing in this report are the property of their respective holders.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report, including the sections titled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases you can identify these statements by forward-looking words, such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “potential,” “seek,” “expect,” “goal” or the negative or plural of these words or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•our expectations as to the extent to which we will be able to continue to commercialize GOCOVRI® (amantadine) extended release capsules, OSMOLEX ER® (amantadine) extended release tablets, and any of our other product candidates that are approved;

•the anticipated scope, rate of progress and cost of our preclinical studies and clinical trials and other research and development activities that we may pursue;

•our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for or ability to obtain additional financing;

•our expectations as to the sufficiency of our capital resources;

•our expectations as to our ability to obtain and maintain intellectual property protection for our products and any of our product candidates;

•our expectation as to the legal proceedings and related stays and terms of settlements;

•the anticipated receipt and timing of any royalties from our collaborators;

•our expectations as to the revenues from our collaborations;

•our expectations as to our ability to retain and recruit key personnel;

•our anticipated financial performance; and

•our anticipated developments and projections relating to our competitors or our industry.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

You should read this report and the documents that we reference in this report and have filed with the Securities and Exchange Commission as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

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RISK FACTOR SUMMARY

Investing in our securities involves a high degree of risk. Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, as well as other risks that we face, can be found under the heading “Item 1A. Risk Factors” below.

•The outbreak of the novel Coronavirus (“COVID-19”) has negatively impacted our business, including the commercialization strategy and sales of GOCOVRI® (amantadine) extended release capsules.

•Our success depends heavily on the success of GOCOVRI for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. To the extent GOCOVRI is not commercially successful, our business, financial condition and results of operations will be materially harmed.

•If we are unable to recruit and retain qualified personnel and third-party distributors, our business will be substantially harmed.

•Failure to successfully obtain coverage and reimbursement for GOCOVRI in the United States, or the availability of coverage and reimbursement only at limited levels, would diminish our ability to generate product revenue.

•We face substantial competition in the commercialization of GOCOVRI.

•Unforeseen safety issues could emerge with GOCOVRI that could require us to change the prescribing information to add warnings, limit use of the product, and/or result in litigation. Any of these events could have a negative impact on our business.

•If manufacturers obtain approval for generic versions of GOCOVRI, or of products with which we compete, our business may suffer.

•If we are found to have improperly promoted GOCOVRI, or if physicians misuse it, we may be subject to restrictions on the sale or marketing of GOCOVRI and significant fines, penalties, sanctions and product liability claims, and our image and reputation within the industry and marketplace could be harmed.

•GOCOVRI is complex to manufacture, and manufacturing disruptions may occur that could cause us to experience disruptions in the supply of GOCOVRI.

•Risks related to the commercialization of GOCOVRI will be substantially the same for OSMOLEX ER® (amantadine) extended release tablets.

•We may in the future seek to acquire additional product candidates, which may subject us to additional risks and expense.

•We rely on third-party organizations to manufacture, supply, and distribute GOCOVRI. If one of these organizations fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new third-party vendors and/or face delays in the commercialization and supply of GOCOVRI.

•We rely on a single-source third-party contract manufacturing organization for the manufacture and supply of drug product for GOCOVRI.

•We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of these trials.

•Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy and other healthcare payer cost-containment initiatives and current societal pressures regarding pharmaceutical product pricing, may negatively impact our ability to generate revenues from or could limit or prevent our products’ commercial success.

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•We are subject to ongoing regulatory obligations and regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.

•If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations, and financial condition could be adversely affected.

•If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the United States, we could be subject to additional reimbursement requirements, fines, sanctions and exposure under other laws which could have a material adverse effect on our business, results of operations and financial condition.

•If we fail to comply with data protection laws and regulations, we could be subject to government enforcement actions (which could include civil or criminal penalties), private litigation, increased compliance costs and/or adverse publicity, which could negatively affect our operating results and business.

•The regulatory approval process is expensive, time consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates.

•Our ability to successfully commercialize GOCOVRI and any product candidates may be materially adversely affected if we are unable to obtain and maintain effective intellectual property rights for our products and product candidates.

•We may not be able to protect our intellectual property rights throughout the world.

•We may become involved in lawsuits or other proceedings to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming, and if unsuccessful could materially harm our business.

•Under our license agreement with Allergan, if Allergan fails to successfully commercialize NAMZARIC for any reason or if the license agreement with Allergan is terminated, the royalties we are eligible to receive under our license agreement with Allergan may not occur or may be minimal, and would have a negative impact on our revenue potential and harm our business.

•We are the subject of litigation claiming violation of Federal and state false claims acts in connection with the commercialization of NAMENDA XR and NAMZARIC by Allergan, which may have a material and negative impact on our business.

•Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

•If we do not have adequate funds to cover all of our development and commercial activities, we may have to raise additional capital or curtail or cease operations.

•We have outstanding debt backed by three of our principal assets, GOCOVRI, OSMOLEX ER, and royalties we may receive on NAMZARIC, and failure by us or our royalty subsidiary to fulfill our obligations under the applicable loan agreements may cause the repayment obligations to accelerate.

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PART I

ITEM 1.  BUSINESS

Overview

At Adamas Pharmaceuticals, Inc., our mission is to make everyday life significantly better for people affected by neurological diseases. We are a fully integrated company focused on growing a portfolio of therapies to address a range of neurological diseases. With commercial and partnered medicines, we are focused on supporting our patient community and growing a portfolio of differentiated neurological therapies. We combine our proven expertise in discovery, development and commercialization with our passion for improving lives to deliver innovative medicines to reduce the burden of neurological diseases on patients, caregivers, and society. Currently, we are primarily focused on the commercialization of GOCOVRI in the United States. Additionally, we are integrating OSMOLEX ER, which we acquired on January 4, 2021, and are commercializing the product in the United States.

GOCOVRI® (amantadine) extended release capsules is the first and only FDA-approved medicine indicated for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. GOCOVRI was approved for marketing by the U.S. Food and Drug Administration, or FDA, on August 24, 2017 for its initial indication to treat dyskinesia. On February 1, 2021, we announced we had received marketing authorization from the FDA for a supplemental New Drug Application (sNDA) for GOCOVRI, gaining a second indication for the product as an adjunctive treatment for OFF episodes. The recent update to the label indication makes GOCOVRI the only medicine clinically proven and approved to reduce both OFF and dyskinesia in Parkinson’s patients taking a levodopa-based medication, resulting in a clinically meaningful increase in good ON time. On June 17, 2020, we announced that we had discontinued further development of (ADS-5102) a potential additional indication for GOCOVRI for the treatment of walking impairment in patients with multiple sclerosis (“MSW”).

OSMOLEX ER® (amantadine) extended release tablets, was approved by the FDA on February 16, 2018, for the treatment of Parkinson’s disease and drug-induced extrapyramidal reactions in adult patients. On January 4, 2021, we acquired the global rights to OSMOLEX ER from Osmotica Pharmaceuticals US LLC, a subsidiary of Osmotica Pharmaceuticals plc.

NAMZARIC® (memantine hydrochloride extended release and donepezil hydrochloride) capsules for the treatment of moderate to severe dementia of an Alzheimer’s type, is marketed in the United States by Allergan plc under an exclusive license agreement between us and Forest Laboratories Holdings Limited (“Forest”), an indirect, wholly-owned subsidiary of Allergan plc (collectively, “Allergan”). We began recognizing royalty revenue on net sales of NAMZARIC in May 2020.

Going forward, we intend to expand our product pipeline by acquiring, through license or otherwise, additional candidates for research and development and potential commercialization.

Our Strategy

Our business strategy is to discover, develop, and commercialize clinically differentiated medicines for patients suffering from chronic neurological diseases. We have built a portfolio of approved products that we have commercialized through our own specialty sales force, or through partnerships. We are focused on:

Maximizing the potential of our GOCOVRI brand for patients: By executing our three commercial strategic priorities: first, to raise the urgency to diagnose and treat by educating physicians and patients on the functional disruption caused by OFF and dyskinesia, and the challenges with managing one without worsening the other; second, to differentiate to drive adoption by communicating the unique clinical profile, label, and health economic value, thereby ensuring appropriate patients are started on therapy; and third, to improve access and fulfillment, ensuring the new expanded indication is covered by payers, and by enhancing the overall customer experience through optimizing fulfillment and distribution.

Expanding our pipeline of neurological medicines: We have expanded our neurology portfolio with OSMOLEX ER which is approved for the treatment of Parkinson’s disease and drug-induced extrapyramidal reactions in adult

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patients. Going forward we intend to align OSMOLEX ER positioning with its FDA-approved label, ensuring clear differentiation of GOCOVRI and OSMOLEX ER to provide distinct patient populations with the best therapeutic solution for their symptoms while ensuring uninterrupted care to current OSMOLEX ER patients. We will continue to evaluate additional opportunities for pipeline and portfolio development.

Building a sustainable, fully integrated company: We aim to fully leverage our internal capabilities and industry experience in drug development and commercialization of neurological medicines. We intend to grow our capabilities and brand in line with our vision while operating with disciplined management of operating expenses. We are building a nimble and responsive organization that has rapidly and effectively embraced new ways of working in the ongoing COVID-19 pandemic.

Our Portfolio

Approved Products

GOCOVRI for the Treatment of OFF and Dyskinesia in Patients with Parkinson’s Disease

Parkinson’s disease (PD) is a chronic, progressive neurodegenerative disorder affecting close to one million people in the United States. It is caused by the gradual loss of brain cells that produce the neurotransmitter dopamine. PD is characterized by prominent motor symptoms including tremors, rigidity, bradykinesia and postural instability. As the disease progresses, people with PD taking levodopa-based therapy are likely to experience reemergence or sudden return of stiffness, rigidity and tremors, referred to as OFF episodes between medication doses, that may be unpredictable. The primary treatment for PD is with levodopa; however, over time levodopa may lead to involuntary, uncontrolled movements known as dyskinesia. Approximately 90 percent of people on levodopa therapy will eventually experience OFF and dyskinesia. We estimate approximately 200,000 people with PD currently experience dyskinesia (with or without OFF episodes), and a further 200,000 to 300,000 people with PD experience OFF episodes. This results in a total addressable market of 400,000 to 500,000 people with Parkinson’s who may potentially benefit from GOCOVRI’s full newly-expanded label. The abrupt and unpredictable transitions between episodes of OFF time, normal movement, and dyskinesia leads to considerable impact on patients’ lives.

GOCOVRI® (amantadine) extended release capsules, is the first and only FDA-approved medication indicated for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as adjunctive treatment for patients with Parkinson’s disease taking levodopa/carbidopa experiencing OFF episodes. GOCOVRI, taken once daily at bedtime, provides an initial lag and a slow rise in amantadine concentration during the night, resulting in a high concentration from the morning and throughout the waking day, when OFF and dyskinesia occur. GOCOVRI has a time dependent amantadine release, utilizing a delayed release coating followed by an extended release coating (i.e., a DR/ER formulation) providing a high concentration in the morning that gradually falls throughout the day into the evening. Additionally, in the pivotal clinical trials, the adjunctive use of GOCOVRI did not require changes to dopaminergic therapies.

GOCOVRI was approved for marketing by the FDA on August 24, 2017, with seven years of orphan exclusivity and additional patent protections out to 2034. GOCOVRI was commercially launched in January 2018 for its initial indication to treat dyskinesia. On February 1, 2021, we announced that we had received marketing authorization from the FDA for a second indication for GOCOVRI, gaining a second indication for the product as an adjunctive treatment to levodopa/carbidopa in patients with PD experiencing OFF episodes. The GOCOVRI prescribing information states that GOCOVRI is not interchangeable with other amantadine immediate or extended release products.

On January 2, 2020, we announced we had granted Sandoz Inc. a license for its generic version of GOCOVRI as of March 4, 2030, which is over 12 years post GOCOVRI launch, or earlier in certain circumstances typical for such agreements. The agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period ending July 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year ended December 31, 2019. On February 1, 2021, we announced we had granted Zydus a license for its generic version of GOCOVRI as of March 4, 2030. The agreement has similar terms as the Sandoz agreement, including the potential license acceleration provision. With these licenses granted to Sandoz and Zydus, the first filer ANDA challenges for GOCOVRI’s two available strengths have now been settled.

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In a robust clinical program consisting of three randomized, placebo-controlled studies and a two-year open label safety study, GOCOVRI demonstrated a durable reduction in dyskinesia and OFF time in people with Parkinson’s disease. Specifically, the pooled data analysis (placebo adjusted) from the two positive Phase 3 pivotal trials of GOCOVRI demonstrates:

•A 27% decrease in dyskinesia compared to placebo at week 12 based on a 41% reduction in dyskinesia as measured on the Unified Dyskinesia Rating Scale total score, compared to 14% for placebo at week 12;

•A 36% reduction in OFF time (placebo adjusted), or approximately one hour per day; and

•A 29% increase or approximately 2.4 hours in ‘good ON’ time daily (ON time without troublesome dyskinesia).

The most common adverse reactions, which were reported by ≥10% of patients receiving GOCOVRI, were hallucinations, dizziness, dry mouth, peripheral edema, fall, constipation, orthostatic hypotension, and urinary tract infection. Warnings and precautions with GOCOVRI include falling asleep during activities of daily living, suicidality and depression, hallucinations/psychotic behavior, dizziness and orthostatic hypertension, and impulse control/compulsive behaviors.

In addition, the open label safety study of GOCOVRI, EASE LID 2, demonstrated a sustained improvement in dyskinesia and OFF among patients using GOCOVRI in a real-world setting. Results showed the treatment effect of GOCOVRI on motor complications (OFF and dyskinesia) was maintained for at least two years, providing long-term durability and safety data for GOCOVRI. This effect was seen in all patients in the study, including those who were switched from amantadine immediate release treatment to GOCOVRI and patients who had received deep brain stimulation treatment. Data from the open label study, which is the longest-running amantadine study to date, were accepted for publication in the Journal of Parkinson’s Disease and published online in January 2020 and in print in April 2020.

OSMOLEX ER for the Treatment of Parkinson’s Disease and Drug-Induced Extrapyramidal Reactions in Adults

On January 4, 2021, we acquired the global rights to OSMOLEX ER® (amantadine) extended release tablets from Osmotica Pharmaceuticals US LLC, a subsidiary of Osmotica Pharmaceuticals plc, as part of a litigation settlement agreement. In February 2018, the FDA approved OSMOLEX ER for the treatment of Parkinson’s disease and drug-induced extrapyramidal reactions in adult patients based on demonstration of bioequivalence to Symmetrel (amantadine immediate release). OSMOLEX ER time dependent amantadine release profile is an immediate release followed by an extended release (i.e., IR/ER), providing high doses directly upon ingestion followed by a more continuous extended release. The OSMOLEX ER prescribing information states that OSMOLEX ER is not interchangeable with other amantadine immediate or extended release products.

An OSMOLEX ER capsule contains an outer layer that immediately releases the medication upon the patient taking the pill and an inner core that slowly releases the medication over long periods of time. This allows OSMOLEX ER to be taken just once a day, easing complicated medication routines.

Amantadine immediate release has been used as monotherapy in early Parkinson’s disease progression or in those patients with mild symptoms, as an option to lessen motor symptoms. Extrapyramidal reactions, also known as extrapyramidal symptoms (EPS) are defined as a group of motor complications associated with antipsychotic medication treatment. EPS adverse effects most typically include acute dystonia, akathisia, parkinsonism, tardive dyskinesia and tremor. EPS symptoms are mediated by changes in dopaminergic pathways, chiefly dopamine receptor blockade, due to antipsychotic medications. Approximately eleven million people in the U.S. are treated with anti-psychotic medications with approximately 21 percent of patients experiencing extrapyramidal symptoms.

Partnered Products

NAMZARIC and NAMENDA XR (commercialized by Allergan plc)

NAMZARIC® (memantine hydrochloride extended release and donepezil hydrochloride) capsules and NAMENDA XR® (memantine hydrochloride) extended release capsules are two commercially available medicines for the treatment of moderate to severe dementia of an Alzheimer’s type, currently marketed by Forest, an indirect, wholly-

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owned subsidiary of Allergan plc, in the United States under an exclusive license agreement between us and Forest. We began recognizing royalties on net sales of NAMZARIC in May of 2020. We do not expect to receive royalties on net sales of NAMENDA XR, due to the entry of generic versions of NAMENDA XR.

Investigational Programs

ADS-5102 for the Treatment of Walking Impairment in Patients with Multiple Sclerosis

Multiple sclerosis (MS) is a chronic autoimmune-mediated disorder that affects approximately 1 million people in the United States. Among the MS patients in the US, nearly 270,000 have walking impairment, which is present throughout the day.

We have evaluated ADS-5102 (amantadine) extended release capsules, an investigational agent, taken once-daily at bedtime, in multiple sclerosis patients with walking impairment in a Phase 3 (INROADS) study. Data from the study, announced in December 2019, showed that subjects taking 274 mg ADS-5102 had a statistically significant improvement in walking demonstrated by response rate of 21.1% compared to 11.3% taking placebo (p=0.01) and 17.6% (p=0.08) for subjects taking 137 mg ADS-5102. However, additional patient, physician, and payer research based on the revised target product profile informed by this level of clinical benefit projected a limited commercial opportunity and we discontinued additional development of this program in June 2020. The open-label extension study of ADS-5102 in this population will be closed out by the second quarter of 2021.

ADS-4101 in Development for the Treatment of Partial Onset Seizures in Patients with Epilepsy

Epilepsy affects an estimated three million Americans, of which approximately 60% have partial onset seizures. Of those people with partial onset seizures, about 30% to 40% of patients have poor seizure control with current anti-epilepsy drugs. There are limited data on the temporal distribution of seizures over the 24-hour day; however, published studies suggest that seizures occur in a diurnal pattern, characterized by a peak between 11 a.m. and 5 p.m. and lowest between 11 p.m. and 5 a.m.

ADS-4101 is an investigational high-dose, modified release lacosamide capsule, taken once-daily at bedtime. Lacosamide is an anti-epilepsy active ingredient previously approved by the FDA and currently marketed by UCB SA/NV as VIMPAT® (lacosamide). Based upon the patents and regulatory exclusivities listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book, it is estimated that VIMPAT will lose patent exclusivity in March 2022. ADS-4101 was designed to reduce the initial rate-of-rise in lacosamide concentrations, potentially improving the adverse event profile and dose limitations due to dizziness following administration of VIMPAT. By matching the timing pattern of seizures to the concentration of the anti-epileptic drug, with a higher drug concentration during the day and lower drug concentration during the night, ADS-4101 may enable improved seizure control for adults with epilepsy in the United States.

We have completed two Phase 1 studies of ADS-4101 in healthy volunteers. The Phase 1a study showed that a single 400 mg dose of ADS-4101 was better tolerated compared to the equivalent dose of VIMPAT immediate release tablets. The data also demonstrated that ADS-4101 exhibited the desired pharmacokinetic properties, namely a reduced rate of initial rise and delayed time to maximum drug concentration appropriate for bedtime dosing. In addition, a multi-dose Phase 1b study demonstrated that a 600 mg dose of ADS-4101, taken once-nightly, provided a 1.5 to 2.5-fold increase in average lacosamide concentrations throughout the day compared to the maximum approved daily dose of 400 mg, taken as 200 mg twice-daily (BID), of VIMPAT immediate release tablets in healthy volunteers, with comparable tolerability.

We had an initial meeting with the FDA in 2018 regarding our planned Phase 3 pivotal programs for ADS-4101. In 2019, we placed this development program on hold in order to focus our resources on our priorities of GOCOVRI commercialization, and our MSW development program. We continue to fully evaluate the potential value of ADS-4101 and options for its further development both internally and through partnering opportunities.

License agreement with Allergan

In November 2012, we granted Allergan an exclusive license, with right to sublicense, to certain of our intellectual property rights relating to human therapeutics containing memantine in the United States. In connection with these rights, Allergan markets and sells NAMZARIC and NAMENDA XR for the treatment of moderate to severe

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dementia related to Alzheimer’s disease. Pursuant to the agreement, Allergan made an upfront payment of $65.0 million. We earned and received additional cash payments totaling $95.0 million upon achievement by Allergan of certain development and regulatory milestones. Under the agreement, external costs incurred related to the prosecution and litigation of intellectual property rights are reimbursable.

We are entitled to receive royalties on net sales in the United States by Allergan, its affiliates, or any of its sublicensees of controlled-release versions of memantine products covered by the terms of the license agreement. Beginning in May 2020, we began recognizing tiered royalties from Allergan in the low double digits to mid-teens, as a percent of net sales of NAMZARIC in the United States. Based on recent trends of NAMZARIC sales, we expect the tiered royalty to be in the low double digits through the term of the agreement. At this point, we will not receive royalties on sales of NAMENDA XR because of the entry of multiple generic versions of NAMENDA XR in 2018. Allergan’s obligation to pay royalties with respect to fixed-dose memantine-donepezil products, including NAMZARIC, continues until the later of (i) 15 years after the commercial launch of the first fixed-dose memantine-donepezil product by Allergan in the United States or (ii) the expiration of the Orange Book listed patents for which Allergan obtained rights from us covering such product. However, Allergan’s obligation to pay royalties for any product covered by the license is eliminated in any quarter where there is significant competition from generics. Based on Allergan’s and our current settlement agreements with the NAMZARIC ANDA filers to date, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer’s generic version of NAMZARIC is January 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest license date have the option to launch an authorized generic version of NAMZARIC beginning on January 1, 2026 instead of launching their own generic version of NAMZARIC on January 1, 2025. For further information, see Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

Royalty-Backed Loan

In May 2017, we entered into a Royalty-Backed Loan with HealthCare Royalty Partners (“HCR”) whereby we initially borrowed $35 million, followed by an additional $65 million received in the fourth quarter 2017 and additionally amended certain key terms with an effectiveness date of January 4, 2021. Principal and interest is payable quarterly from the proceeds of a 12.5% royalty on net sales of GOCOVRI, OSMOLEX ER, and up to $15 million on annual royalties of NAMZARIC. The royalty rate is subject to increase to 22.5% if total principal and interest payments have not reached minimum specified levels on December 2022. The royalty rate will drop to 6.25% after the principal amount of the loan has been repaid in full, until we have made total payments of $200 million. If we are required to prepay due to a change of control provision, the obligation is fully satisfied by making a prepayment sufficient to bring the cumulative payments to $175 million, if such prepayment is made on or prior to December 31, 2022, or $195 million if made thereafter. The loan agreement matures on March 31, 2027, if not repaid earlier. We must maintain cash, cash equivalents and marketable securities of at least $25 million at all times through the term. As of December 31, 2020, the total remaining payment obligation of the Royalty-Backed Loan was $179.2 million. Under the terms of the loan, HCR has recourse to Adamas Pharma, LLC, not Adamas Pharmaceuticals, Inc.

Intellectual property

Our discoveries and products are protected by a robust intellectual product portfolio and available regulatory exclusivities. In developing therapies, we search for clinically meaningful treatment effects, including from existing medicines.

As with any pharmaceutical or biotechnology company, our success significantly depends upon our ability to obtain and maintain exclusivity for our products, product candidates, and any in- and out-licensed programs, including GOCOVRI, OSMOLEX ER, NAMZARIC, ADS-5102, and ADS-4101. These protections may include regulatory exclusivity, patent protection, unpatented trade secrets, know-how, and/or continuing technological innovation to develop and maintain our competitive position.

We actively protect our proprietary information, in part, by using confidentiality agreements with our commercial partners, collaborators, employees, and consultants and invention assignment agreements with our employees and selected consultants. Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed, or misappropriated, or such intellectual property and proprietary

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rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages. For more information, please see “Risk factors—Risks related to intellectual property” and Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies.”

As of February 9, 2021, we owned 38 issued U.S. patents and multiple U.S. patent applications, as well as additional patents and patent applications in other jurisdictions. The patent portfolios for GOCOVRI, OSMOLEX ER, ADS-4101 and NAMZARIC as of February 1, 2021, are summarized below:

GOCOVRI

GOCOVRI is currently covered for its FDA-approved indication by a total of 15 issued U.S. patents and additional patent applications containing method and composition claims relating to the pharmacokinetic profile and dosing of amantadine as well as the GOCOVRI formulation. These issued patents expire through 2034 and applications, if issued, expire as late as 2038. These patents and patent applications are wholly owned by us and are not subject to any license agreements. We also own additional foreign patents and patent applications covering GOCOVRI. On December 30, 2019, as part of a litigation settlement, we granted Sandoz a license to make, use, sell, offer to sell and import a generic version of GOCOVRI (amantadine) extended release capsules (including for any new indications approved under the GOCOVRI NDA), effective as of March 4, 2030, or earlier in certain circumstances typical for such agreements. The agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period ending July 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year ended December 31, 2019. On January 30, 2021, as part of a litigation settlement, we granted Zydus a license to make, use, sell, offer to sell and import a generic version of GOCOVRI (amantadine) extended release capsules (including for any new indications approved under the GOCOVRI NDA), effective as of March 4, 2030, or earlier in certain circumstances typical for such agreements. The agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period ending July 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year ended December 31, 2019. For more information, please see Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies.”

OSMOLEX ER

OSMOLEX ER is currently covered for its FDA-approved indications by a total of 18 issued U.S. patents and additional applications containing method and composition claims relating to the pharmacokinetic profile and dosing of amantadine as well as OSMOLEX ER formulation. These issued patents expire through 2038. These patents and patent applications are wholly owned by us and are not subject to any license agreements. We also own additional foreign patents covering OSMOLEX ER.

ADS-4101

ADS-4101 is currently covered by U.S. and ex-U.S. patent applications containing method and composition claims relating to their pharmacokinetic profile and dosing of antiepileptic agents. On January 25, 2021, a Notice of Allowance was received in U.S. Patent Application No. 15/396,161, and on February 18, 2021, a Notice of Allowance was received in U.S. Patent Application No. 15/863,746. Both of these applications are expected to issue as patents within the first half of 2021. Patents issuing from these applications, if issued, will expire at least as late as 2036. These patent applications are wholly owned by us and are not subject to any license agreements.

NAMZARIC

NAMZARIC is covered by a total of seven of our issued U.S. patents containing method and compositions claims relating to the pharmacokinetic profile and dosing of memantine. These patents expire as late as 2029 and are exclusively licensed to Allergan. We also own additional foreign patents and patent applications covering NAMZARIC.

Commercial activities, including sales and marketing

We commenced the full commercial launch of GOCOVRI in January 2018. To drive awareness and adoption of GOCOVRI by movement disorder centers, specialists and other neurologists for their Parkinson’s disease patients with OFF and dyskinesia, we deploy a field sales team of approximately 60 experienced neurology account specialists. This team is equipped with compelling educational materials demonstrating the benefit and safety profile of GOCOVRI for appropriate patients. Also, to facilitate patient access to, and physician experience with, GOCOVRI, we have both in-

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office and direct to patient free trial programs. We support a number of financial support programs for eligible patients including: a co-pay assistance program for commercially insured patients, which requires no more than a $20 copay per prescription; a patient assistance program ‘GOCOVRI ONBOARD’ for under-insured or non-insured patients; and the provision of information for government insured patients about available programs to assist with their out-of-pocket costs.

A significant portion of our operating expenses in 2020 were related to commercializing GOCOVRI. We expect this to continue in 2021. For 2020 and 2019, sales of GOCOVRI accounted for 96% and 100% of our revenues, respectively.

We sell GOCOVRI to a specialty pharmacy and certain limited specialty distributors, which we collectively refer to as our customers. For the years ended December 31, 2020 and 2019, our largest customer, Alliance Rx Walgreens Prime, or AllianceRx, was responsible for approximately 95% and 98% of our product revenue, respectively. We have a product purchase agreement with Walgreen Co., acting on behalf of itself and its specialty pharmacy affiliates, including AllianceRx, through which AllianceRx purchases its supply of GOCOVRI. The agreement provides that AllianceRx has the nonexclusive right to purchase GOCOVRI from us or our authorized distributors solely to dispense to patients in the United States and Puerto Rico, and that AllianceRx will purchase GOCOVRI only from us or our authorized distributors. There are no minimum purchase requirements under the product purchase agreement. We do not believe the loss of this customer would significantly impact the ability to distribute our product as we believe alternative distributors are available.

We obtained the global rights to sell OSMOLEX ER on January 4, 2021, and began selling product through select specialty pharmacies and distributors. To drive awareness and adoption of OSMOLEX ER for the treatment of Parkinson’s disease and drug-induced extrapyramidal reactions in adults, we utilize a tele-sales team to educate both neurologists and psychiatrists on the benefit and safety profile of OSMOLEX ER for appropriate patients. Also, to facilitate patient access to, and physician experience of OSMOLEX ER, we have a patient assistance program ‘ACCESS OSMOLEX’ and physician in-office free trial program.

Competition

Our industry is highly competitive and subject to rapid and significant technological change. While we believe that our development experience and scientific knowledge provide us with competitive advantages, we may face competition from large pharmaceutical and biotechnology companies, smaller pharmaceutical and biotechnology companies, specialty pharmaceutical companies, generic drug companies, academic institutions, government agencies and research institutions, and others.

Many of our competitors may have significantly greater financial, technical, and human resources than we have. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop or market products or other novel technologies that are more effective, safer, or less costly than any that will be commercialized by us. Our success will be based in part on our ability to identify, develop, and manage a portfolio of drugs that are safer, more efficacious, and/or more cost-effective than alternative therapies.

GOCOVRI

The commercialization of new pharmaceutical products is highly competitive, and we face substantial competition with respect to GOCOVRI. For example, although GOCOVRI is the first and only FDA-approved medicine for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and, as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes, we face competition from various branded and generic drugs approved for the treatment of Parkinson’s disease that physicians either have historically used or may use in an attempt to manage dyskinesia. Competition may arise from all versions of levodopa (SINEMET (Merck & Co., Inc.), PARCOPA (Schwartz Pharma), RYTARY (Amneal Pharmaceuticals, Inc.), DUOPA (AbbVie), INBRIJA (Acorda)); dopamine agonists (APOKYN subcutaneous apomorphine, REQUIP XL (GlaxoSmithKline plc), MIRAPEX and MIRAPEX ER (Boehringer Ingelheim Pharmaceuticals Inc.), NEUPRO Patch (UCB SA/NV), KYNMOBI (Sunovion)); MAOB inhibitors (selegiline (Somerset Pharmaceuticals, Inc.), AZILECT (Teva Pharmaceuticals Industries, Ltd.), XADAGO (Newron Pharmaceuticals S.p.A.)); adenosine receptor antagonist (NOURIANZ (Kyowa Kirin, Inc.)); COMT inhibitors

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(ONGENTYS (Neurocrine Biosciences), COMTAN (Novartis), TASMAR (Valeant)); and other versions of amantadine (Symmetrel (Endo Pharmaceuticals, Inc.) - amantadine immediate release).

We will also face competition from investigational drugs in late stage development for the treatment of Parkinson’s disease, if approved, including product candidates from Mitsubishi Tanabe, Bial-Portela CSA, Genervon Biopharmaceuticals, and Pharma Two B. GOCOVRI may also face competition from drugs currently in development for dyskinesia in Parkinson’s disease or for Parkinson’s disease from a number of pharmaceutical companies, such as Novartis, Avanir Pharmaceuticals, Neurolixis, Amarantus BioScience, Addex Pharma, and Neurim Pharmaceuticals Ltd.

Many of our competitors, including a number of large pharmaceutical companies that compete directly with us, have significantly greater financial resources commercializing approved products than we do. Also, many of our competitors are large pharmaceutical companies that will have a greater ability to reduce prices for their competing drugs in an effort to gain market share and undermine the value proposition that we might otherwise be able to offer to payers.

OSMOLEX ER

Anticholinergics are the mainstay of therapy for typical Extrapyramidal symptoms (EPS) and tetrabenazine is the mainstay for Tardive Dyskinesia. Anticholinergics are reportedly used prophylactically and as a treatment for EPS. The first-generation VMAT2 inhibitor tetrabenazine was commonly used off-label for the treatment of Tardive Dyskinesia prior to the approval of longer-acting analogues AUSTEDO (deutetetrabenazine) and INGREZZA (valbenazine) for Tardive Dyskinesia. Immediate release tetrabenazine is associated with poor compliance due to inconvenient three times a day (TID) dosing and a high rate of adverse events, including sedation and somnolence. These adverse events are correlated with drug exposure and in many cases limit the titration to an effective dose of tetrabenazine, resulting in suboptimal clinical outcomes. These issues helped pave the way for longer-acting formulations, such as AUSTEDO and INGREZZA, with reduced adverse peak-dose effects and more convenient administration. The pipeline for competitive agents is limited for treatments for EPS due to antipsychotics. One example is the post-marketing study being conducted by Acadia for NUPLAZID in patients with neuropsychiatric symptoms related to neurodegenerative diseases.

NAMZARIC

In the market for Alzheimer’s disease treatments, NAMZARIC competes or will compete with branded and generic products such as galantamine, rivastigmine, memantine, and donepezil. In addition, Allergan currently markets NAMENDA, the immediate-release version of memantine, which physicians and patients may favor instead of NAMZARIC. Generic versions of memantine, including generic versions of NAMENDA XR, extended release memantine, are currently available to patients. Several generic manufacturers have or are currently seeking regulatory approval or have received regulatory approval to market generic versions of NAMZARIC, although generic versions of NAMZARIC are not currently available to patients. We and our partner Allergan continue enforcement of our patent rights with respect to this product. We are also aware that other biopharmaceutical companies are developing treatments for Alzheimer’s disease that may compete with NAMZARIC. See Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for more information.

Manufacturing

We currently have no manufacturing facilities. We rely on third-party manufacturers to produce bulk drug substance and finished drug products required for commercialization of GOCOVRI and OSMOLEX ER, and to supply our clinical trials of ADS-5102. We have entered into a supply agreement with Osmotica Pharmaceutical US LLC (“Osmotica”), a subsidiary of Osmotica Pharmaceuticals plc, in which Osmotica will be the sole manufacturer of OSMOLEX ER. We plan to continue to rely upon contract manufacturers to manufacture commercial quantities of GOCOVRI, OSMOLEX ER, and ADS-5102, and for any other product candidates we may pursue, if and when we receive approval for marketing by the applicable regulatory authorities. With respect to GOCOVRI and ADS-5102, we are seeking to qualify additional manufacturers of finished drug products and have recently qualified an additional manufacturer of bulk drug substance.

GOCOVRI, ADS-5102 and ADS-4101 are based upon controlled release coated pellet technology and can be difficult to manufacture. These products consist of an inert core, a drug layer, an optional seal coating, and controlled

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release coatings. Our products are made in a fluidized bed coating machine in sequential steps. Once the extended or modified release coating is applied, the coated pellets are tested to ensure that the desired dissolution rate is achieved. These coatings are relatively thin, and susceptible to changes in raw materials, temperature, humidity, and other manufacturing process parameters.

OSMOLEX ER is a tablet that uses an osmotic pump mechanism to provide an extended release of the product. This product consists of a core tablet surrounded by multiple coatings including a coating with a laser-drilled hole in order to facilitate release of the drug over time. This product is made in standard equipment used to prepare and compress tablets and then apply film coatings in addition to the laser drilling equipment used in processing. Once bulk tablets are produced, they are tested to ensure compliance with dissolution and other specification requirements. This product is also susceptible to changes in raw materials, temperature, humidity, and other manufacturing process parameters.

Allergan is responsible for all manufacturing related to NAMZARIC.

Our third-party manufacturers, their facilities, and all lots of drug substance and drug products used commercially or in our clinical trials are required to be in compliance with current Good Manufacturing Practices, or cGMP. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP requirements and FDA satisfaction before any product is approved and we can manufacture commercial products. Our third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including warning letters, the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. These actions could have a material impact on the availability of our products.

Government regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state, and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, recordkeeping, tracking, approval, import, export, advertising, and promotion of our products.

The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

•nonclinical laboratory and animal tests, including some that must be conducted in accordance with Good Laboratory Practices;

•submission of an IND, which must become effective before clinical trials may begin;

•adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug candidate for its intended use;

•pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with cGMP and Good Clinical Practices; and

•FDA approval of an NDA to permit commercial marketing for particular indications for use.

The testing and approval process requires substantial time, effort, and financial resources. Prior to commencing the first clinical trial with a product candidate, we must submit an IND to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the existing IND must be made for each successive

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clinical trial conducted during product development. Further, an independent institutional review board for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial commences at that center. Regulatory authorities or an institutional review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Some studies also include a data safety monitoring board, which receives special access to unblinded data during the clinical trial and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

•Phase 1—Studies are initially conducted to test the product candidate for safety, dosage tolerance, absorption, metabolism, distribution, and excretion in healthy volunteers or patients.

•Phase 2—Studies are conducted with groups of patients with a specified disease or condition to provide enough data to evaluate the preliminary efficacy, optimal dosages and dosing schedule, and expanded evidence of safety. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

•Phase 3—These clinical trials are undertaken in larger patient populations to further evaluate dosage, to provide statistically significant evidence of clinical efficacy, and to further test for safety in an expanded patient population at multiple clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling. These trials may be done globally to support global registrations.

The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product candidate, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

NDA submission, review and approval by the FDA

The Federal Food, Drug, and Cosmetic Act (“FDCA”) provides two pathways for the approval of new drugs through an NDA. An NDA under Section 505(b)(1) of the FDCA is a comprehensive application to support approval of a product candidate that includes, among other things, data and information to demonstrate that the proposed drug is safe and effective for its proposed uses, that production methods are adequate to ensure its identity, strength, quality, and purity of the drug, and that proposed labeling is appropriate and contains all necessary information. A 505(b)(1) NDA contains results of the full set of preclinical and clinical studies conducted by or on behalf of the applicant to characterize and evaluate the product candidate.

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway to obtain FDA approval for new or improved formulations or new uses of previously approved drug products. Specifically, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely to some extent upon the FDA’s findings of safety and effectiveness for an approved product that acts as the reference listed drug (“RLD”), and submit its own product-specific data-which may include data from preclinical or clinical studies conducted by or on behalf of the applicant-to address differences between the product candidate and the RLD.

The submission of an NDA under either Section 505(b)(1) or Section 505(b)(2) generally requires payment of a substantial user fee to the FDA. The FDA reviews applications to determine, among other things, whether a product is

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safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product’s identity, strength, quality, and purity. For some NDAs, the FDA may convene an advisory committee to seek insights and recommendations on issues relevant to approval of the application. The FDA may determine that a Risk Evaluation and Mitigation Strategy (“REMS”) is necessary to ensure that the benefits of a new product outweigh its risks, and such REMS can be imposed either at the time of approval or subsequent to a product’s marketing. A REMS may include various elements, ranging from a medication guide or patient package insert to limitations on who may prescribe or dispense the drug, depending on what the FDA considers necessary for the safe use of the drug. Under the Pediatric Research Equity Act, certain applications for approval must include an assessment, generally based on clinical study data, of the safety and effectiveness of the subject drug or biological product in relevant pediatric populations. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. 

Once the NDA submission has been accepted for filing, which occurs, if at all, within 60 days after submission of the NDA, the FDA’s goal for review of an NDA is based upon goals set under annual user fee guidance, although the review process can be and often is significantly extended by FDA requests for additional information, studies, or clarification. Upon completion of its review, the FDA will respond to the applicant by approving the application or issuing a Complete Response letter. A Complete Response letter outlines deficiencies in the NDA and may request additional information, including additional preclinical or clinical data. Even if an applicant submits this additional information, the FDA may determine that the NDA still does not meet the standards for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than the sponsor. The timing of approval, if any, of any NDA we submit will depend on when the FDA determines that the NDA satisfies all requirements for approval. Also, even if the FDA approves an NDA, such approval may entail limitations on the uses or conditions for which such product may be marketed, or the FDA may require Phase 4 post-marketing studies to monitor the safety or efficacy of the product, and may further limit the marketing of the product based on the results of these post-marketing studies. The FDA may withdraw approval of an NDA if the sponsor does not comply with extensive post-marketing regulatory requirements (as described below) or if problems occur after the product reaches the marketplace.

The Hatch-Waxman Act

The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, established two abbreviated approval pathways for pharmaceutical products that are in some way follow-on versions of already approved products: the 505(b)(2) NDA pathway, described above, and the abbreviated new drug application (“ANDA”) pathway. To facilitate these abbreviated approval pathways, NDA applicants are required to list the FDA information concerning certain patents with claims that cover the applicant’s product. Upon approval of an NDA and upon the issuance of any new patent claims that meet the requirements for submission to the FDA, the NDA holder is required to update the information and submit any new information concerning applicable patents, which will then be published in the FDA publication, Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book. Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA (1) that no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) that such patent has expired; (3) the date on which such patent expires; or (4) that such patent is invalid or will not be infringed upon by the manufacture, use, or sale of the drug product for which the application is submitted. This last certification is known as a Paragraph IV certification. If the ANDA or 505(b)(2) applicant provides a Paragraph IV certification to the FDA, the competitor must also send notice of the Paragraph IV certification to the holder of the NDA for the RLD and the patent owner once the application has been accepted for filing by the FDA. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. If the NDA holder or patent owner files a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification, the FDA may not approve the 505(b)(2) application or ANDA until the earlier of 30 months from the date the NDA or patent holder receives notice of the certification, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the applicant. If a listed patent claims a method of using the approved drug, the ANDA or 505(b)(2) NDA applicant may, instead of submitting a certification to the patent, submit a “Section viii” statement certifying that the labeling for the proposed product does not contain, or carves out, any language regarding the patented method-of-use.

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The Hatch-Waxman Act also provides periods of regulatory exclusivity for products that would serve as RLDs for an ANDA or 505(b)(2) application. If a product is a new chemical entity, or NCE-generally meaning that the active moiety has never before been approved in any drug-there is a period of five years from the product’s approval during which the FDA may not accept for filing any ANDA or 505(b)(2) application for a drug with the same active moiety. An ANDA or 505(b)(2) application may be submitted after four years, however, if the sponsor makes a Paragraph IV certification challenging a listed patent. Because of relevant statutory and regulatory provisions, as well as the time it takes for the FDA to review and approve an application, five-year NCE exclusivity usually effectively means an ANDA or 505(b)(2) application is not approved for a period well beyond five years after approval of the RLD.

A product that is not an NCE may qualify for a three-year period of exclusivity if the NDA contains clinical data that were necessary for approval. In that instance, the exclusivity period does not preclude filing or review of the ANDA or 505(b)(2) application; rather, the FDA may not grant final approval to the ANDA or 505(b)(2) application until three years after approval of the RLD. Additionally, the exclusivity applies only to the conditions of approval that required submission of the clinical data. For example, if an NDA is submitted for a product that seeks approval for a new indication, and clinical data were required to demonstrate the safety or effectiveness of the product for that use, the FDA could not approve an ANDA or 505(b)(2) application for another product with that active moiety for that use.

Orphan Drug designation and exclusivity

The Orphan Drug Act provides incentives for the development of drugs intended to treat rare diseases or conditions, which generally are diseases or conditions affecting less than 200,000 individuals in the United States. If a sponsor demonstrates that a drug or biologic is intended to treat a rare disease or condition and meets other qualifying criteria, the FDA grants orphan drug designation to the product for that use. The benefits of orphan drug designation include research and development tax credits and exemption from user fees. In general, a drug that is approved for the orphan drug designated indication is granted seven years of orphan drug exclusivity, and during that period, the FDA generally may not approve any other application for the same product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically superior to the product with exclusivity.

Post-approval requirements

Any drug products we manufacture, market, or distribute pursuant to FDA approvals are subject to continuing regulation by the FDA. For example, drug manufacturers and their subcontractors must register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by regulatory authorities, including by the FDA for compliance with cGMP, which imposes significant manufacturing-related requirements.

The FDA closely regulates the marketing and promotion of drugs. A company’s promotional claims about the safety and efficacy of its drug products must be consistent with FDA-approved labeling, truthful, and non-misleading. Failure to comply with these requirements can result in adverse publicity, warning or untitled letters, corrective advertising, and potential civil and criminal penalties. Physicians may legally prescribe approved drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such “off-label” use is common in some areas of medicine and reflects physicians’ professional judgment that such use is an appropriate treatment option for patients under certain circumstances. The FDA does not regulate physicians’ practice of medicine, but the FDA does restrict manufacturers’ communications about their drug products, including communications about unapproved uses of approved products. However, a manufacturer that is found to have promoted off-label use of its product may be subject to significant liability, including administrative, civil and criminal sanctions.

In addition to these post-marketing requirements, companies that manufacture or distribute drug products or that hold approved NDAs must comply with numerous other post-marketing regulatory requirements, including submitting annual reports, reporting information about adverse drug experiences, and maintaining certain records.

The extensive laws and regulations that apply to the research, development, manufacture, quality control, safety, effectiveness, approval, labeling, storage, record keeping, reporting, distribution, import, export, advertising, and promotion of drug products and product candidates in the United States are subject to change, and it is difficult to foresee whether, how, and when such changes may affect our business.

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Other healthcare regulations

Our business activities, including but not limited to, research, sales, promotion, distribution, medical education, and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, the Department of Health and Human Services and its various divisions, including the Centers for Medicare and Medicaid Services, and state and local governments. Our business activities must comply with numerous healthcare laws, including but not limited to, the federal Anti-Kickback Statute, the False Claims Act, the Veterans Health Care Act, and similar state laws.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. Liability under the Anti-Kickback Statute may be established without a person or entity having actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. We seek to comply with these exceptions and safe harbors whenever possible, but the exceptions and safe harbors are drawn narrowly, and our business practices may be subject to scrutiny if they do not qualify for an exception or safe harbor or if there is no exception or safe harbor available. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the statute and to share in any monetary recovery. Many pharmaceutical and other healthcare companies have been investigated or subject to lawsuits by whistleblowers and have reached substantial financial settlements with the federal government under the False Claims Act for a variety of alleged improper marketing activities, among other things. Pharmaceutical and other healthcare companies also are subject to other federal false claim laws, including federal criminal healthcare fraud and false statement statutes that extend to non-government health benefit programs.

We and our business activities are subject to the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

Additionally, the federal Open Payments program requires certain manufacturers of drugs, devices, biological, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with certain exceptions, to report annually to the federal government information related to payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as certain ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers will also be required to report information regarding payments and other transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and anesthesiologist assistants, and certified nurse-midwives.

The majority of states also have statutes or regulations similar to the federal Anti-Kickback Statute and federal False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. Additionally, there are state laws that require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual physicians in the states, restrict when pharmaceutical companies may provide meals to prescribers or engage

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in other marketing related activities, impose price reporting obligations with respect to certain drug products, and/or require pharmaceutical companies to implement compliance programs or marketing codes of conduct. In addition, certain state and local laws require the registration of pharmaceutical sales representatives. Outside the U.S., we may be subject to similar laws and regulations in those countries where we market and sell products.

In addition, we may be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business. Numerous federal and state laws and regulations, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of personal information. Failure to comply with such laws and regulations could result in government enforcement actions and create liability for us (including the imposition of significant penalties), private litigation and/or adverse publicity that negatively affects our business. In addition, healthcare providers who prescribe our products and research institutions we collaborate with are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”). HIPAA and its implementing regulations impose certain requirements on covered entities, including certain healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity and their subcontractors that use, disclose, access, or otherwise process individually identifiable protected health information, relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, which are independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

In order to be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we will have to comply with the Veterans Health Care Act of 1992 (“VHCA”). The VHCA requires manufacturers to offer their covered drugs (biologics and single source and innovator multiple source drugs) for sale to certain federal agencies, including but not limited to, the Department of Veterans Affairs (“VA”), on a Federal Supply Schedule contract, at a price no higher than the statutory Federal Ceiling Price (“FCP”). The FCP is based on the non-federal average manufacturer price, or Non-FAMP, which we will have to calculate and report to the VA on a quarterly and annual basis. In addition, the Federal Supply Schedule contract requires compliance with applicable federal procurement laws.

Depending on the circumstances, failure to comply with these laws can result in penalties, including significant criminal, civil, and/or administrative criminal penalties, damages, fines, disgorgement, exclusion of products from reimbursement under government programs, “qui tam” actions brought by individual whistleblowers in the name of the government, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, refusal to allow us to enter into supply contracts, including government contracts, reputational harm, diminished profits, and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our business.

Health reform

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

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For example, in March 2010, the Patient Protection and Affordable Care Act (“PPACA”) was passed, which has substantially changed how health care is financed by both governmental and private insurers, and has significantly impacted the U.S. pharmaceutical industry. The PPACA, among other things, revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program (“MDRP”) are calculated, increased the minimum Medicaid rebates owed by most manufacturers under the MDRP, extended the MDRP to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, provided incentives to programs that increase the federal government’s comparative effectiveness research, and provided for a Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable branded drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

There remain legal and political challenges to certain aspects of the PPACA. Since January 2017, former President Trump signed several executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. In December 2018, the Centers for Medicare and Medicaid Services (“CMS”) published a new final rule permitting further collections and payments to and from certain PPACA qualified health plans and health insurance issuers under the PPACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act Cuts and Jobs Act of 2017. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it is unclear when or how the Supreme Court will rule. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the PPACA will impact the PPACA.

Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which went into effect in 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which ended the use of the statutory formula for clinician payment and established a quality payment program. At this time it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement.

In addition, there have also been proposals to impose federal rebates on Medicare Part D drugs, requiring federally-mandated rebates on all drugs dispensed to Medicare Part D enrollees or on only those drugs dispensed to certain groups of lower income beneficiaries. If any of these proposals are adopted, they could result in our owing additional rebates, which could have a negative impact on revenues from sales of our products.

There has been heightened governmental scrutiny recently over pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. Such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. At the federal level, the Trump Administration’s budget proposal for fiscal

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year 2021 included a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Additionally, the Trump Administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services (“HHS”) has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. Further, on July 24, 2020 and September 13, 2020, the Trump Administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. As a result, the FDA released a final rule on September 24, 2020, effective November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. On November 20, 2020, CMS issued an interim final rule implementing former President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. The likelihood of implementation of any of the other Trump administration reform initiatives is uncertain, particularly in light of the recent U.S. presidential election. At the state level, legislatures have become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, have been designed to encourage importation from other countries and bulk purchasing.

We expect that the PPACA, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of any of our product candidates that we successfully commercialize. There have also been proposals to impose federal rebates on Medicare Part D drugs, requiring federally-mandated rebates on all drugs dispensed to Medicare Part D enrollees or on only those drugs dispensed to certain groups of lower income beneficiaries. If any of these proposals are adopted, they could result in us owing additional rebates, which could have a negative impact on revenues from sales of any of our product candidates that we successfully commercialize. Further, it is possible that additional government action is taken in response to the COVID-19 pandemic.

Pharmaceutical pricing and reimbursement

Our ability to commercialize our product candidates successfully, and to attract commercialization partners for our products, will depend in significant part on the availability of adequate financial coverage and reimbursement from third-party payers, including, in the U.S., governmental payers such as the Medicare and Medicaid programs, managed care organizations, and private health insurers. We intend to participate in and then will have certain price reporting and other obligations to the Medicaid Drug Rebate program and other governmental pricing programs. These obligations are discussed in greater detail under the heading “If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs in the United States, we could be subject to additional reimbursement requirements, fines, sanctions and exposure under other laws which could have a material adverse effect on our business, results of operations and financial condition” in Part 1, Item 1A. Risk Factors, of this Annual Report on Form 10-K. Political, economic, and regulatory influences are subjecting the healthcare industry in the U.S. to fundamental changes. There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could impact our ability to sell any of our product candidates that we successfully commercialize profitably. We expect to experience pricing pressure in the U.S. in connection with the sale of our products due to managed healthcare, the increasing influence of health maintenance organizations, additional legislative proposals to curb healthcare costs, and negative publicity regarding pricing and price increases generally, which could limit the prices that we charge for any of our product candidates that we successfully commercialize, limit our commercial opportunity, and/or negatively impact revenues from sales of our products. We anticipate that the U.S.

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Congress, state legislatures, and the private sector will continue to consider and may adopt healthcare policies intended to curb rising healthcare costs, particularly given the current atmosphere of mounting criticism of prescription costs in the U.S. These cost containment measures include controls on government-funded reimbursement for drugs; new or increased requirements to pay prescription drug rebates to government health care programs; pharmaceutical cost transparency bills that aim to require drug companies to justify their prices; controls on healthcare providers; challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products through other means; requirements to try less expensive products or generics before a more expensive branded product; changes in drug importation laws; expansion of use of managed care systems in which healthcare providers contract to provide comprehensive healthcare for a fixed cost per person; and public funding for cost effectiveness research, which may be used by government and private third-party payers to make coverage and payment decisions. For example, much attention has been paid to legislation proposing federal rebates on Medicare Part D and Medicare Advantage utilization for drugs issued to certain groups of lower income beneficiaries and the desire to change the provisions that treat these dual-eligible patients differently from traditional Medicare patients. Any such changes could have a negative impact on revenues from sales of any of our product candidates that we successfully commercialize.

Coverage, reimbursement, and formulary placement decisions are being negotiated on a plan by plan basis for GOCOVRI for the treatment of dyskinesia in Parkinson’s disease and, as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. Coverage, reimbursements, and placement decisions for products are based on many factors including the coverage, reimbursement, and placement of already marketed branded drugs for the same or similar indications, the safety and efficacy of the product, availability of generics for similar indications, and the clinical need for the product. Within the Medicare program, as self-administered drugs, GOCOVRI would be reimbursed under the expanded prescription drug benefit, known as Medicare Part D. This program is a voluntary Medicare benefit administered by private plans that operate under contracts with the federal government. These Part D plans negotiate discounts with drug manufacturers, which are passed on to each of the plan’s enrollees. Historically, Part D beneficiaries have been exposed to significant out-of-pocket costs after they surpass an annual coverage limit and until they reach a catastrophic coverage threshold. However, changes made by recent legislation will reduce this patient coverage gap, known as the “donut hole”, by transitioning patient responsibility in that coverage range from 100% in 2010 to only 25% currently. To help achieve this reduction, since 2011, pharmaceutical manufacturers are required to pay quarterly discounts of 50% off the negotiated price of branded drugs issued to Medicare Part D patients in the donut hole, and such quarterly discounts have increased to 70% on January 1, 2019. In 2020, drug manufacturers have been responsible for a larger share of total drug costs due to an increase to the catastrophic coverage threshold. Such increase will also result in a higher out-of-pocket costs paid by Part D beneficiaries.

If a drug product is reimbursed by Medicare or Medicaid, pricing and rebate programs must comply with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, as applicable, as well as with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, or the OBRA, and the Veterans Health Care Act of 1992, or the VHCA, each as amended. Among other things, the OBRA requires drug manufacturers to pay rebates on prescription drugs to state Medicaid programs and empowers states to negotiate rebates on pharmaceutical prices, which may result in prices for our future products that will likely be lower than the prices we might otherwise obtain. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply.

Third-party payers decide which drugs they will pay for and establish reimbursement and co-pay levels. Third-party payers are increasingly challenging the prices charged for medical products and services and examining their cost effectiveness, in addition to their safety and efficacy. Even with studies, any of our product candidates that we successfully commercialize may be considered less safe, less effective, or less cost-effective than other products, and third-party payers may not provide coverage and reimbursement for any of our product candidates that we commercialize, in whole or in part. The process for determining whether a payer will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payer will pay for the product once coverage is approved. Third-party payers may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products for a particular indication. For example, third-party payers have started to require discounts and/or exclusivity arrangements with some drug manufacturers in exchange for including a specific product on their formularies. Any such requirements could have a negative impact on revenues from sales of our products.

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Payers also are increasingly considering new metrics as the basis for reimbursement rates, such as average sales price, average manufacturer price, and actual acquisition cost. Payers may also impose price protection or inflation protection in their contracts with manufacturers to limit the manufacturer’s ability to increase prices. The existing data for reimbursement based on these metrics is relatively limited, although certain states have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates. Both Medicare and Medicaid are administered by CMS. CMS surveys and publishes retail community pharmacy acquisition cost information in the form of National Average Drug Acquisition Cost files to provide state Medicaid agencies with a basis of comparison for their own reimbursement and pricing methodologies and rates. It is difficult to project the impact of these evolving reimbursement mechanics on the willingness of payers to cover our products.

The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Human Capital

As of December 31, 2020, we employed 138 full-time equivalent employees, have not experienced work stoppages and believe our employee relations are good.

Corporate and other Information

We were incorporated in Delaware in November 2000 under the name NeuroMolecular, Inc. In December 2004, we changed our name to NeuroMolecular Pharmaceuticals, Inc., and in July 2007 we changed our name to Adamas Pharmaceuticals, Inc. Our principal executive offices are located at 1900 Powell Street, Suite 1000, Emeryville, California 94608, and our telephone number is (510) 450-3500. Our website address is www.adamaspharma.com. References to our website address do not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

We make available, free of charge on our corporate website, copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and all amendments to these reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act. We also show detail about stock trading by corporate insiders by providing access to SEC Forms 3, 4 and 5. Our common stock is traded on the Nasdaq Stock Market under the symbol “ADMS”.

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Item 1A.  Risk Factors

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, results of operations, and future growth prospects. Our business could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.

Risks related to the COVID-19 pandemic

The outbreak of the novel Coronavirus (“COVID-19”) has negatively impacted our business, including the commercialization strategy and sales of GOCOVRI® (amantadine) extended release capsules.

The outbreak of the novel Coronavirus (“COVID-19”), which is understood to have begun in December 2019, continues to grow both within the U.S. and globally. The World Health Organization has declared the outbreak of COVID-19 to be a pandemic, and the U.S. federal government has declared it a national emergency. Efforts to contain the spread of COVID-19 have intensified and the U.S. has implemented severe travel restrictions, enforced social distancing, shelter-in-place orders and delays or cancellations of physician visits. These circumstances have negatively impacted our business and the commercialization strategy of GOCOVRI, including a fluid environment in which office practices are changing frequently including healthcare providers temporarily closing their offices or restricting patient visits, patients postponing visits to healthcare provider facilities, and depending on the local environment, limiting the ability of our sales force to travel and meet with healthcare providers and resulting in sales and marketing being conducted in a mix of virtual and live interactions. In particular, we have observed an impact in our new prescription rate, which we attribute to the effects of the restrictive actions taken.

We have implemented a work-from-home policy for all our employees, including allowing for flexible work schedules. The effects of our work-from-home policy may negatively impact productivity and disrupt our business.

These disruptions in our operations have negatively impacted, and we expect will continue to negatively impact, our business, operating results and financial condition. The COVID-19 pandemic continues to rapidly evolve. The ultimate cumulative impact of the COVID-19 pandemic on our business operations, the duration and severity of which will depend on future developments, is highly uncertain and cannot be predicted with confidence. We will continue to monitor the situation closely. The COVID-19 pandemic may also exacerbate a number of the risks discussed below.

Risks related to the commercialization of GOCOVRI® (amantadine) extended release capsules

Our success depends heavily on the success of GOCOVRI for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. To the extent GOCOVRI is not commercially successful, our business, financial condition and results of operations will be materially harmed.

We have invested and continue to invest a significant portion of our efforts and financial resources in the development, approval and commercialization of GOCOVRI for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. The success of GOCOVRI will depend on numerous factors, including:

•GOCOVRI’s efficacy and safety profile;

•our success in the marketing, sales, and distribution of GOCOVRI, especially in light of the COVID-19 pandemic;

•the duration of the COVID-19 pandemic, the stay-at-home restrictions and access of our staff to clinics to be able to interact with healthcare providers;

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•acceptance of GOCOVRI by physicians, hospital administrators, patients, third-party payers, and others in the healthcare community;

•coverage and adequate reimbursement of GOCOVRI by third-party payers;

•willingness and ability of patients to pay out of pocket for GOCOVRI;

•successfully establishing and maintaining commercial manufacturing with third parties;

•effectively competing with other approved or used medicines and future compounds in development;

•continued demonstration of an acceptable safety profile of GOCOVRI; and

•obtaining, maintaining, enforcing, and defending intellectual property rights and claims.

If we are not successful in addressing these issues, or one or more of these factors negatively affect us, we could experience significant delays or an inability to further commercialize GOCOVRI, which would materially harm our business. 

If we are unable to recruit and retain qualified personnel and third-party distributors, our business will be substantially harmed.

Competition for biotechnology and pharmaceutical employees, sales personnel and other key personnel is intense. We have experienced and may in the future experience difficulty attracting and retaining qualified candidates to fill open positions and may be required to expend significant financial resources in our employee recruitment and retention efforts. We are required to expend significant time and resources to market, sell, and distribute GOCOVRI to neurologists and movement disorder specialists in a credible, persuasive, and compliant manner consistent with applicable laws. Our business could be harmed if we are unable to recruit, employ, appropriately train, and retain experienced sales professionals to successfully execute our commercialization strategies and tactics, including educating potential customers about the benefits and risks of GOCOVRI and its proper administration.

Moreover, there is no guarantee that the strategies, tactics and marketing messages, or the distribution and reimbursement capabilities that we have established will be successful. Specifically, for distribution of GOCOVRI, we are heavily dependent on third-party logistics, pharmacy and distribution partners. If they are unable to perform effectively, including due to the impact of the COVID-19 pandemic on their operations, or if they do not provide efficient distribution of the medicine to patients, our business will suffer.

Failure to successfully obtain coverage and reimbursement for GOCOVRI in the United States, or the availability of coverage and reimbursement only at limited levels, would diminish our ability to generate product revenue.

Our ability to commercialize GOCOVRI successfully in the United States will depend in part on the extent to which we obtain and maintain coverage and reimbursement for GOCOVRI from third-party payers, including government health administration authorities, such as those that administer the Medicare and Medicaid programs, and private health insurers. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payers to reimburse all or part of the costs associated with their prescription drugs. Coverage and adequate reimbursement from both governmental healthcare programs, such as Medicare and Medicaid, and commercial payers are critical to GOCOVRI’s commercial success since they ensure patients have affordable access to the drug. Coverage and reimbursement decisions may depend upon clinical and economic standards that disfavor newer drug products when more established or cheaper therapeutic alternatives are already available or subsequently become available. For example, even though other versions of amantadine are not approved for dyskinesia, some payers have asked physicians if patients have had prior experience with such versions or required that physicians actually prescribe such versions prior to providing access to GOCOVRI. For some patients, coverage and reimbursement may not be available for GOCOVRI, or the patient’s out of pocket cost may be unaffordable.

Even if we obtain coverage for GOCOVRI, the level of coverage might not be adequate or may require co-payments or co-insurance payments that patients find unacceptably high. Coverage and reimbursement determinations by third-party payers can impact the demand for GOCOVRI and therefore our revenues. Patients may choose not to use GOCOVRI if coverage is not provided or the payer’s determined out of pocket cost for the patient is unaffordable for the patient. If coverage and reimbursement are not available or are available only to limited levels making the drug

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unaffordable to patients, our business could be harmed.

Our inability to obtain and maintain coverage and adequate reimbursement rates from both government-funded and private third-party payers for GOCOVRI could have a material adverse effect on our operating results, and our overall financial condition.

We face substantial competition in the commercialization of GOCOVRI.

The commercialization of pharmaceutical products is highly competitive and we face substantial competition with respect to GOCOVRI. For example, although GOCOVRI is the first and only FDA-approved medicine for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes, we face competition from various branded and generic drugs approved for the treatment of Parkinson’s disease that physicians either have historically used or may use in an attempt to manage dyskinesia. If approved, we will also face competition from investigational drugs in late-stage development for the treatment of Parkinson’s disease, and may also face competition from drugs currently in development for dyskinesia in Parkinson’s disease or for Parkinson’s disease from a number of pharmaceutical companies.

Many of our competitors, including a number of large pharmaceutical companies that compete directly with us, have significantly greater financial resources commercializing approved products than we do. Also, many of our competitors are large pharmaceutical companies that will have a greater ability to reduce prices for their competing drugs in an effort to gain market share and undermine the value proposition that we might otherwise be able to offer to payers.

Unforeseen safety issues could emerge with GOCOVRI that could require us to change the prescribing information to add warnings, limit use of the product, and/or result in litigation. Any of these events could have a negative impact on our business.

Discovery of unforeseen safety problems or increased focus on a known problem could impact our ability to commercialize GOCOVRI and could result in restrictions on its permissible uses, including withdrawal of the medicine from the market.

If we or others identify additional undesirable side effects caused by GOCOVRI after approval:

•regulatory authorities may require the addition of labeling statements, specific warnings, contraindications, or field alerts to physicians and pharmacies;

•regulatory authorities may withdraw their approval of the product and require us to take our approved drugs off the market;

•we may be required to change the way the product is administered, conduct additional clinical trials, change the labeling of the product, or implement a Risk Evaluation and Mitigation Strategy, or REMS;

•we may have limitations on how we promote our drugs;

•third-party payers may limit coverage or reimbursement for GOCOVRI;

•sales of GOCOVRI may decrease significantly;

•we may be subject to litigation or product liability claims; and

•our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of GOCOVRI and could substantially increase our commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from its sale.

Further, GOCOVRI may also be affected by the safety and tolerability of its parent drug or drugs with similar mechanisms of action. Although amantadine, which is a component of GOCOVRI, has been used in patients for many years, problems identified with other approved amantadine products or amantadine products being studied in clinical trials could result in increased regulatory scrutiny of our products and/or adversely affect the commercialization of GOCOVRI.

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If a safety issue emerges post-approval, we may become subject to costly product liability litigation by our customers, their patients or payers. Product liability claims could divert management’s attention from our core business, be expensive to defend, and result in sizable damage awards against us that may not be covered by insurance. If we cannot successfully defend ourselves against claims that GOCOVRI caused injuries, we will incur substantial liabilities.

We currently hold $15.0 million in product liability insurance coverage, which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to obtain insurance coverage at a reasonable cost or in amounts adequate to satisfy any liability or associated costs that may arise in the future. These events could harm our business and results of operations and cause our stock price to decline.

If manufacturers obtain approval for generic versions of GOCOVRI, or of products with which we compete, our business may suffer.

Under the U.S. Food, Drug and Cosmetic Act, or FDCA, the FDA can approve an Abbreviated New Drug Application, or ANDA, for a generic version of a branded drug without the ANDA applicant undertaking the clinical testing necessary to obtain approval to market a new drug. Generally, in place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating that its product has the same active ingredient(s), strength, dosage form, route of administration and that it is bioequivalent to the branded product. We have recently settled an ANDA litigation with a generic filer. See Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report for more information. However, other filers could submit an ANDA to the FDA requesting permission to manufacture and market another generic version of GOCOVRI, which could result in our expending significant time and incurring significant expenses in challenging the submissions. Further, if one or more of these filers is successful, the introduction of a generic version of GOCOVRI could harm our business and results of operations and cause our stock price to decline.

If we are found to have improperly promoted GOCOVRI, or if physicians misuse it, we may be subject to restrictions on the sale or marketing of GOCOVRI and significant fines, penalties, sanctions and product liability claims, and our image and reputation within the industry and marketplace could be harmed.

The FDA and other regulatory agencies, including regulatory authorities outside the United States, strictly regulate the marketing and promotional claims that are made about drug products, such as GOCOVRI. In particular, promotion of a product must be consistent with its labeling approved by the FDA or by regulatory agencies in other countries. For example, in the case of GOCOVRI, for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes, we cannot prevent physicians from prescribing GOCOVRI for indications or uses that are inconsistent with the approved label based on the physician’s professional medical judgment. If, however, we are found to have promoted such unapproved uses prior to the FDA’s approval for an additional indication, we may, among other consequences, receive untitled or warning letters and become subject to significant liability, which would materially harm our business. Both the U.S. federal government and foreign regulatory authorities have levied significant civil and criminal fines against companies and individuals for alleged improper promotion and have entered into settlement agreements with pharmaceutical companies to limit inappropriate promotional activities. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business. In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged.

Physicians prescribing of our products for unapproved uses may also subject us to product liability claims, to the extent such uses lead to adverse events, side effects, or injury.

GOCOVRI is complex to manufacture, and manufacturing disruptions may occur that could cause us to experience disruptions in the supply of GOCOVRI.

GOCOVRI is a high-dose, extended release amantadine, specifically designed to be taken once-daily at bedtime to provide an initial lag, then a slow rise in amantadine concentration during the night, and high levels of amantadine in the morning that gradually fall throughout the day into the evening. The manufacture of extended release versions of drugs is more complex than the manufacture of the immediate release versions of drugs. Notwithstanding the fact that we have validated our process, manufacturing disruptions may occur, including disruptions related to the impact or

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uncertainties of the duration of the COVID-19 pandemic. Such problems may prevent the production of lots that meet the specifications required for sale of the product and may be difficult and expensive to resolve. Although we have an adequate supply of GOCOVRI to address patient needs into mid-2022 and have not observed disruptions in our supply chain to date as a result of COVID-19, there is no guarantee that we will not experience interruption of, or delays in receiving, supply due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems in the future. If any such issues were to arise with respect to GOCOVRI, our business, financial results, or stock price could be adversely affected.

If we are unable to maintain orphan exclusivity for GOCOVRI for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, our business may be substantially harmed.

When GOCOVRI was approved for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, GOCOVRI earned seven years of orphan drug exclusivity under the Orphan Drug Act for this use. Even so, the FDA could still subsequently approve the same drug with the same active moiety for the same indication if the FDA concludes that the later drug is safer or more effective or makes a major contribution to patient care, or if we are unable to assure that sufficient quantities of medicine are available to meet patient needs. If we are unable to maintain orphan drug exclusivity for GOCOVRI for the treatment of dyskinesia, our business may be substantially harmed.

Risks related to the commercialization of GOCOVRI will be substantially the same for OSMOLEX ER® (amantadine) extended release tablets.

We rely on a single supplier of OSMOLEX ER, and if that supplier is unable to supply OSMOLEX ER, or is unable to supply OSMOLEX ER in sufficient quantities, we may not be able to meet demand for OSMOLEX ER which could impair our investment in OSMOLEX ER.

We obtained the global rights to sell OSMOLEX ER on January 4, 2021, and began selling product through select specialty pharmacies and distributors. We have entered into a supply agreement with Osmotica Pharmaceutical US LLC (“Osmotica”), a subsidiary of Osmotica Pharmaceuticals plc, in which Osmotica will be the sole manufacturer of OSMOLEX ER. If Osmotica is unable to supply sufficient quantities of OSMOLEX ER to meet market demand, we may be unable to realize on our investment in OSMOLEX ER, which could have an adverse effect on our financial results and condition.

We have just begun to market OSMOLEX ER, and are subject to the same commercialization and regulatory risks regarding OSMOLEX ER as we have with respect to the commercialization and regulatory compliance for GOCOVRI.

We have just begun to market OSMOLEX ER, and we are subject to the same commercialization and post-approval regulatory risks with respect to OSMOLEX ER as we have with respect to the commercialization and regulatory compliance for GOCOVRI. Further, although our commercial team has experience with the marketing and sale of GOCOVRI, it has only begun to market and sell OSMOLEX ER, and we may encounter unexpected difficulties in marketing and selling OSMOLEX ER.

Risks related to clinical development of potential future product candidates

If we resume development of ADS-4101, or seek to develop additional product candidates that we may develop or acquire, we will face regulatory and development risks. 

Although we have placed the development program for ADS-4101 (lacosamide) modified release capsules for the treatment of partial onset seizures in patients with epilepsy on hold, if we determine to resume development of ADS-4101, or develop or acquire other potential product candidates and seek to develop them, we will face regulatory and other development risks. There are risks associated with pursuing clinical trials for potential future product candidates, as we may experience numerous unforeseen events during, or as a result, of clinical studies that could harm our ability to commercialize such products or to receive regulatory approval, including that:

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•clinical studies may produce negative or inconclusive results or raise significant safety concerns, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs;

•even if clinical studies demonstrate statistically significant efficacy and acceptable safety, the FDA or similar authorities outside the United States may not consider the results of our studies to be sufficient for approval or we may not receive approval in a timely manner, especially in light of the COVID-19 pandemic;

•our clinical sites and clinical investigators may fail to comply with, or inconsistently apply, the trial protocols, regulatory requirements including Good Clinical Practices, contractual obligations, and the rating assessments;

•our third-party vendors, including our Contract Research Organizations, or CROs, and contract manufacturing organizations, or CMOs, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

•we might have to suspend or terminate clinical studies for various reasons, including a finding that our products have unanticipated serious side effects or other unexpected characteristics or that the patients are being exposed to unacceptable health risks;

•regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

•the supply or quality of materials necessary to conduct clinical studies may be insufficient or inadequate, especially in light of the COVID-19 pandemic;

•our new product discovery or research program may not be successful or warrant clinical development;

•we may be unable to successfully complete the development program in a timely manner, especially in light of the COVID-19 pandemic;

•we may be unsuccessful commercializing our products, if approved, including marketing, sales, and distribution of the product independently or in partnership with another company;

•we may fail to gain acceptance by the medical community and patients of the approved product;

•we may be unable to obtain coverage and adequate reimbursement by third-party payers;

•patients may be unwilling or unable to pay out of pocket for the products;

•we may be unable to effectively compete with other approved or used medicines and future compounds in development;

•we may be unable to continue demonstration of an acceptable safety profile following approval; and

•we may be unable to obtain, maintain, enforce, and defend intellectual property rights and claims.

If we are forced to delay or abandon development of our products, especially in light of the COVID-19 pandemic, our business, results of operations, and financial condition will be materially and adversely harmed.

We may expend our limited resources to pursue a particular product or indication and fail to capitalize on products or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we may choose to focus on research programs and products for specific indications. As a result, we may forego or delay pursuit of opportunities with our product candidate or other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our investment in current and future research and development programs and product candidates for specific indications may not yield any commercially viable products for us or future partners. For example, we discontinued the development of ADS-5102 for the treatment of walking impairment in patients with multiple sclerosis in June 2020 following a comprehensive evaluation of the INROADS Phase 3 data, including evaluating the ongoing, open label extension study, and engaging with the FDA, the revised product profile and potential path to submission.

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If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to retain sole development and commercialization rights.

We may in the future seek to acquire additional product candidates, which may subject us to additional risks and expense.

In the future, in seeking to diversify our product candidate portfolio we may seek to identify and acquire or in-license novel product candidates. We may fail to identify and acquire or in-license product candidates, including for reasons discussed in these risk factors, and also:

•the process by which we identify and decide to acquire product candidates may not be successful;

•the competition to acquire or in-license promising product candidates is fierce and many of our competitors are large, multinational pharmaceutical, biotechnology and medical device companies with considerably more financial, development and commercialization resources and experience than we have;

•potential product candidates may, upon further study during or after the acquisition process, fail to demonstrate clinical efficacy, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval or achieve market acceptance; and

•potential product candidates may not be effective in treating their targeted diseases.

In addition, if we do acquire additional product candidates and they prove to be unsuccessful, we will have spent significant amounts of resources in acquiring and pursuing these product candidates and not receive any return on our investments. Further, time and resources spent searching for, identifying, acquiring, and developing potential product candidates may distract management’s attention from our existing business.

Risks related to our reliance on third parties

We rely on third-party organizations to manufacture, supply, and distribute GOCOVRI. If one of these organizations fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new third-party vendors and/or face delays in the commercialization and supply of GOCOVRI.

We do not own facilities for clinical and commercial manufacturing of GOCOVRI and we rely upon third-party contract manufacturing organizations to manufacture, serialize and supply drug product for our clinical studies and to meet commercial demand. If our manufacturers were to encounter difficulties with production costs and yields, quality control, including stability of GOCOVRI and quality assurance testing, shortages of qualified personnel, especially in light of the COVID-19 pandemic, or fail to comply with strictly enforced cGMP requirements, other federal and state regulatory requirements, our commercial supply of GOCOVRI could be jeopardized. We have little control over our manufacturers’ operations or their compliance with applicable regulations and standards. Any delay or interruption in the supply of clinical study materials or commercial product could cause delays in our clinical programs, harm our ability to gain approval from regulatory authorities, and potentially disrupt patient access to our approved products. These events would substantially harm our business, reputation and stock price.

We also rely on a single specialty pharmacy to distribute and provide access to GOCOVRI for the vast majority of our patients. Accordingly, this specialty pharmacy is our largest customer representing approximately 95% of our product revenue. If this specialty pharmacy fails to perform, it could materially harm our business.

All third-party manufacturers of our products and ingredients thereof must comply with cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance, and the maintenance of records and documentation. Manufacturers of our products may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new standards at any time or change their interpretation and enforcement of existing standards for manufacture, packaging, or testing of products. We have little control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’

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failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical studies, regulatory submissions, approvals, commercialization or supply of our products, entail higher costs, impair our reputation, and potentially disrupt patient access or our approved products.

We rely on a single-source third-party contract manufacturing organization for the manufacture and supply of drug product for GOCOVRI.

We have supply agreements with two drug substance suppliers and we currently rely on a single drug product manufacturer for GOCOVRI. We continue to seek additional long-term supply agreements with suppliers and supplier qualifications. A failure of our drug substance suppliers or single-source drug product manufacturer for GOCOVRI, or our failure to qualify at least one other drug product manufacturer organization on a timely basis, especially in light of the current COVID-19 pandemic, and validate the manufacturing process employed at that manufacturer could delay or harm commercialization of GOCOVRI. Although we believe alternative sources of supply exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities is limited and it could be expensive and take a significant amount of time to arrange and negotiate acceptable long-term contracts and obtain regulatory approvals and qualifications, which would adversely affect our business. New suppliers of any drug substance would be required to be qualified under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing the product. Obtaining the necessary FDA approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs, which may be passed on to us. Qualifying and negotiating long-term contracts with manufacturers and providers of packaging services is a lengthy process. If at any time, one or more of our qualified contract manufacturing organizations were not able to manufacture our drug substance or drug product or provide the requisite services, our business and financial condition would be materially adversely affected.

We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of these trials.

We do not independently conduct clinical studies of our products. Instead, we rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators to perform this function. Our reliance on these third parties for clinical development activities reduces our control over these activities, but does not relieve us of our responsibilities. For example, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practice, for conducting, recording, and reporting the results of clinical studies to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of patients in clinical studies are protected, even though we are not in control of these processes. These third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for our products and will not be able to, or may be delayed in our efforts to, successfully commercialize our products.

We also rely on other third parties to store and distribute supplies for our clinical studies. Any performance failure on the part of our existing or future distributors could delay clinical development or regulatory approval of our products or commercialization of our products, producing additional losses and depriving us of potential product revenue.

Risks related to government regulation

Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare policy and other healthcare payer cost-containment initiatives and current societal pressures regarding pharmaceutical product pricing, may negatively impact our ability to generate revenues from or could limit or prevent our products’ commercial success.

In the United States, there have been and we expect there will continue to be a number of legislative and regulatory changes to the healthcare system that could affect our future revenue and profitability and the future revenue and profitability of our potential customers. Federal and state lawmakers regularly propose and, at times, enact

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legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For example, in March 2010, the Patient Protection and Affordable Care Act (“PPACA”) was passed, which has substantially changed how healthcare is financed by both governmental and private insurers, and has significantly impacted the U.S. pharmaceutical industry. Details of healthcare regulations, including changes under the PPACA, are discussed in the business heading “Other healthcare regulations” in Part I, Item 1, of this Annual Report on Form 10-K.

The constitutionality of the PPACA is currently under review by the U.S. Supreme Court, and it is unclear when a decision will be reached. We expect that the PPACA, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of our existing products.

The continuing efforts of the government, insurance companies, managed care organizations, other payers of healthcare services, and patient and political groups to contain or reduce costs of healthcare may, among other things, adversely affect:

•our ability to set a price we believe is fair for our products;

•the reputation of our company;

•our ability to generate revenue and achieve or maintain profitability; and

•the availability of capital.

Our ability to commercialize our products successfully, and to attract commercialization partners for our products, will depend in significant part on the availability of adequate financial coverage and reimbursement from third-party payers, including, in the United States, governmental payers such as the Medicare and Medicaid programs, managed care organizations and private health insurers. Details of these considerations are discussed in the business heading “Other healthcare regulations” in Part I, Item 1, of this Annual Report on Form 10-K.

We are subject to ongoing regulatory obligations and regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.

The manufacturing, marketing, and further development of GOCOVRI are subject to continual review by the FDA and/or analogous non-U.S. regulatory authorities. In addition, we are and will be subject to extensive and ongoing regulatory requirements with regard to the labeling, packaging, adverse event reporting, storage, distribution, advertising, promotion, tracking, recordkeeping, and periodic reporting for our products. Further, we and our contract manufacturers of our drug products are required to comply with cGMP regulations, which include requirements related to quality control and quality assurance and maintenance of records and documentation. Regulatory authorities must approve manufacturing facilities before they can be used to manufacture our drug products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. Certain changes to the manufacturing processes would also be subject to pre-approval by regulatory authorities. In addition, if we or a third party discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, its manufacturer, or us, including but not limited to requiring withdrawal of the product from the market or suspension of manufacturing. If we, our products or the manufacturing facilities for our products fail to comply with regulatory requirements of the FDA and/or applicable non-U.S. regulatory authorities, we could be subject to administrative or other sanctions, including:

•warning letters or untitled letters;

•civil or criminal penalties and fines;

•injunctions;

•suspension, variation, or withdrawal of regulatory approval;

•suspension of ongoing clinical studies;

•voluntary or mandatory product recalls;

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•requirements for dissemination of corrective information or modifications to promotional materials;

•refusal to approve pending applications for marketing approval of new drugs or supplements to approved applications filed by us;

•refusal to permit import or export of our products;

•restrictions on operations, including costly new manufacturing requirements; or

•seizure or detention of our products.

Regulatory requirements and policies may change, and we may need to comply with additional laws and regulations that are enacted. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory compliance, we may not be permitted to market, or continue to market, our future products and our business may suffer.

If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations, and financial condition could be adversely affected.

Healthcare providers, physicians, distributors, and third-party payers play a primary role in the distribution, recommendation, and prescription of any pharmaceutical product for which we obtain marketing approval. Our arrangements with third-party payers and customers expose us to broadly applicable federal and state fraud and abuse and other laws and regulations that may constrain the business or financial arrangements through which we market, sell and distribute GOCOVRI and other products for which we may obtain marketing approval. The laws and regulations that may affect our ability to operate include: the federal healthcare program Anti-Kickback Statute, the federal civil and criminal false claims laws, including the federal civil False Claims Act and civil monetary penalties laws, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, including as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, the federal Physician Payments Sunshine Act, being implemented as the Open Payments Program, and analogous state laws and regulations, such as anti-kickback, and false claims laws, which may be broader in scope and apply to items or services reimbursed by any third-party payer, including commercial insurers.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including significant civil, criminal and/or administrative penalties, damages, fines, disgorgement, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these or other laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, and fraud laws may prove costly. In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. Moreover, the requirements governing drug pricing and reimbursement vary widely from country to country.

Health Technology Assessment, or HTA, of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures, and most European Union member states now have an HTA system. The HTA process in the European Union member states is governed by the national laws of these countries. HTA is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of the use of a given medicinal product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and cost-effectiveness of individual medicinal products as well as their potential implications for the national healthcare system. Those elements of medicinal products are compared with other treatment options available on the market.

The outcome of HTA may influence the pricing and reimbursement status for specific medicinal products within individual European Union member states. The extent to which pricing and reimbursement decisions are influenced by the HTA of a specific medicinal product vary between the European Union member states.

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In 2011, Directive 2011/24/EU was adopted at European Union level. This Directive concerns the application of patients’ rights in cross-border healthcare. The Directive is intended to establish rules for facilitating access to safe and high-quality cross-border healthcare in the European Union. Pursuant to Directive 2011/24/EU, a voluntary network of national authorities or bodies responsible for HTA in the individual EU member states was established. The purpose of the network is to facilitate and support the cooperation between national authorities or bodies and the exchange of information concerning HTAs. This could lead to greater harmonization between European Union member states of the criteria taken into account in the conduct of HTA in pricing and reimbursement decisions.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in the United States, we could be subject to additional reimbursement requirements, fines, sanctions and exposure under other laws which could have a material adverse effect on our business, results of operations and financial condition.

We participate in and have certain price reporting obligations to the Medicaid Drug Rebate program, as administered by the Centers for Medicare and Medicaid Services (CMS), and other governmental pricing programs in the United States, and we may participate in additional government pricing programs in the future.

Under the Medicaid Drug Rebate program, a manufacturer is required to pay a rebate to each state Medicaid program for its covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid and Medicare Part B. Those rebates are based on pricing data reported by the manufacturer on a monthly and quarterly basis to CMS. These data include the average manufacturer price and, in the case of innovator products, the best price for each drug which, in general, represents the lowest price available from the manufacturer to any entity in the United States in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions.

Pricing requirements and rebate/discount calculations are complex, vary among products and programs, and are often subject to interpretation by the reporting manufacturer, governmental or regulatory agencies and the courts. We will be liable for errors associated with any submission of pricing data and for any overcharging of government payers. CMS and the OIG have pursued manufacturers that were alleged to have failed to report these data to the government in a timely manner. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that our submissions will not be found by CMS to be incomplete or incorrect. There also can be no assurance that we will be able to identify all factors that may cause our discount and rebate payment obligations to vary from period to period, and our actual results may differ significantly from our estimated allowances for discounts and rebates. Changes in estimates and assumptions may have a material adverse effect on our business, results of operations and financial condition.

In order to be eligible to have any of our product candidates that we successfully commercialize paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by the Department of Veterans Affairs, or VA, Department of Defense, Public Health Service, and Coast Guard, referred to collectively as the Big Four agencies, and certain federal grantees, we are required to participate in the VA Federal Supply Schedule, or FSS, pricing program, established under Section 603 of the Veterans Health Care Act of 1992. Under this program, we are obligated to make any of our product candidates that we successfully commercialize that meet the statutory definition of “covered drug” (biologics and single and innovator multiple source drugs) available for procurement on an FSS contract and charge a price to the Big Four agencies that is no higher than the Federal Ceiling Price, or FCP, which is a price calculated pursuant to a statutory formula. The FCP is derived from a calculated price point called the “non-federal average manufacturer price,” or Non-FAMP, which we will be required to calculate and report to the VA on a quarterly and annual basis. Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant penalties for each item of false information. The FSS contract also contains extensive disclosure and certification requirements.

Under Section 703 of the National Defense Authorization Act for FY 2008, we will be required to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare network pharmacies to Tricare beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. If we overcharge the government in connection with the FSS contract or Tricare Retail Pharmacy Rebate Program, whether due to a misstated FCP or otherwise, we are required to refund the difference to the government.

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Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and any response to government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, results of operations and financial condition. In addition, in the event that CMS were to terminate our rebate agreement, no federal payments would be available under Medicaid or Medicare for our covered outpatient drugs.

If we fail to comply with data protection laws and regulations, we could be subject to government enforcement actions (which could include civil or criminal penalties), private litigation, increased compliance costs and/or adverse publicity, which could negatively affect our operating results and business.

We are subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), govern the collection, use, disclosure, and protection of health-related and other personal information. Failure to comply with data protection laws and regulations could result in government enforcement actions and create liability for us, including civil and/or criminal penalties, private litigation and/or adverse publicity that could negatively affect our operating results and business. In addition, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) that are subject to privacy and security requirements under HIPAA, as amended by HITECH. Although we are not directly subject to HIPAA—other than potentially with respect to providing certain employee benefits—we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. HIPAA generally requires that healthcare providers and other covered entities obtain written authorizations from patients prior to disclosing protected health information of the patient (unless an exception to the authorization requirement applies). If authorization is required and the patient fails to execute an authorization or the authorization fails to contain all required provisions, then we may not be allowed access to and use of the patient’s information and our research efforts could be delayed. Furthermore, use of protected health information that is provided to us pursuant to a valid patient authorization is subject to the limits set forth in the authorization (e.g., for use in research and in submissions to regulatory authorities for product approvals). In addition, HIPAA does not replace federal, state, international or other laws that may grant individuals even greater privacy protections.

On June 28, 2018, California enacted the California Consumer Privacy Act (CCPA), which took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

In the EU, the General Data Protection Regulation (GDPR) took effect on May 25, 2018, introducing sweeping new data protection requirements that carry potential fines of up to the greater of 20 million Euros or 4% of annual global revenue. The GDPR will increase our responsibility and potential liability in relation to personal data that we process, expose us to substantial potential fines in the event of violations, increase our compliance costs and could restrict our operations in Europe.

The regulatory approval process is expensive, time consuming, and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates.

The research, development, manufacturing, quality control, labeling, approval, safety, effectiveness, storage, record keeping, reporting, selling, import, export, advertising, promotion, marketing, and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States, and by regulatory authorities in other countries, with different regulations from country to country. We are not permitted to market our products in the United States or other countries until we receive regulatory approvals.

To receive approval to commercialize any of our product candidates in the United States, we must demonstrate with substantial evidence from adequate and well-controlled clinical studies, and to the satisfaction of the FDA, that such

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product candidates are safe and effective for their intended uses. Results from preclinical studies and clinical studies can be interpreted in different ways. Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA. Administering any of our product candidates to humans may produce undesirable side effects, which could interrupt, delay, or cause suspension of clinical studies of our product candidates and result in the denial of approval of our product candidates for any or all targeted indications.

FDA approval of an NDA is not guaranteed, and the approval process is expensive and may take several years. The FDA also has substantial discretion in the approval process. Despite the time and expense we invest, failure can occur at any stage, and we could encounter problems that require us to repeat clinical studies, perform additional preclinical studies and clinical studies, or abandon development and commercialization of a product candidate altogether. The number of preclinical studies and clinical studies that will be required for FDA approval varies depending on, among other factors, the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular product candidate. The FDA can delay, limit, or deny approval of a product candidate for many reasons, including, but not limited to:

•disagreement with the design or implementation of our clinical trials;

•failure of clinical trials to show the level of statistical significance or clinical meaningfulness needed for approval;

•failure to demonstrate that a product candidate is safe or effective;

•insufficient data from preclinical and clinical studies to support an application;

•a finding by an institutional review board, or IRB, Data Safety Monitoring Board, or DSMB, Data Monitoring Committee, or DMC, or the FDA that the clinical trial exposes subjects or patients to an unacceptable health risk;

•disapproval of our or our third-party manufacturer’s processes or facilities; or

•changes to FDA’s approval policies or regulations.

If any of our product candidates fails to demonstrate safety and efficacy in clinical studies or does not gain regulatory approval, our business and results of operations will be materially and adversely harmed.

Risks related to intellectual property

Our ability to successfully commercialize GOCOVRI and any product candidates may be materially adversely affected if we are unable to obtain and maintain effective intellectual property rights for our products and product candidates.

Our success depends in large part on our ability to obtain and maintain exclusivity, patent(s), and other intellectual property protection in the United States and in other countries with respect to GOCOVRI, our product candidates, and any in- and out-licensed programs. We have sought to protect GOCOVRI and our product candidate(s) by filing patent applications in the United States and abroad related to our novel discoveries, technologies, and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part. In addition, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our discoveries or technologies or from developing competing products and technologies.

The patent position of pharmaceutical and biotechnology companies generally is highly uncertain and involves complex legal and factual questions for which many legal principles remain unresolved. In recent years, patent rights have been the subject of significant litigation. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued in the United States or in other jurisdictions which protect our technology or products or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of

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our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. In addition, the United States Patent and Trademark Office, or USPTO, might require that the term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights is highly uncertain.

The United States has enacted and implemented wide-ranging patent reform legislation. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on actions by the United States Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future. Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future.

From time to time, we may become involved in opposition, interference, derivation, inter partes review, post-grant review, or other proceedings challenging our patent rights or the patent rights of others, and the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us or Allergan, without payment to us.

Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us, or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity, or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in the patent claims of our owned or licensed patents being narrowed, invalidated, or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products. Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours or otherwise provide us with a competitive advantage.

For our partnered assets, like NAMZARIC, we may not have the right to control the prosecution of patent applications, or to maintain or enforce the patent, covering our products or product candidates that we license to third parties or that we may license from third parties. Therefore, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. In addition, if third parties who license patents to us or from us fail to maintain such patents, or lose rights to those patents, the rights we have licensed may be reduced or eliminated.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, and defending patents on all of our products and product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as in the United States. These products may compete with our products and product candidates in jurisdictions where we do not have any issued patents, and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in

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foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products against third parties in violation of our proprietary rights generally. The initiation of proceedings by third parties to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent prosecution process and following the issuance of a patent. Our failure to comply with such requirements could result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case if our patent were in force.

We may become involved in lawsuits or other proceedings to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming, and if unsuccessful could materially harm our business.

Competitors may infringe or otherwise violate our patents, trademarks, copyrights or other intellectual property for GOCOVRI, our partnered products, any product candidates, and any in- and out-licensed programs. To counter infringement or unauthorized use, we or our licensees may be required to file infringement claims, which can be expensive and time-consuming. For example, two companies filed Abbreviated New Drug Applications and we filed suit against each of them to enforce our patents and have subsequently settled these lawsuits.

We anticipate that the prosecution of any lawsuits related to our partnered products and any lawsuits related to GOCOVRI may require a significant amount of time and attention from our senior executives and management. In addition, in a patent infringement proceeding, a court may decide that a patent of ours (or a patent we license) is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the product in question. An adverse result in any litigations or proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Such a result could limit our ability to prevent others from using or commercializing similar or identical products, limit our ability to prevent others from launching generic versions of our products and could limit the duration of patent protection for our products, all of which could have a material adverse effect on our business. Also, a successful challenge to our patents could reduce or eliminate our right to receive royalties from Allergan under our license agreement with Allergan. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings alleging that we or our partners are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our partners to develop, manufacture, market, and sell our products and product candidates and to use our proprietary discoveries and technologies without infringing, misappropriating, or otherwise violating the proprietary rights or intellectual property of third parties. We or our partners may become party to, or be threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference, derivation, re-examination, inter partes review, post-grant review, opposition, or similar proceedings before the USPTO and its foreign counterparts. The costs of these proceedings could be substantial, and the proceedings may result in a loss of such intellectual property rights. Some of our competitors may be able to sustain the costs of complex patent disputes and litigation more effectively than we can, because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any disputes or litigation could adversely affect our ability to raise the funds necessary to continue our operations. Third parties may assert infringement claims against us or our partners based on existing patents or patents that may be granted in the future. Under our license agreement with Allergan we are obliged to indemnify Allergan under certain circumstances and our royalty entitlements may also be reduced. Our indemnification obligation to Allergan, while subject to customary limitations, has no monetary cap, and our right to

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receive royalties from Allergan may be eliminated in any calendar quarter in which certain third-party generic competition exists. If we or our partners are found to infringe a third-party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages. A finding of infringement could prevent us from commercializing our products and product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.

In addition to our patented technology and products, we rely upon trade secrets, including unpatented know-how, technology, and other proprietary information, to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our employees, our partners, and consultants. We also have agreements with our employees and selected consultants that obligate them to assign their inventions to us. However, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute such agreements, we may be unsuccessful in executing such an agreement with each party who in fact conceives or develops intellectual property that we regard as our own. In addition, it is possible that technology relevant to our business will be independently developed by a person that is not a party to such an agreement.

While to our knowledge the confidentiality of our trade secrets has not been compromised, if the employees, consultants or partners that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could be disclosed, misappropriated, or otherwise become known or be independently discovered by our competitors. In addition, intellectual property laws in foreign countries may not protect our intellectual property to the same extent as the laws of the United States. If our trade secrets are disclosed or misappropriated, it would harm our ability to protect our rights and adversely affect our business.

Risks related to NAMZARIC®

Under our license agreement with Allergan, if Allergan fails to successfully commercialize NAMZARIC for any reason or if the license agreement with Allergan is terminated, the royalties we are eligible to receive under our license agreement with Allergan may not occur or may be minimal, and would have a negative impact on our revenue potential and harm our business.

In November 2012, we entered into a license agreement with Allergan pursuant to which we granted Allergan a right to develop and commercialize NAMZARIC in the United States. Under that agreement, we began to receive royalties from Allergan on the net sales of NAMZARIC, starting in May 2020. If for any reason Allergan fails to successfully commercialize NAMZARIC, including due to the impact of the COVID-19 pandemic, on which we are eligible to receive royalties in the low double digits to mid-teens, we may not receive such future royalties or receive minimal amounts, and our business may be harmed. Even if we do receive royalties, based on recent trends of NAMZARIC net sales, we expect the tiered royalty to be in the low double digits through the term of the agreement.

We are the subject of litigation claiming violation of Federal and state false claims acts in connection with the commercialization of NAMENDA XR and NAMZARIC by Allergan, which may have a material and negative impact on our business.

On April 1, 2019, we were served with a complaint against us and several Allergan entities alleging violations of Federal and state false claims acts (“FCA”) in connection with the commercialization of NAMENDA XR and NAMZARIC by Allergan, as further described in Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report. The complaint alleges that patents held by Allergan and us covering NAMENDA XR and NAMZARIC were procured through fraud on the United States Patent and Trademark Office and that these patents were asserted against potential generic

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manufacturers of NAMENDA XR and NAMZARIC to prevent the generic manufacturers from entering the market, thereby wrongfully excluding generic competition resulting in artificially high price being charged to government payors. The complaint includes a claim for damages of “potentially more than $2.5 billion dollars,” treble damages and statutory penalties. We are in the early stages of this litigation. Defending this litigation may be costly, divert time and attention of our management from the conduct of our business, and if we are unable to prevail in this litigation it may result in substantial damages, each of which could have a material and negative impact on our business.

Risks related to our financial condition and need for additional capital

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

Our quarterly and annual operating results have fluctuated significantly, and we expect may fluctuate significantly in the future, particularly in light of the COVID-19 pandemic and the effect that it is having on patient demand and the economy as a whole, which makes it difficult for us to predict our future operating results. Any future revenue will depend on our ability to market and sell GOCOVRI, OSMOLEX ER, any product candidate, the payment of royalties to us from Allergan under terms of our licensing agreement regarding NAMZARIC, or the establishment of potential future collaboration and license agreements, if any, and the achievement of any upfront or milestone payments provided thereunder. Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including:

•uncertainties related to, and the duration of, the COVID-19 pandemic;

•the level of demand for our products, which may vary significantly as they are launched and compete for position in the marketplace;

•pricing and reimbursement policies with respect to GOCOVRI, OSMOLEX ER, and any product candidate, if approved, and the competitive response from existing and potential future therapeutic approaches that compete with our products and product candidate;

•the cost of manufacturing our products and any product candidate, which may vary due to a number of factors, including the terms of our agreements with contract manufacturing organizations, or CMOs;

•the timing, cost, level of investment, and success or failure of research and development activities relating to our products and any product candidate, which may change from time to time;

•expenditures that we may incur to acquire and develop additional product candidates and technologies;

•the timing and success or failure of clinical studies for competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners;

•the timing and magnitude of upfront and milestone payments under any potential future collaboration and licensing agreements;

•future accounting pronouncements or changes in our accounting policies; and

•changing or volatile U.S., European, and global economic environments, especially as a result of the COVID-19 pandemic.

The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated operating results and/or earnings guidance that we may provide.

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If we do not have adequate funds to cover all of our development and commercial activities, we may have to raise additional capital or curtail or cease operations.

We began to commercialize GOCOVRI for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, in January 2018, and it will require substantial funds to continue to commercialize GOCOVRI. In addition, funds are required for the continued operation of our business. We have entered into a Sales Agreement with Cowen and Company, LLC under which we may offer and sell our common stock having aggregate sales proceeds of up to $50 million from time to time through Cowen and Company, LLC as our sales agent. As of December 31, 2020, we had issued 217,403 shares of common stock and raised net proceeds of $1.0 million under this facility. Subsequent to December 31, 2020, and through February 16, 2021, we issued an additional 1,335,896 shares of common stock under the sales agreement and raised net proceeds of approximately $7.2 million. As of December 31, 2020, we had approximately $83.4 million in cash, cash equivalents, and investments. We believe that our available cash, cash equivalents, and investments will be sufficient to fund our anticipated level of operations for at least the next 12 months, but there can be no assurance that this will be the case, especially in light of the uncertainties related to, and the duration of, the COVID-19 pandemic.

We have financed our operations primarily through proceeds from our license agreement with Allergan, public and private equity offerings, our royalty-backed loan agreement (“Royalty-Backed Loan”) with HealthCare Royalty Partners III, L.P. (“HCR”), since 2017 with sales of GOCOVRI, and, to a lesser extent, government grants, venture debt, and benefits from tax credits made available under a federal stimulus program supporting drug development. We anticipate that our cash requirements will be substantial as we:

•commercialize GOCOVRI, including distribution, marketing, and sales capabilities;

•manufacture GOCOVRI for commercial use;

•investigate ADS-5102 in preclinical and clinical trials for potentially other indications;

•seek regulatory approvals for our products and any product candidates that successfully complete clinical studies;

•continue the research, development, and manufacture of our current products and product candidate; and

•seek to discover or in-license additional product candidates.

If we do not have adequate funds to support these activities, our business opportunities could be hindered.

If we need additional funds to operate our business and if we cannot raise additional capital when needed, or if additional capital is not available to us on favorable terms, our stockholders may be adversely affected or our business may be harmed.

If we need additional funds to support our business and additional funding is not available on favorable terms or at all, we may need to delay or reduce the scope of our research and clinical development programs or commercialization efforts. We do not have any committed external source of funds or other support for our development efforts. We expect to finance future cash needs through a combination of public or private equity offerings, debt financings, royalty financings, collaborations, strategic alliances, licensing arrangements, asset sales, and other marketing and distribution arrangements. The trading prices for our common stock, as well as the broader equity and debt markets, have been highly volatile since the advent of the COVID-19 pandemic. Additional financing may not be available to us when we need it or it may not be available on favorable terms. If we raise additional capital through debt financings, royalty financings, collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our products and product candidate, technologies, future revenue streams, or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, in addition to the repayment of principal and interest on negotiated terms, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend one or more of our clinical studies or research and development programs or our commercialization efforts.

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We have outstanding debt backed by three of our principal assets, GOCOVRI, OSMOLEX ER, and royalties we may receive on NAMZARIC, and failure by us or our royalty subsidiary to fulfill our obligations under the applicable loan agreements may cause the repayment obligations to accelerate.

In May 2017, we, through a newly formed wholly-owned subsidiary, entered into a Royalty-Backed Loan with HCR, pursuant to which we initially borrowed $35 million and then borrowed an additional $65 million upon FDA approval and FDA’s recognition in the Orange Book of the seven-year orphan drug exclusivity that GOCOVRI earned upon approval in August 2017, for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications. Certain key terms of the Royalty-Backed Loan were amended, with an effectiveness date of January 4, 2021.

Effective with the January 4, 2021 amendment, interest and principal on the loan are payable from the proceeds of royalty on U.S. net sales of GOCOVRI, OSMOLEX ER, and up to $15 million of our annual royalties from Allergan on U.S. net sales of NAMZARIC. The HCR notes mature in March 2027, if not earlier repaid.

The loan is secured with rights to GOCOVRI (ADS-5102), OSMOLEX ER, and rights to certain payment amounts on NAMZARIC and the loan documents further provide for assignment into our subsidiary holding these rights to any future intellectual property, licenses, assets and agreements with respect to the manufacture, development, supply, distribution, sale and commercialization of GOCOVRI and OSMOLEX ER. The loan documents contain customary events of default permitting HCR to accelerate and require mandatory prepayment of outstanding principal and interest, including: failure to timely pay principal and interest when due and payable; failure to perform specified covenants with respect to maintenance of the collateral and prohibitions on liens with respect to the collateral; limitations on payments of dividends, additional loans, acquisition or merger transactions not in accordance with the arrangement. Upon the occurrence, an event of default under the loan documents, we could be required to prepay the entire loan and, if we are not able to do so, we may lose control over certain rights and payments to GOCOVRI, OSMOLEX ER, and royalty payments with respect to NAMZARIC, either of which would seriously harm our business.

General Risk Factors

We are and in the future may be subject to securities litigation, which may be expensive and could divert management attention.

Our share price is volatile and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We have become the target of this type of litigation and in May 2019 a putative class action lawsuit alleging violations of the federal securities laws was filed against us and certain of our current and former directors and officers alleging violations of the securities laws by us and certain of our current and former directors and officers in connection with our January 2018 secondary public offering of common stock. In addition, in December 2019, another putative class action lawsuit was filed against us and certain former officers alleging violations of the Securities Act of 1934. For more information, please see Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report. Lawsuits such as this one can be expensive to defend and could divert our management’s attention from the conduct of our business, which could have an adverse effect on our business.

Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

Our stock price has fluctuated in the past and may be volatile in the future. The stock market in general and the market for securities of pharmaceutical and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investments in our stock.

In addition, the clinical development stage of our operations may make it difficult for investors to evaluate the success of our business to date and to assess our future viability. The market price for our common stock may be influenced by many factors, including:

•uncertainties related to, and the duration of, the COVID-19 pandemic;

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•our success in commercializing GOCOVRI for the treatment of OFF and dyskinesia in patients with Parkinson’s disease;

•the availability of reimbursement by third-party payers at acceptable levels, or at all, for GOCOVRI;

•the success of competitive products or technologies;

•results of clinical studies of product candidates we may choose to develop or those of our competitors;

•introductions and announcements of new products and product candidates by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements;

•actions taken by regulatory agencies with respect to our or our competitors’ products, product candidates, clinical studies, manufacturing process, or sales and marketing terms;

•variations in our financial results or those of companies that are perceived to be comparable to us;

•our revenue performance, both in absolute terms and relative to analyst and shareholder expectations;

•the success of our efforts to acquire or in-license additional products or product candidates;

•developments concerning our collaborations, including but not limited to those with our sources of manufacturing and our commercialization partners;

•announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, or capital commitments;

•developments or disputes concerning patents or other proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our current or future products;

•our ability or inability to raise additional capital and the terms on which we raise it; 

•the recruitment or departure of key personnel;

•changes in the structure of healthcare reimbursement systems;

•regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our current or future products;

•market conditions in the pharmaceutical and biotechnology sectors;

•actual or anticipated changes in revenue forecasts, earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally;

•trading volume of our common stock;

•sales of our common stock by us or our stockholders;

•general economic, industry, and market conditions; and

•the other risks described in this “Risk Factors” section.

These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Additionally, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations, and growth prospects.

Our ability to use net operating losses to offset future taxable income may be subject to limitations.

As of December 31, 2020, we had federal and, subject to the recent California franchise tax law change affecting California state net operating losses mentioned below, state net operating loss carryforwards of $375.1 million and $345.2 million, respectively. Portions of the federal net operating loss carryforwards will begin to expire, if not utilized, beginning in 2024, and the state net operating loss carryforward begins expiring in 2028. Portions of these net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the current federal income tax law, federal net operating losses incurred in taxable years beginning after December 31, 2017,

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and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses in taxable years beginning after December 31, 2020, is limited. It is still uncertain if and to what extent various states will conform to the changes in federal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. It is possible that we have experienced an ownership change. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, including a recent California franchise tax law change limiting the usability of California state net operating losses to offset taxable income in tax years beginning after 2019 and before 2023.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations have been affected by the COVID-19 pandemic and could be subject to earthquakes, power shortages, telecommunications failures, floods, hurricanes, fires, extreme weather conditions, other medical epidemics, and other natural or manmade disasters or business interruptions. The duration of the COVID-19 pandemic and the occurrence of any of these other business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our corporate headquarters is located in California and certain clinical sites for our product candidates, operations of our existing and future partners, and suppliers are or will be located near major earthquake faults and fire zones. The ultimate impact on us, our significant partners, suppliers, and our general infrastructure of being located near major earthquake faults and fire zones and being consolidated in certain geographical areas is unknown, but our operations and financial condition could suffer in the event of a major earthquake, fire, or other natural or manmade disaster.

Any future operations or business arrangements with entities outside the United States present risks that could materially adversely affect our business.

If we obtain approval to commercialize any approved products or utilize CMOs outside of the United States, a variety of risks associated with international operations could materially adversely affect our business. If any product or product candidates that we may develop are approved for commercialization outside the United States, we will be subject to additional risks related to entering into international business relationships, including:

•impacts of the COVID-19 pandemic;

•different regulatory requirements for drug approvals in foreign countries;

•reduced protection for intellectual property rights;

•unexpected changes in tariffs, trade barriers, and regulatory requirements;

•different payer reimbursement regimes, governmental payers or patient self-pay systems and price controls;

•economic weakness, including inflation or political instability in particular foreign economies and markets;

•difficulties in assuring compliance with foreign corrupt practices laws;

•compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad;

•foreign taxes, including withholding of payroll taxes;

•foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

•workforce uncertainty in countries where labor unrest is more common than in the United States;

•compliance with privacy laws;

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•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

•business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters, including earthquakes, hurricanes or typhoons, floods, and fires.

Our internal computer systems, or those of our CROs, CMOs, or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our business.

Despite the implementation of security measures, our internal computer systems and those of our CROs, CMOs, specialty pharmacy, distributors, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war, and telecommunication and electrical failures. While we are not aware of any material system failure, accident, or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs or commercialization efforts. For example, the loss of clinical study data from completed or ongoing clinical studies for any of our products or product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. While we back-up our internal computer systems periodically and store such data off-site or in the cloud, we can offer no assurance that such off-site storage of data will allow us to continue our business without interruptions to our operations, which could result in a material disruption of our drug development programs or commercialization efforts. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our products and product candidates could be delayed.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay, or prevent a merger, acquisition, or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions include that:

•our board of directors is divided into three classes with staggered three-year terms, which may delay or prevent a change of our management or a change in control;

•our board of directors has the right to change the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

•our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock would not be able to take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by the board of directors or the chairman of the board and chief executive officer;

•our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

•stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and

•our board of directors may issue, without stockholder approval, shares of undesignated preferred stock, and the ability to issue undesignated preferred stock makes it possible for our board of directors to issue

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preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.  PROPERTIES

We lease approximately 37,626 square feet of office space in Emeryville, California, under an operating lease that expires April 30, 2025. We believe that our existing facility will be sufficient for our needs for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

For information regarding legal proceedings, refer to Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report, which information is incorporated by reference here.

ITEM 4.  MINE SAFETY DISCLOSURES

The disclosure required by this item is not applicable.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on the Nasdaq Global Market under the symbol “ADMS”.

Holders

As of February 16, 2021, there were 17 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Dividends

We have never declared or paid, and do not anticipate declaring, or paying in the foreseeable future, any cash dividends on our capital stock. Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our operating results, financial conditions, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

ITEM 6.  SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this report. This discussion and other parts of this report contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions, and the expected impact that the COVID-19 pandemic will continue to have on our business. Our actual results could differ materially from those discussed in these forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled “Risk factors.”

This discussion and analysis generally covers our financial condition and results of operations for the year ended December 31, 2020, as compared to the year ended December 31, 2019. For a discussion of the year ended December 31, 2019, as compared to the year ended December 31, 2018, refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the United States Securities and Exchange Commission on February 25, 2020.

Overview

At Adamas Pharmaceuticals, Inc., our mission is to make everyday life significantly better for people affected by neurological diseases. We are a fully integrated company focused on growing a portfolio of therapies to address a range of neurological diseases. With commercial and partnered medicines, we are focused on supporting our patient community and growing a portfolio of differentiated neurological therapies. We combine our proven expertise in discovery, development and commercialization with our passion for improving lives to deliver innovative medicines to reduce the burden of neurological diseases on patients, caregivers, and society. Currently, we are primarily focused on the commercialization of GOCOVRI in the United States. Additionally, we are integrating OSMOLEX ER, which we acquired on January 4, 2021, and are commercializing the product in the United States.

GOCOVRI® (amantadine) extended release capsules is the first and only FDA-approved medicine indicated for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. GOCOVRI was approved for marketing by the U.S. Food and Drug Administration, or FDA, on August 24, 2017 for its initial indication to treat dyskinesia. On February 1, 2021, we announced we had received marketing authorization from the FDA for a supplemental New Drug Application (sNDA) for GOCOVRI, gaining a second indication for the product as an adjunctive treatment for OFF episodes. The recent update to the label indication makes GOCOVRI the only medicine clinically proven and approved to reduce both OFF and dyskinesia in Parkinson’s patients taking a levodopa-based medication, resulting in a clinically meaningful increase in good ON time. On June 17, 2020, we announced that we had discontinued further development of (ADS-5102) a potential additional indication for GOCOVRI for the treatment of walking impairment in patients with multiple sclerosis (“MSW”).

OSMOLEX ER® (amantadine) extended release tablets, was approved by the FDA on February 16, 2018, for the treatment of Parkinson’s disease and drug-induced extrapyramidal reactions in adult patients. On January 4, 2021, we acquired the global rights to OSMOLEX ER from Osmotica Pharmaceuticals US LLC, a subsidiary of Osmotica Pharmaceuticals plc.

NAMZARIC® (memantine hydrochloride extended release and donepezil hydrochloride) capsules for the treatment of moderate to severe dementia of an Alzheimer’s type, is marketed in the United States by Allergan plc under an exclusive license agreement between us and Forest Laboratories Holdings Limited (“Forest”), an indirect, wholly-owned subsidiary of Allergan plc (collectively, “Allergan”). We began recognizing royalty revenue on net sales of

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NAMZARIC in May 2020.

Going forward, we intend to expand our product pipeline by acquiring, through license or otherwise, additional candidates for research and development and potential commercialization.

On December 1, 2020, we entered into a purchase agreement (the “Asset Purchase Agreement”) with Osmotica pursuant to which we acquired the global rights to OSMOLEX ER and existing inventory for $7.5 million and the assumption of certain liabilities. The Asset Purchase Agreement closed on January 4, 2021.

On December 1, 2020, we entered into an agreement with HealthCare Royalty Partners III, L.P. (“HCR”) to amend certain key terms of our royalty-backed loan agreement (“Royalty-Backed Loan”) with HCR, to be effective upon the closing of the Asset Purchase Agreement with Osmotica which subsequently closed on January 4, 2021. For further discussion of the amended terms of the Royalty-Backed Loan, see “Note 16 - Subsequent Events” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

On January 2, 2020, we announced we had granted Sandoz Inc. a license for its generic version of GOCOVRI as of March 4, 2030, which is over 12 years post GOCOVRI launch, or earlier in certain circumstances typical for such agreements. The agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period ending July 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year ended December 31, 2019. On February 1, 2021, we announced we had granted Zydus a license for its generic version of GOCOVRI as of March 4, 2030. The agreement has similar terms as the Sandoz agreement, including the potential license acceleration provision. With these licenses granted to Sandoz and Zydus, the first filer ANDA challenges for GOCOVRI’s two available strengths have now been settled.

Impact of the COVID-19 pandemic on our company

The outbreak of the novel Coronavirus (“COVID-19”), which is understood to have begun in December 2019, continues to grow both within the U.S. and globally. The World Health Organization has declared the outbreak of COVID-19 to be a pandemic, and the U.S. federal government has declared it a national emergency.

How we are operating in the current COVID-19 shutdown

We are committed to the health and safety of our employees and their families and doing our part to slow the community spread of COVID-19. In mid-March, we implemented a number of actions, including a work-from-home policy for all our employees, allowing for flexible work schedules, and restrictions on in-person meetings. We are very proud of our entire team as we transitioned swiftly to working remotely. We are following the guidelines of the Centers for Disease Control and other federal, state and local authorities and will continue to assess when it is appropriate for our team to return to normal work practices.

Impact on our ability to sell GOCOVRI

We continue to see stable GOCOVRI prescription refill rates due to our continued strong patient persistence, adequate supply of GOCOVRI, and patient access to GOCOVRI through distribution from our specialty pharmacy directly to a patient’s home. However, we have seen that new prescription rates have been impacted due to several factors, including: a fluid environment in which office practices are changing frequently including many healthcare providers have temporarily closed their offices or are restricting patient visits; patients are postponing visits to healthcare provider facilities; and our sales force has moved to a mix of virtual and live interactions with healthcare providers, adapting to the local environment. While we believe this initial decline and continued impact on new prescriptions to be temporary, the duration and severity is dependent on future developments, which are highly uncertain and cannot be predicted with confidence.

Impact on our supply chain

Our GOCOVRI supply chain remains robust and thus far we have observed no disruptions to our inventory on hand or our planned manufacturing schedule. In October 2020, the FDA approved our sNDA for AMSA S.p.A. as a secondary supplier of active pharmaceutical ingredient for GOCOVRI. We have an adequate supply of GOCOVRI to address patients’ needs into mid-2022. Based on current information, we believe that our partners in our supply chain have been and will continue to operate during the current COVID-19 outbreak.

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Impact on our financial condition and capital resources

The extent of the impact of COVID-19 on our business, financial results, liquidity and cash flows will depend largely on future developments, including new information that may emerge concerning the severity and duration of actions taken to contain or prevent further spread. With already imposed shelter-at-home orders in place, we have observed widespread closure of clinics, and cancellation or rescheduling of patient appointments have been combined with restriction of access to sales representatives in some institutions and a marked increase in telemedicine consultations that may result in further sales reductions. In light of restrictions on travel and in-person meetings, we have also experienced cost reductions related to the transition to virtual formats and other travel related costs, in addition to other certain cost management activities. As of December 31, 2020, we had cash, cash equivalents, and investments of $83.4 million.

Financial operations overview

Revenue

The following table summarizes the sources of our revenue for the years ended December 31, 2020 and 2019 (in thousands):

	Years Ended December 31,
	2020		2019
Product sales	$	71,166	$	54,637
Royalty revenue	3,295		—
Total revenues	$	74,461	$	54,637

Product sales consist of sales of GOCOVRI, which was approved by the FDA on August 24, 2017. We began commercial sales of GOCOVRI in the fourth quarter of 2017, and initiated the full commercial launch in January 2018.

Royalty revenue consists of royalties from Allergan for sales of NAMZARIC in the United States, which we began to recognize in May 2020.

Prior to the generation of product sales from GOCOVRI, our revenue had been generated primarily from payments under our license agreement with Allergan for non-refundable upfront license payments, milestone payments and reimbursements for research and development expenses for full-time equivalent employees assigned to the license agreement. There are no further milestone payments to be earned under our license agreement with Allergan, and we expect reimbursements for full-time equivalents assigned to the license agreement to be inconsequential in future periods. Beginning in May 2020, we began to recognize tiered royalties from Allergan in the low double digits to mid-teens, as a percent of net sales of NAMZARIC in the United States. Based on recent trends of NAMZARIC net sales, we expect the tiered royalty to be in the low double digits through the term of the agreement, but is eliminated in any quarter where there is significant competition from generics. Based on Allergan’s and our current settlement agreements with the NAMZARIC ANDA filers to date, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer’s generic version of NAMZARIC is January 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest license date have the option to launch an authorized generic version of NAMZARIC beginning on January 1, 2026 instead of launching their own generic version of NAMZARIC on January 1, 2025. For further discussion of NAMZARIC ANDA filers, see Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

Cost of product sales

Cost of product sales consists primarily of direct and indirect costs related to the manufacturing of GOCOVRI products sold, including third-party manufacturing costs, packaging services, freight, allocation of overhead costs, and inventory adjustment charges. We began capitalizing inventory manufactured at the FDA approved locations upon FDA approval of GOCOVRI and upon FDA approval of a supplemental NDA for a second manufacturing site with our current third-party manufacturer. We recorded inventory acquired prior to the regulatory approvals as research and development expense.

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Research and development expenses

Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our wholly-owned product candidates. We recognize all research and development costs as they are incurred.

Research and development expenses consist of:

•fees paid to clinical investigators, clinical trial sites, consultants, and vendors, including contract research organizations, or CROs, in conjunction with implementing, conducting, and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as for investigator grants, patient screening fees, laboratory work, and statistical compilation and analysis;

•expenses related to production of clinical supplies, including fees paid to contract manufacturing organizations, or CMOs;

•expenses related to establishment and validation of manufacturing capabilities for commercial supply;

•expenses related to the buildup of commercial supply to support commercial launch, prior to FDA approval;

•expenses related to compliance with regulatory requirements;

•other consulting fees paid to third parties; and

•employee-related expenses, which include salaries, benefits, and stock-based compensation.

The following table summarizes our research and development expenses incurred during the years ended December 31, 2020 and 2019 (in thousands):

	Years Ended December 31,
	2020		2019
GOCOVRI(1)	$	8,024	$	23,448
ADS-4101(2)	—		2,516
Other research and development expenses	1,722		4,070
Total research and development expenses	$	9,746	$	30,034

(1)Includes program costs we incurred for GOCOVRI (formerly referred to as ADS-5102) for the treatment of dyskinesia in patients with Parkinson’s disease, and ADS-5102 (GOCOVRI) for additional potential CNS indications, including for the treatment of walking impairment in patients with multiple sclerosis.

(2)We placed the ADS-4101 development program on hold during the quarter ended June 30, 2019.

The program-specific expenses summarized in the table above include costs directly attributable to our product candidates. Other research and development expenses include costs for early stage programs and costs not allocated to a specific program. We allocate benefits, stock-based compensation, and indirect costs to our product candidates on a program-specific basis, and we include these costs in the program-specific expenses. We begin to track and report program-specific expenses for early stage programs once they have been nominated and selected for further development and clinical-stage work has commenced.

Our investment in research and development activities, including the clinical development of our product candidates, has historically represented a significant portion of our total operating expenses. We have concluded the two-year Phase 3 open-label study of GOCOVRI, suspended investment in the development of ADS-4101, and completed additional analyses of the data from the INROADS trial for ADS-5102 for MSW and will not initiate further Phase 3 development. Our research and development efforts are focused on completing activities for ADS-5102 for MSW, primarily continuing the open-label extension study through the end of 2020 and publishing the data from the INROADS trial. As a result, we expect research and development costs to decrease from 2019 levels for the foreseeable future, based on this focused strategy.

The process of conducting the necessary clinical research to obtain FDA approval is costly and time consuming.

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The actual probability of success for each product candidate and clinical program may be affected by a variety of factors, including but not limited to, the quality of the product candidate, early clinical data, investment in the program, competition, manufacturing capability, and commercial viability. Furthermore, in the past we have entered into licensing arrangements with other pharmaceutical companies to develop and commercialize our product candidates, and we may enter into additional licensing arrangements or collaborations in the future. In situations in which third parties have control over the clinical development of a product candidate, the estimated completion dates are largely under the control of such third parties and not under our control. We cannot forecast with any degree of certainty which of our product candidates, if any, will be subject to future licensing or collaboration arrangements or how such arrangements would affect our development plans or capital requirements. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

Selling, general and administrative expenses, net

Selling, general and administrative expenses, net, consist primarily of personnel and related benefit costs, including stock-based compensation, facilities, professional services, insurance, public company related expenses, charitable contribution expenses, costs associated with supporting the commercialization of GOCOVRI, as well as litigation settlement charges. We anticipate our selling, general and administrative expenses will remain significant and may increase as we continue to support the commercialization of GOCOVRI.

Interest and other income, net

Interest and other income, net, consists of changes in fair value of the embedded derivative liability related to our Royalty-Backed Loan with HCR, in addition to interest received on our investments.

Interest expense

Interest expense consists of accrued interest pursuant to our Royalty-Backed Loan and amortization of debt issuance costs. Interest expense accrues using the effective interest rate method over the estimated period the debt is expected to be repaid. Interest expense over the life of the Royalty-Backed Loan includes an annual interest rate of 11% on the outstanding principal, a royalty rate of 6.25% on net sales of GOCOVRI after the principal amount is paid, and amortization of the debt discount, until a maximum aggregate repayment amount has been reached.

Critical accounting policies and significant judgments and estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. We base our estimates on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We have discussed the development, selection, and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 of our financial statements included in this Annual Report on Form 10-K, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers (“ASC606”), which we adopted on January 1, 2018, using the full retrospective transition method. We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less.

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Product sales

Our product sales in 2020 and 2019 consist solely of U.S. sales of GOCOVRI. We sell our products principally to a specialty pharmacy and certain specialty distributors (each a “Customer” or collectively our “Customers”). The Customer subsequently dispenses product directly to a patient. In addition, except for limited circumstances, the Customer has no right of product return to us. We recognize revenue from product sales when the Customer obtains control of our product, which occurs at a point in time, typically upon delivery to the Customer. We record revenue from product sales after considering the impact of various forms of variable consideration, which include Medicare Part D coverage gap, rebates, chargebacks, co-payment assistance, distribution fees, and product returns. Each of these items of variable consideration we record at the time of revenue recognition and requires significant estimates, judgment and information obtained from external sources. If management’s estimates differ from actual results, we will record adjustments that would affect product sales in the period of adjustment. For a full description of our various forms of variable consideration, see Revenue Recognition in “Note 2 - Basis of Presentation and Summary of Significant Accounting Policies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report. Medicare Part D coverage gap, rebates and chargebacks require the most complex and significant judgment and are described further below.

Medicare Part D coverage gap: Medicare Part D coverage gap is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States, which mandates manufacturers to fund a portion of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Funding of the coverage gap is generally invoiced and paid in arrears. We estimate the Medicare Part D coverage gap using the expected-value method based on an amount expected to be incurred for the current quarter’s activity based on expected utilization, plus an accrual balance for known prior quarters and is adjusted quarterly based on actual experience. We estimate for expected utilization of the Medicare Part D coverage gap based on data received from the specialty pharmacy and historical utilization.

Rebates: Rebates include discounts under the Medicaid Drug Rebate Program, TRICARE Retail Pharmacy Refunds Program (TRICARE), and Managed Care contracts. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or statutory requirements with benefit providers. We estimate rebates based on statutory discount rates and expected utilization. We estimate for expected utilization of rebates based on data received from the specialty pharmacy and specialty distributor. We use the expected-value method for estimating rebates and we adjust the estimates quarterly to reflect actual experience.

Chargebacks: Chargebacks are discounts that occur when Healthcare Providers purchase directly from our Customer. Healthcare Providers, which currently consist of Public Health Service institutions, non-profit clinics, government entities, group purchasing organizations, and health maintenance organizations, generally purchase the product at a discounted price. Our Customer, in turn, charges back to us the difference between the price initially paid by our Customer and the discounted price paid by the Healthcare Providers to our Customer. We base the allowance for chargebacks on an estimate of sales through to Healthcare Providers from our Customer.

The following table summarizes activity with respect to our sales allowances and accruals for the years ended December 31, 2020 and 2019 (in thousands):

	Government and other rebates, and chargebacks		Co-payment assistance, data fees, cash discounts and returns		Total
Balances at December 31, 2018	$	924	$	242	$	1,166
Provision related to current period sales	5,546		2,579		8,125
Credit or payments made during the period	(4,832)		(2,444)		(7,276)
Balances at December 31, 2019	1,638		377		2,015
Provision related to current period sales	9,073		3,294		12,367
Credit or payments made during the period	(8,223)		(3,242)		(11,465)
Adjustment related to prior period sales	(829)		(115)		(944)
Balances at December 31, 2020	$	1,659	$	314	$	1,973

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Stock-Based Compensation

We account for stock-based compensation of restricted stock units granted to employees based on the closing price of our common stock on the date of grant. We account for stock-based compensation of stock options and for employee stock purchase plan shares by estimating the fair value using the Black-Scholes option-pricing model. We recognize and amortize the fair value of stock-based awards, net of estimated forfeitures, over the applicable vesting period.

The Black-Scholes option pricing model requires the use of certain subjective assumptions. The most significant subjective assumptions are management’s estimates of the expected volatility and the expected term of the award. Judgment is also required in estimating the amount of share-based awards that we expect to be forfeited.

Long-Term Debt

Long-term debt consists of our Royalty-Backed Loan with HCR, accounted for as a debt financing arrangement. We accrue interest expense using the effective interest rate method over the estimated period we expect the debt to be repaid. We must make certain assumptions and estimates, including future royalties and net product sales, in determining the expected repayment term, amortization period of the debt discount, and accretion of interest expense, as well as the classification between current and long-term portions. We will base payment amounts to HCR on actual royalties and net product sales. We periodically assess our assumptions and estimates and adjust the liabilities accordingly.

Embedded Derivatives Related to Debt Instruments

We evaluate and value embedded derivatives that are required to be bifurcated from their host contract separately from the debt instrument. Under our loan agreement with HCR, upon the occurrence of a default or a change in control, we may be required to make mandatory prepayments of the borrowings. The prepayment premium is considered an embedded derivative, as the holder of the loans may exercise the option to require prepayment by us. Further, in the event of a regulatory change that results in a material adverse effect on HCR’s rate of return, we shall pay directly to HCR an amount that compensates HCR for such reduction. We remeasure the embedded derivatives each reporting period and report changes in the estimated fair value as gains or losses in interest and other income, net, in our consolidated statements of operations.

The model used in valuing the embedded derivative as a result of a change in control requires the use of significant estimates and assumptions including but not limited to: 1) expected cash flows we expect to receive on U.S. net sales of GOCOVRI and on royalties from Allergan on U.S. net sales of NAMZARIC; 2) our risk adjusted discount rates; and 3) the probability of a change in control occurring during the term of the note based on the percentage of similar companies that were acquired over the previous five year period. We evaluated the embedded derivative value as a result of an event of default and the value as a result of increased costs due to a regulatory change and considered both to have no material value based on current assessment of probability, but could become material in future periods if a specified event of default or regulatory change became more probable than is currently estimated.

Results of operations

Fluctuations in Operating Results

Our results of operations have fluctuated from period to period in the past and, especially in light of the COVID-19 pandemic, are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the impact on our operations as a result of the COVID-19 pandemic, fluctuations in product sales due to variances in the number of paid prescriptions from period to period, conversions from our free drug trial program to paid prescriptions, and fluctuations in our Medicare Part D Coverage Gap liability and the volume of purchases eligible for government mandated discounts and rebates, as well as changes in discount percentages that may be impacted by potential future price increases and other factors. Further, we expect the timing of expenditures related to our commercial activities associated with GOCOVRI to vary from period to period, including those associated with the label revision for GOCOVRI to include OFF episodes, and potential development of additional product candidates. Due to these fluctuations, we believe that the period to period comparisons of our operating results are not necessarily a good indication of our future performance.

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Comparison of the years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019 (in thousands, except percentages):

	Years Ended December 31,				Increase/		% Increase/
	2020		2019		(Decrease)		(Decrease)
Product sales	$	71,166	$	54,637	$	16,529	30	%
Royalty revenue	3,295		—		3,295		NM
Cost of product sales	2,038		2,469		(431)		(17)	%
Research and development expenses	9,746		30,034		(20,288)		(68)	%
Selling, general and administrative expenses, net	106,841		114,369		(7,528)		(7)	%
Interest and other income, net	748		2,093		(1,345)		(64)	%
Interest expense	13,987		15,044		(1,057)		(7)	%

NM - Not meaningful.

The following table summarizes the approximate number of total GOCOVRI paid prescriptions for the years ended December 31, 2020 and 2019:

	Years Ended December 31,		Increase	% Increase
	2020	2019
Total GOCOVRI Paid Prescriptions	31,070	25,780	5,290	21	%

Strong patient persistence of 45%-50% at 12 months continued in the fourth quarter of 2020. In addition to total paid prescriptions, we monitor new paid prescriptions as a key performance indicator for our business and starting with the first quarter of 2020 are reporting this metric. The following table summarizes the approximate number of total GOCOVRI paid prescriptions and approximate number of new GOCOVRI paid prescriptions for each of the quarterly periods presented:

	Three months ended
	December 31	September 30	June 30	March 31
Total GOCOVRI paid prescriptions:
2020(1)	8,165	7,785	7,915	7,205
2019	7,160	6,640	6,160	5,820
New GOCOVRI paid prescriptions:
2020	510	430	370	500

(1)Total GOCOVRI paid prescriptions in 2020 for the three months ended September 30, June 30, and March 31 have been adjusted from previously reported amounts of 7,930, 8,150, and 7,210, respectively, to reflect reconciled 340b dispenses through the specialty distribution channel.

Product sales

Product sales increased by $16.5 million, or 30%, to $71.2 million for the year ended December 31, 2020, from $54.6 million for the year ended December 31, 2019, due to growth in sales of GOCOVRI since its launch, in addition to a 3% price increase that went into effect in January 2020. The approximate number of total paid prescriptions increased by 5,290, or 21%, to 31,070 for the year ended December 31, 2020, from 25,780 for the year ended December 31, 2019.

Royalty revenue

Royalty revenue was $3.3 million for the year ended December 31, 2020. We began recognizing royalty revenue on net sales of NAMZARIC in May 2020 and accordingly had no royalty revenue for the year ended December 31, 2019.

Cost of product sales

Cost of product sales decreased by $0.4 million to $2.0 million, or 3% of product sales, for the year ended

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December 31, 2020, from $2.5 million, or 5% of product sales, for the year ended December 31, 2019. Included in cost of product sales for the year ended December 31, 2019 is a one-time charge related to amending our agreement with our CMO. Prior to receiving FDA approval in August 2017, we recorded all inventory costs incurred in the manufacture of GOCOVRI to be sold upon commercialization as research and development expense. As of December 31, 2020, substantially all the inventory that was previously expensed to research and development had been sold to customers. We do not expect our cost of product sales of GOCOVRI as a percentage of product sales to exceed 6% for the foreseeable future, excluding potential unknown one-time charges.

Research and development expenses

Research and development expenses decreased by $20.3 million, or 68%, to $9.7 million for the year ended December 31, 2020, from $30.0 million for the year ended December 31, 2019. The decrease in research and development expenses was mainly attributable to: decreased costs related to clinical activity for our Phase 3 study in support of ADS-5102 for the treatment of walking impairment in patients with multiple sclerosis mainly due to completion of the Phase 3 INROADS trial at the end of 2019; decreased costs related to the decision during the second quarter of 2019 to defer additional investment in the development of our product candidate ADS-4101 for the treatment of partial onset seizures in patients with epilepsy; and decreased costs related to early stage programs. Included in research and development expenses was stock-based compensation expense, which was $0.4 million compared to $1.7 million for the years ended December 31, 2020 and 2019, respectively.

Selling, general and administrative expenses, net

Selling, general and administrative expenses, net, decreased by $7.5 million, or 7%, to $106.8 million for the year ended December 31, 2020, from $114.4 million for the year ended December 31, 2019, primarily due to: decreased costs of approximately $6.6 million in personnel related costs, including stock-based compensation and other certain one-time charges in conjunction with a consulting agreement entered into during the prior year with our former Chief Executive Officer; and decreased costs of approximately $7.8 million related to legal fees, cost management activities, and other general corporate expense. The decrease for the year ended December 31, 2020 was offset in part by a one-time charge of approximately $5.0 million related to a probable loss associated with the OSMOLEX ER settlement of patent litigation, in addition to approximately $1.9 million for GOCOVRI related promotional costs, market research, and other external professional services, as compared to the same period in the prior year. Included in selling, general and administrative expenses was stock-based compensation expense, which was $6.0 million compared to $11.1 million for the years ended December 31, 2020 and 2019, respectively.

Interest and other income, net

Interest and other income, net, decreased by $1.3 million, or 64%, to $0.7 million for the year ended December 31, 2020, from $2.1 million for the year ended December 31, 2019. The decrease in interest and other income, net, was primarily driven by lower interest income earned on lower cash and investment balances, offset in part by a change in fair value of the embedded derivative liability related to our Royalty-Backed Loan with HCR, which was $0.2 million compared to $0.8 million for the years ended December 31, 2020 and 2019, respectively.

Interest expense

Interest expense decreased by $1.1 million, or 7%, to $14.0 million for the year ended December 31, 2020, compared to $15.0 million in the year ended December 31, 2019. The decrease in interest expense was mainly related to a lower estimated effective interest rate on our Royalty-Backed Loan with HCR, offset in part by a higher principal balance.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash, cash equivalents, and investments, which totaled $83.4 million and $132.6 million at December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $505.3 million.

Prior to 2018, we raised an aggregate of approximately $202.3 million in sales of equity securities and entered into a Royalty-Backed Loan with HCR, whereby we borrowed a total of $100.0 million. As of December 31, 2020, the total remaining payment obligation of the Royalty-Backed Loan was $179.2 million. During the last three fiscal years,

54

we have funded our operations primarily through sales of GOCOVRI, through sales of our common stock, and to a lesser extent through royalties received on net sales of NAMZARIC. We made GOCOVRI available for physician and patient use in the fourth quarter of 2017, with a full commercial launch in January 2018. Prior to the generation of revenue from GOCOVRI, we had not generated any commercial revenue from the sale of our products. In January 2018, we completed a follow-on public offering of our common stock from which proceeds raised were approximately $134.3 million, net of underwriting discounts, commissions, and offering-related transaction costs from the sale of 3,450,000 shares of common stock. In November 2019, we entered into a sales agreement with Cowen and Company, LLC, pursuant to which we may, from time to time, issue and sell shares of common stock having an aggregate offering value of up to $50.0 million. As of December 31, 2020, we had issued 217,403 shares of common stock and raised net proceeds of $1.0 million under the sales agreement. Subsequent to December 31, 2020, and through February 16, 2021, we issued an additional 1,335,896 shares of common stock under the sales agreement and raised net proceeds of approximately $7.2 million. Beginning in May 2020, we began to recognize tiered royalties from Allergan in the low double digits to mid-teens, as a percent of net sales of NAMZARIC in the United States. As of December 31, 2020, we had non-cancelable purchase commitments of $2.4 million due within one year.

We believe our existing cash, cash equivalents, and investments at December 31, 2020 will be sufficient to fund our projected operating requirements, including continued commercialization of GOCOVRI for the treatment of OFF and dyskinesia in patients with Parkinson’s disease and operations related to completing activities for ADS-5102 in MSW, for at least 12 months from the issuance of this annual report on Form 10-K. However, it is possible that we will not achieve the progress that we expect, because revenues from GOCOVRI may be less than anticipated, especially in light of the current COVID-19 pandemic, and the actual costs and timing of drug development, particularly clinical studies, and regulatory approvals are difficult to predict, subject to substantial risks and delays, and often vary depending on the particular indication and development strategy. The duration and severity of the COVID-19 pandemic is unknown and makes projecting the outcome of future developments highly uncertain and cannot be predicted with confidence. Moreover, the costs associated with commercializing drugs are high and market acceptance is uncertain.

We expect to incur substantial expenses and operating losses for the foreseeable future. We expect to continue significant spending in connection with the continued commercialization of GOCOVRI for the treatment of OFF and dyskinesia in patients with Parkinson’s disease, OSMOLEX activities, and potential development of additional product candidates. To continue these activities, we may decide to raise additional funds through a combination of public equity offerings, debt financings, royalty financings, collaborations, strategic alliances, licensing arrangements, asset sales, and other marketing and distribution arrangements. Sufficient additional funding may not be available on acceptable terms, or at all, especially as a result of the economic downturn occurring and expected to continue as a result of the actions taken to contain the spread of COVID-19. If adequate funds are not available in the future, we may need to delay, reduce the scope of, or put on hold our clinical studies, research and development programs, or commercialization efforts.

The following table summarizes our cash flows for the periods indicated (in thousands):

	Years Ended December 31,
	2020		2019
Net cash (used in) provided by:
Operating activities	$	(50,708)	$	(80,779)
Investing activities	54,940		88,863
Financing activities	1,654		1,085
Net increase (decrease) in cash and cash equivalents	$	5,886	$	9,169

Net Cash Used In Operating Activities

Net cash used in operating activities was $50.7 million for the year ended December 31, 2020 and consisted primarily of our net loss of $57.4 million less non-cash adjustments of $21.9 million, mainly for accretion of interest expense of $14.0 million and stock-based compensation of $6.4 million, in addition to payments related to our Royalty-Backed Loan with HCR of $11.7 million, and changes to our assets and liabilities of $3.5 million due to timing of payments in the ordinary course of business.

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Net cash used in operating activities was $80.8 million for the year ended December 31, 2019 and consisted primarily of our net loss of $105.2 million less non-cash adjustments of $29.6 million, mainly for stock-based compensation of $12.9 million and interest expense of $15.0 million, in addition to payments related to our Royalty-Backed Loan with HCR of $6.5 million.

Net Cash Provided By Investing Activities

Net cash provided by investing activities was $54.9 million for the year ended December 31, 2020, as a result of maturities and sales of available-for-sale securities, net of purchases.

Net cash provided by investing activities was $88.9 million for the year ended December 31, 2019, primarily as a result of maturities of available-for-sale securities, net of purchases.

Net Cash Provided By Financing Activities

Net cash provided by financing activities was $1.7 million for the year ended December 31, 2020, as a result of cash proceeds of $1.0 million related to the sale of common stock under a controlled equity offering coupled with $0.6 million related to the exercise of stock options and purchases of common stock under the Employee Stock Purchase Plan (ESPP).

Net cash provided by financing activities was $1.1 million for the year ended December 31, 2019, as a result of cash proceeds related to the exercise of stock options and purchases of common stock under the ESPP.

Off-balance sheet arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities.

Contractual obligations

As a smaller reporting company, we are not required to provide the disclosure required by Item 303(a)(5) of Regulation S-K.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements, see “Note 2 - Basis of Presentation and Summary of Significant Accounting Policies” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ADAMAS PHARMACEUTICALS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	58
Consolidated Financial Statements:
Consolidated Balance Sheets	60
Consolidated Statements of Operations	61
Consolidated Statements of Comprehensive Loss	62
Consolidated Statements of Stockholders’ Equity (Deficit)	63
Consolidated Statements of Cash Flows	64
Notes to Consolidated Financial Statements	65

57

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Adamas Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Adamas Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Sales Deductions for the Medicare Part D Coverage Gap

As described in Notes 2 and 5 to the consolidated financial statements, revenue from product sales is recorded after considering the impact of the variable consideration, including mandated payments to fund a portion of the Medicare Part D coverage gap, which can decrease the transaction price, at the time of revenue recognition. As of December 31, 2020, the liability for accrued sales deductions was $1.6 million, of which a portion related to accrued sales deductions for the Medicare Part D coverage gap. Management estimates the liability related to accrued sales deductions for the Medicare Part D coverage gap using the expected-value method based on an amount expected to be incurred for the current quarter’s activity based on expected utilization. The liability is adjusted quarterly based on actual experience.

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Management's estimate for expected utilization of the Medicare Part D coverage gap is based on data received from the specialty pharmacy and historical utilization.

The principal considerations for our determination that performing procedures relating to accrued sales deductions for the Medicare Part D coverage gap is a critical audit matter are the high degree of auditor judgment, subjectivity, and effort in performing procedures relating to accrued sales deductions due to the significant judgment by management when developing the estimate.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) obtaining an understanding of management’s process and methodology used to develop the estimate of the accrued sales deductions for the Medicare Part D coverage gap, (ii) performing retrospective comparison of actual third party invoices received subsequent to the prior and current year-end to evaluate the reasonableness of the prior and current period estimate, (iii) developing an independent estimate by utilizing third party data, (iv) comparing the independent estimate to management’s estimate, and (v) testing claims paid by the Company.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 23, 2021

We have served as the Company’s auditor since 2007.

59

ADAMAS PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,
	2020		2019
Assets
Current assets
Cash and cash equivalents	$	71,660	$	65,774
Available-for-sale securities	11,705		66,833
Accounts receivable, net	8,042		5,770
Inventory	7,294		5,267
Prepaid expenses and other current assets	13,035		6,676
Total current assets	111,736		150,320
Property and equipment, net	1,598		2,449
Operating lease right-of-use assets	6,657		8,048
Prepaid expenses and other non-current assets	38		1,341
Total assets	$	120,029	$	162,158
Liabilities and stockholders’ deficit
Current liabilities
Accounts payable	$	2,144	$	6,932
Accrued liabilities	27,164		16,117
Current portion of long-term debt	3,657		2,041
Other current liabilities	1,902		1,858
Total current liabilities	34,867		26,948
Long-term debt	126,307		125,674
Long-term portion of operating lease liabilities	6,453		8,272
Other non-current liabilities	2,378		2,157
Total liabilities	170,005		163,051
Commitments and Contingencies (Note 9)
Stockholders’ deficit
Preferred stock, $0.001 par value — 5,000,000 shares authorized, and zero shares issued and outstanding at December 31, 2020 and December 31, 2019	—		—
Common stock, $0.001 par value — 100,000,000 shares authorized, 28,866,956 and 27,964,778 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively	34		33
Additional paid-in capital	455,277		446,942
Accumulated other comprehensive income	—		16
Accumulated deficit	(505,287)		(447,884)
Total stockholders’ deficit	(49,976)		(893)
Total liabilities and stockholders’ deficit	$	120,029	$	162,158

The accompanying notes are an integral part of these consolidated financial statements.

60

ADAMAS PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years Ended December 31,
	2020		2019
Revenues:
Product sales	$	71,166	$	54,637
Royalty revenue	3,295		—
Total revenues	74,461		54,637
Costs and operating expenses:
Cost of product sales	2,038		2,469
Research and development	9,746		30,034
Selling, general and administrative, net	106,841		114,369
Total costs and operating expenses	118,625		146,872
Loss from operations	(44,164)		(92,235)
Interest and other income, net	748		2,093
Interest expense	(13,987)		(15,044)
Net loss	$	(57,403)	$	(105,186)
Net loss per share, basic and diluted	$	(2.03)	$	(3.80)
Weighted average shares used in computing net loss per share, basic and diluted	28,305		27,677

The accompanying notes are an integral part of these consolidated financial statements.

61

ADAMAS PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands) 

	Years Ended December 31,
	2020		2019
Net loss	$	(57,403)	$	(105,186)
Other comprehensive income (loss)
Reclassification of realized gain on available-for-sale securities recognized in interest and other income, net	(34)		—
Unrealized gain on available-for-sale securities	18		280
Total other comprehensive income (loss)	(16)		280
Comprehensive loss	$	(57,419)	$	(104,906)

The accompanying notes are an integral part of these consolidated financial statements.

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ADAMAS PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balances at December 31, 2018	27,434,358	$	32	$	432,815	$	(264)	$	(342,698)	$	89,885
Exercise of stock options	184,626	—		293		—		—		293
Restricted stock units vested	151,288	—		—		—		—		—
Stock issued under employee stock purchase plan	194,506	1		774		—		—		775
Other comprehensive income	—	—		—		280		—		280
Stock-based compensation	—	—		13,060		—		—		13,060
Net loss	—	—		—		—		(105,186)		(105,186)
Balances at December 31, 2019	27,964,778	$	33	$	446,942	$	16	$	(447,884)	$	(893)
Exercise of stock options	237,425	—		176		—		—		176
Restricted stock units vested	258,819	—		—		—		—		—
Stock issued under employee stock purchase plan	188,531	—		437		—		—		437
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs	217,403	1		1,040		—		—		1,041
Other comprehensive loss	—	—		—		(16)		—		(16)
Stock-based compensation	—	—		6,682		—		—		6,682
Net loss	—	—		—		—		(57,403)		(57,403)
Balances at December 31, 2020	28,866,956	$	34	$	455,277	$	—	$	(505,287)	$	(49,976)

The accompanying notes are an integral part of these consolidated financial statements.

63

ADAMAS PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2020		2019
Cash flows from operating activities
Net loss	$	(57,403)	$	(105,186)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	851		1,214
Stock-based compensation	6,431		12,852
Accretion of interest expense	13,987		15,044
Change in fair value of embedded derivative liability	221		805
Net accretion of discounts and amortization of premiums of available-for-sale securities	(135)		(1,219)
Realized gain on available-for-sale securities	(55)		—
Provision for write-down of inventory	595		884
Changes in assets and liabilities
Accrued interest of available-for-sale securities	362		50
Accounts receivable, net	(2,272)		(259)
Inventory	(2,205)		(970)
Prepaid expenses and other assets	(5,056)		1,560
Operating lease right-of-use assets	1,437		1,008
Accounts payable	(4,979)		398
Current portion of long-term debt	(11,738)		(6,450)
Long-term portion of operating lease liabilities	(1,696)		(1,188)
Accrued liabilities and other liabilities	10,947		678
Net cash used in operating activities	(50,708)		(80,779)
Cash flows from investing activities
Purchases of property and equipment	—		(18)
Purchases of available-for-sale securities	(68,936)		(93,869)
Maturities of available-for-sale securities	106,810		182,750
Sales of available-for-sale securities	17,066		—
Net cash provided by investing activities	54,940		88,863
Cash flows from financing activities
Proceeds from public offerings, net of offering costs	1,041		—
Proceeds from Paycheck Protection Program Loan	2,650		—
Repayment of Paycheck Protection Program Loan	(2,650)		—
Proceeds from issuance of common stock upon exercise of stock options	176		310
Proceeds from employee stock purchase plan	437		775
Net cash provided by financing activities	1,654		1,085
Net increase in cash and cash equivalents	5,886		9,169
Cash and cash equivalents at beginning of period	65,774		56,605
Cash and cash equivalents at end of period	$	71,660	$	65,774
Supplemental disclosure
Cash paid for interest	$	11,738	$	6,450
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease liabilities	$	46	$	9,056
Stock-based compensation capitalized in inventory	$	251	$	208

The accompanying notes are an integral part of these consolidated financial statements.

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ADAMAS PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Adamas Pharmaceuticals, Inc. (the “Company”) is a commercial-stage pharmaceutical company focused on growing a portfolio of therapies to address a range of neurological diseases. In August 2017, the U.S. Food and Drug Administration (FDA) approved GOCOVRI® (amantadine) extended release capsules, the first and only FDA-approved medication indicated for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications. In February 2021, the FDA approved a second indication for GOCOVRI for use as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. On January 4, 2021, the Company acquired the global rights to OSMOLEX ER® (amantadine) extended release tablets from Osmotica Pharmaceuticals US LLC, a subsidiary of Osmotica Pharmaceuticals plc. In November 2012, the Company granted Forest Laboratories Holdings Limited “Forest”, an indirect wholly-owned subsidiary of Allergan plc (collectively “Allergan”) an exclusive license, with right to sublicense, certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. In connection with these rights, Allergan markets and sells NAMZARIC® (memantine hydrochloride extended release and donepezil hydrochloride) capsules for the treatment of moderate to severe dementia related to Alzheimer’s disease. In May 2020, the Company became entitled to receive royalties at rates in the low double digits to mid-teens from Allergan for sales of NAMZARIC in the United States.

The Company was incorporated in the State of Delaware on November 15, 2000, and operates as one segment. The Company’s headquarters and operations are located in Emeryville, California.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition and variable consideration, lease assets and liabilities, clinical trial accruals, fair value of assets and liabilities including short-term and long-term classification, embedded derivatives, income taxes, inventory, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Risks and Uncertainties

The outbreak of the novel Coronavirus (“COVID-19”), which is understood to have begun in December 2019, continues to grow both within the U.S. and globally. The World Health Organization has declared the outbreak of COVID-19 to be a pandemic, and the U.S. federal government has declared it a national emergency. The Company is subject to risks and uncertainties as a result of the outbreak of COVID-19. Despite disruptions to the Company’s business operations, the COVID-19 pandemic did not significantly impact GOCOVRI prescription refill rates for the year ended December 31, 2020, and thus far management has observed no disruptions to its inventory on hand or planned manufacturing schedule. However, new prescription rates have been impacted due to several factors, including: a fluid environment in which office practices are changing frequently including many healthcare providers have temporarily closed their offices or are restricting patient visits; patients are postponing visits to healthcare provider facilities; and the sales force has moved to a mix of virtual and live interactions with healthcare providers, adapting to the local environment. While management believes this initial decline and continued impact on new prescriptions to be temporary, the duration and severity is dependent on future developments, including new information that may emerge concerning the actions taken to contain or prevent further spread, all of which are highly uncertain and cannot be predicted with confidence.

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As of the date of issuance of these consolidated financial statements, due to the numerous uncertainties surrounding the COVID-19 pandemic, the Company is unable to predict the extent to which the COVID-19 pandemic may materially adversely affect the Company’s future business, financial results, liquidity and cash flows.

Liquidity

During the last three fiscal years, the Company has funded its operations primarily through sales of GOCOVRI, through sales of its common stock, and to a lesser extent through royalties received on net sales of NAMZARIC. The Company made GOCOVRI available for physician and patient use in the fourth quarter of 2017, with a full commercial launch in January 2018. Prior to the generation of revenue from GOCOVRI, the Company had not generated any commercial revenue from the sale of its products. In January 2018, the Company completed a follow-on public offering of its common stock from which proceeds raised were approximately $134.3 million, net of underwriting discounts, commissions, and offering-related transaction costs. In November 2019, the Company entered into a sales agreement with Cowen and Company, LLC, pursuant to which it may, from time to time, issue and sell shares of common stock having an aggregate offering value of up to $50.0 million. As of December 31, 2020, the Company had issued 217,403 shares of common stock and raised net proceeds of $1.0 million under the sales agreement.

As of December 31, 2020, the Company had $83.4 million of cash, cash equivalents, and investments, which management believes will be sufficient to fund its projected operating requirements for at least 12 months from the issuance of these consolidated financial statements. However, it is possible that the Company will not achieve the progress it expects, because revenues from GOCOVRI may be less than anticipated, especially in light of the current COVID-19 pandemic.

Inventory

Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method. Inventory consists of raw materials, work-in-process, and GOCOVRI finished goods. Raw materials and work-in-process that may be utilized for both commercial and clinical programs are identical and, as a result, the inventory has an “alternative future use” as defined in authoritative guidance and are included in inventory. Amounts in inventory associated with clinical development programs are charged to research and development expense when the product enters the research and development process and can no longer be used for commercial purposes and, therefore, does not have “alternative future use”. Costs include active pharmaceutical ingredient (API), third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs. If the Company identifies excess, obsolete or unsalable product, the Company will write down its inventory to net realizable value in the period it is identified.

The Company begins capitalizing costs as inventory when the product candidate receives regulatory approval. Prior to regulatory approval, inventory costs related to product candidates are recorded as research and development expense. The Company received FDA approval for GOCOVRI on August 24, 2017, and began capitalizing inventory manufactured at the FDA approved location, after FDA approval.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities, when purchased, of less than three months.

Investments

The Company classifies its investments as “available-for-sale.” In general, these investments are free of trading restrictions. The Company carries these investments at fair value, based on quoted market prices or other readily available market information. Quoted market prices for U.S. government and corporate bonds include both principal and accrued interest components. Unrealized gains and losses are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in its consolidated balance sheets. Gains and losses are recognized when realized as gains or losses in interest and other income, net, in the consolidated statements of operations. When the Company determines that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. The Company considers all marketable debt securities with a maturity of less than one year to be short-term investments, with all others considered to be long-term investments.

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All of the Company’s available-for-sale securities are subject to a periodic impairment review. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the investments’ fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, its intent to sell or hold the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Segments

In accordance with ASC 280-10-50, Segment Reporting, operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company operates in one reportable segment: the development and commercialization of therapeutics targeting chronic disorders of the central nervous system. All revenues for the years ended December 31, 2020 and 2019 were generated in the United States.

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, using the full retrospective transition method. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that the Company would have recognized is one year or less.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct.

Product sales

The Company’s product sales consist of U.S. sales of GOCOVRI. GOCOVRI was approved by the FDA on August 24, 2017, and the Company commenced shipments of GOCOVRI to a specialty pharmacy during October 2017. The Company sells its products principally to a specialty pharmacy and certain specialty distributors (each a “Customer” or collectively its “Customers”). These agreements with its Customers provide for transfer of title to the product at the time the product has been delivered to and accepted by the Customer. The Customer subsequently dispenses product directly to a patient. In addition, except for limited circumstances, the Customer has no right of product return to the Company.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer. The Company has determined that the delivery of its product to Customers constitutes a single performance obligation as there are no other promises to deliver goods or services. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. The Company has assessed the existence of a significant financing component in the agreements with its Customers. The trade payment terms with its Customers do not exceed one year and therefore the Company has elected to apply the practical expedient and no amount of consideration has been allocated as a financing component.

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The Company considers the effects of items which can decrease the transaction price such as variable consideration and consideration payable to a Customer or payer. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. The amount of variable consideration may be constrained and is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Revenue from product sales is recorded after considering the impact of the following variable consideration amounts at the time of revenue recognition:

Distribution Fees: Distribution fees include fees paid to the Company’s Customers for data and prompt payment discounts. Distribution fees are recorded based on contractual terms.

Rebates: Rebates include discounts under the Medicaid Drug Rebate Program, TRICARE Retail Pharmacy Refunds Program (TRICARE), and Managed Care contracts. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or statutory requirements with benefit providers. Rebates are estimated based on statutory discount rates and expected utilization. The expected utilization of rebates is estimated based on data received from the specialty pharmacy and specialty distributor. The Company uses the expected-value method for estimating rebates and estimates are adjusted quarterly to reflect actual experience.

Chargebacks: Chargebacks are discounts that occur when Healthcare Providers purchase directly from a Customer. Healthcare Providers, which currently consist of Public Health Service institutions, non-profit clinics, government entities, group purchasing organizations, and health maintenance organizations, generally purchase the product at a discounted price. The Customer, in turn, charges back to the Company the difference between the price initially paid by the Customer and the discounted price paid by the Healthcare Providers to the Customer. The allowance for chargebacks is based on an estimate of sales through to Healthcare Providers from the Customer.

Product Returns: Consistent with industry practice, the Company offers limited product return rights and generally allows for the return of product that is damaged or defective, and within a few months prior to and up to a few months after the product expiration date. The Company does not allow product returns for product that has been dispensed to a patient. The Company considers several factors in the estimation of potential product returns, including expiration dates of the product shipped, the limited product return rights, third-party data in monitoring channel inventory levels, shelf life of the product, prescription trends, and other relevant factors. Product returns have been insignificant to date and are expected to be immaterial in the future.

Medicare Part D Coverage Gap: Medicare Part D coverage gap is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States, which mandates manufacturers to fund a portion of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Funding of the coverage gap is generally invoiced and paid in arrears. The Medicare Part D coverage gap is estimated using the expected-value method based on an amount expected to be incurred for the current quarter’s activity based on expected utilization, plus an accrual balance for known prior quarters and is adjusted quarterly based on actual experience. The expected utilization of the Medicare Part D coverage gap is estimated based on data received from the specialty pharmacy and historical utilization.

Co-payment Assistance: The Company provides co-payment assistance to patients who have commercial insurance and meet certain eligibility requirements. Co-payment assistance is estimated using the expected-value method based on historical program participation and estimates of program redemption using data provided by third-party administrators.

Each of the above items are variable consideration, are recorded at the time of revenue recognition, and require significant estimates, judgment and information obtained from external sources. The Company determined a significant reversal of revenue would not occur in a future period for the estimates of variable consideration detailed above and, therefore, the transaction price was not reduced during the periods presented. If management’s estimates differ from actual results, the Company will record adjustments that would affect product sales in the period of adjustment.

License agreement revenue

The Company generates revenue from collaboration and license agreements for the development and commercialization of products. Collaboration and license agreements may include non-refundable upfront license fees,

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partial or complete reimbursement of research and development costs, contingent consideration milestone payments based on the achievement of defined objectives, and royalties on sales of commercialized products. Such agreements may contain various promises to customers which are generally capable of being distinct and accounted for as separate performance obligations. The Company’s duties and responsibilities under the collaboration and license agreements typically include the license or transfer of intellectual property rights, obligations to provide research and development services and related materials, and obligations to participate on certain development and/or commercialization committees with the partners. These promises may be regarded as separate performance obligations, or bundled as a single performance obligation, depending upon the nature of the arrangement.

For agreements with multiple performance obligations, the Company allocates estimated revenue to each performance obligation at contract inception based on the estimated relative standalone selling price (SSP) of each performance obligation in the arrangement. Revenue allocated to each performance obligation is then recognized when the entity satisfies the performance obligation by transferring control of the promised good or service to the customer.

Licenses for Intellectual Property (IP): If the Company determines that the license for IP is distinct from the other performance obligations identified in the arrangement, revenue from non-refundable, up-front fees allocated to the license is recognized when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, judgment is applied to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: For contracts with customers that contain payments that are contingent upon achievement of a substantive milestone, at the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative SSP basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

Reimbursement of Research and Development Costs: Amounts related to research and development funding and full-time equivalent employees assigned to the license agreement are recognized over time as the related services or activities are performed, in accordance with the contract terms.

Royalties: For arrangements that include sales-based royalties, and the licensed IP is deemed to be the predominant item to which the royalties relate, the Company recognizes the related royalty revenue at the later of (i) when the related sales occur, or (ii) the satisfaction or partial satisfaction of the performance obligation to which the royalty relates. Sales-based royalties are recorded based on estimated quarterly net sales of NAMZARIC. Differences between actual results and estimated amounts are adjusted in the period in which they become known, which typically follows the quarterly period in which the estimate is made. To date, actual royalties received have not differed materially from estimates. Receivables related to NAMZARIC royalties are recorded in prepaid expenses and other current assets on the consolidated balance sheets.

Cost of Product Sales

Cost of product sales consists primarily of direct and indirect costs related to the manufacturing of GOCOVRI products sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs. Cost of product sales may also include period costs related to certain inventory manufacturing services, inventory adjustment charges, as well as manufacturing variances. In connection with the FDA approval of GOCOVRI on August 24, 2017, the Company began capitalizing inventory manufactured at the FDA approved location starting in August

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2017. Prior to receiving regulatory approval for GOCOVRI from the FDA, the Company expensed all costs incurred in the manufacture of GOCOVRI as research and development.

Concentration of Risk

Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and short and long-term investments. Cash, cash equivalents, and investments are deposited with financial institutions or invested in security issuers that management believes are credit worthy. Deposits may, at times, exceed the amount of insurance provided on such deposits. Risks associated with cash, cash equivalents, and investments are mitigated by the Company’s investment policy which defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of its investments to preserve principal and maintain liquidity.

Major Customers    

The Company has entered into distribution agreements with a specialty pharmacy and certain limited specialty distributors. For the years ended December 31, 2020 and 2019, the Company’s largest customer represented approximately 95% and 98% of the Company’s product revenue, respectively, and approximately 94% and 96% of the Company’s accounts receivable balance at December 31, 2020 and 2019, respectively.

Major Suppliers

The Company does not currently have any of its own manufacturing facilities, and therefore it depends on an outsourced manufacturing strategy for the production of GOCOVRI for commercial use and for the production of its product candidates for clinical trials. The Company has contracts in place with one third-party manufacturer that is approved for the commercial production of GOCOVRI and two third-party suppliers that are approved for GOCOVRI’s active pharmaceutical ingredient. Although there are potential sources of supply other than the Company’s existing manufacturers and suppliers, any new supplier would be required to qualify under applicable regulatory requirements.

Accounts Receivable, net

The Company’s accounts receivable balance consists of amounts due from sales of GOCOVRI. Receivables from sales of GOCOVRI are recorded net of allowances which generally include chargebacks, doubtful accounts, and discounts. The Company’s estimate of the allowance for doubtful accounts is based on an evaluation of the aging of its receivables. Accounts receivable balances are written off against the allowance when it is probable that the receivable will not be collected. Given the nature and historical collectability of the Company’s accounts receivable, the Company determined that an allowance for doubtful accounts was not required at December 31, 2020.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in operations in the period realized.

Estimated useful lives by major asset category are as follows:

	Useful Lives
Computer equipment and software	3 years
Equipment	5 years
Furniture and fixtures	10 years

Leases

The Company determines if an arrangement is, or contains, a lease at inception. An arrangement is, or contains, a lease if it conveys the right to control the use of identified property, plant or equipment (i.e., an identified asset) for a

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period of time in exchange for consideration. The Company’s arrangements determined to be or contain a lease include explicitly or implicitly identified assets where the Company has the right to substantially all of the economic benefits of the assets and has the ability to direct how and for what purpose the assets are used during the lease term. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on its consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term and any amounts probable of being owed under a residual value guarantee (if applicable). In determining the incremental borrowing rate used to calculate the present value of lease payments, the Company uses the interest rate specified in the lease. If the rate is not readily determinable, which is generally the case for the Company, the Company uses its incremental borrowing rate based on the information available at the commencement date. The operating lease ROU assets also include any lease payments made (including any prepaid rents and initial direct costs) and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise any such options. Lease expense for lease payments is recognized on a straight-line basis over the expected lease term. The Company has lease agreements with lease components and non-lease components. For its facility and office equipment lease, the Company accounts for the lease and non-lease components separately. For its vehicle leases, the Company elected the practical expedient to not separate lease components, such as base rent payments, and non-lease components, such as interest, and also applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities, given the volume of individual leases involved in the overall arrangement.

Accounting for Long-Lived Assets

The Company reviews its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by the comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. There have been no such impairments of long-lived assets as of December 31, 2020.

Clinical Trial Accruals

The Company’s clinical trial accruals are based on estimates of patient enrollment and related activities at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations (“CROs”) that conduct and manage clinical trials on the Company’s behalf. The Company estimates clinical trial expenses based on the estimated services performed pursuant to these contracts, as provided by the CRO. These estimates are reviewed for reasonableness by the Company’s internal clinical personnel. The Company monitors patient enrollment levels and related activities using available information; however, if the Company underestimates activity levels associated with various studies at a given point in time, the Company could be required to record significant additional R&D expenses in future periods when the actual activity level becomes known. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Research and Development

Research and development (“R&D”) expenses include salaries and related compensation, contractor and consultant fees, external clinical trial expenses performed by CROs, licensing fees, acquired intellectual property with no alternative future use, and facility and administrative expense allocations. In addition, the Company funds R&D at research institutions under agreements that are generally cancelable at its option. Research costs typically consist of applied research and preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of pre-approval inventory purchases, product formulation, chemical analysis, and the transfer and scale-up of manufacturing at facilities operated by the Company’s contract manufacturers. Clinical development costs include the costs of Phase 1, Phase 2, and Phase 3 clinical trials. These costs are a significant component of the Company’s research and development expenses.

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Long-Term Debt

Long-term debt consists of the Company’s royalty-backed loan agreement (“Royalty-Backed Loan”) with HealthCare Royalty Partners (“HCR”). The Company accounted for the loan agreement as a debt financing arrangement. Interest expense is accrued using the effective interest rate method over the estimated period the debt will be repaid. Debt issuance costs have been recorded as a debt discount in the Company’s consolidated balance sheets and are being amortized and recorded as interest expense throughout the life of the loan using the effective interest rate method. The Company must make certain assumptions and estimates, including future royalties and net product sales, in determining the expected repayment term, amortization period of the debt discount, accretion of interest expense, as well as the classification between current and long-term portions. The Company periodically assesses these assumptions and estimates, and adjusts the liabilities accordingly. Under the terms of the loan, HCR has recourse to Adamas Pharma, LLC, not the Company. See Note 10 - Long-Term Debt, for further details of the Company’s long-term debt.

Embedded Derivatives Related to Debt Instruments

Embedded derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the debt instrument. Under the Company’s loan agreement with HCR, upon the occurrence of a default or a change in control, the Company may be required to make mandatory prepayments of the borrowings. The prepayment premium is considered an embedded derivative, as the holder of the loans may exercise the option to require prepayment by the Company. Further, in the event of a regulatory change that results in a material adverse effect on HCR’s rate of return, the Company shall pay directly to HCR an amount that compensates HCR for such reduction. The embedded derivative is presented as a component of other non-current liabilities. The Company will remeasure the embedded derivatives each reporting period and report changes in the estimated fair value as gains or losses in interest and other income, net, in the consolidated statements of operations and in operating activities in the consolidated statements of cash flows.

Fair Value of Financial Instruments

The carrying value of the Company’s cash and cash equivalents, short-term investments, accounts receivable, long-term investments and other current assets, other assets, accounts payable, accrued liabilities approximate fair value due to the short-term nature or determinable value of these items. See also Note 3 - Fair Value Measurements for further details of the Company’s fair value instruments.

Income Taxes

The Company accounts for income taxes under the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows the provisions of ASC 740, Income Taxes, under which it assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Basic and Diluted Net Loss Per Share

Basic net loss per share is based upon the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalents outstanding during the period. Common stock equivalents are equity awards granted under the Company’s stock awards plans and are calculated under the treasury stock method. Common equivalent shares from unexercised stock options and unvested restricted stock units are excluded from the computation when there is a loss as

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their effect is anti-dilutive, or if the exercise price of such options is greater than the average market price of the stock for the period.

Stock-Based Compensation

The Company accounts for stock-based compensation of stock options and employee stock purchase plan shares by estimating the fair value of stock-based awards using the Black-Scholes option-pricing model. The Company accounts for stock-based compensation of restricted stock units granted to employees based on the closing price of the Company’s common stock on the date of grant. The fair value of stock-based awards, net of estimated forfeitures, is recognized and amortized over the applicable vesting period.

Contingencies

In the normal course of business, the Company is involved from time to time in various legal proceedings and other matters which are complex in nature and have outcomes that are difficult to predict. The company records accruals for loss contingencies when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company considers all relevant factors when making assessments regarding these contingencies. Litigation expenses are expensed as incurred.

Recent Accounting Pronouncements

Accounting Pronouncements Adopted in 2020

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements. Disclosures are updated in Note 3 “Fair Value Measurements”.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments; in November 2018 the FASB issued a subsequent amendment ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses; in April 2019 the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; in May 2019 the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief; and in November 2019 the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The new guidance changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates, which defers the effective date of ASU 2016-13 for all entities except SEC reporting companies that are not smaller reporting companies. As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the timing and effect the new guidance will have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, which is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company does not expect the new guidance to have a material impact on its consolidated financial statements.

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3. FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, Fair Value Measurements and Disclosures, the Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

•Level 1 inputs, which include quoted prices in active markets for identical assets or liabilities;

•Level 2 inputs, which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. For available-for-sale securities, the Company reviews trading activity and pricing as of the measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and

•Level 3 inputs, which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques, as well as significant management judgment or estimation.

The following table represents the fair value hierarchy for the Company’s financial assets and liabilities which require fair value measurement on a recurring basis (in thousands):

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Money market	$	48,152	$	48,152	$	—	$	—
Corporate debt	6,706		—		6,706		—
U.S. Treasury securities	4,999		—		4,999		—
Total assets measured at fair value	$	59,857	$	48,152	$	11,705	$	—
Liabilities:
Embedded derivative liability	$	2,378	$	—	$	—	$	2,378
Total liabilities measured at fair value	$	2,378	$	—	$	—	$	2,378

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
Money market	$	27,720	$	27,720	$	—	$	—
Corporate debt	22,576		—		22,576		—
U.S. Treasury securities	37,811		—		37,811		—
Commercial paper	10,928		—		10,928		—
Total assets measured at fair value	$	99,035	$	27,720	$	71,315	$	—
Liabilities:
Embedded derivative liability	$	2,157	$	—	$	—	$	2,157
Total liabilities measured at fair value	$	2,157	$	—	$	—	$	2,157

Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

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Corporate debt, U.S. Treasury securities, and commercial paper are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy. In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. The Company classified an embedded derivative related to its Royalty-Backed Loan with HCR as a Level 3 liability.

The fair value of the embedded derivative as a result of a change in control was calculated using a probability-weighted discounted cash flow model. The model used in valuing this embedded derivative requires the use of significant estimates and assumptions including but not limited to: 1) expected cash flows the Company expects to receive on U.S. net sales of GOCOVRI and on royalties from Allergan on U.S. net sales of NAMZARIC; 2) the Company’s risk adjusted discount rates; and 3) the probability of a change in control occurring during the term of the note based on the percentage of similar companies that were acquired over the previous five year period. Changes in the estimated fair value of the bifurcated embedded derivative are reported as gains or losses in interest and other income, net, in the consolidated statements of operations. In the periods presented, the Company evaluated the embedded derivative value as a result of an event of default and the value as a result of increased costs due to a regulatory change and considered both to have no material value based on current assessment of probability, but could become material in future periods if a specified event of default or regulatory change became more probable than is currently estimated. See Note 10 “Long-Term Debt” for further description.

At December 31, 2020, the embedded derivative related to the Royalty-Backed Loan was the only recurring fair value measurement with Level 3 unobservable inputs. A risk-adjusted discount rate of 16.7% and a probability of a change in control of 3.0% were applied to calculate the value of the embedded derivative. Significant increases (or decreases) in the discount rate, and significant increases (or decreases) in the probability of a change in control would result in a significantly higher (or lower) fair value measurement.

The following table sets forth changes in Level 3 liabilities measured at fair value on a recurring basis for the years ended December 31, 2020 and 2019 (in thousands):

Balance as of December 31, 2018	$	1,352
Change in fair value included in interest and other income, net	805
Balance as of December 31, 2019	2,157
Change in fair value included in interest and other income, net	221
Balance as of December 31, 2020	$	2,378

There were no transfers into or out of Level 3 during the years ended December 31, 2020 and 2019.

4. INVESTMENTS

The Company’s investments consist of corporate debt, U.S. Treasury securities, and commercial paper classified as available-for-sale securities.

The Company limits the amount of investment exposure as to institution, maturity, and investment type. To mitigate credit risk, the Company invests in investment grade corporate debt, U.S. Treasury securities, and commercial paper. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and shown separately as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Realized gains and losses are reclassified from other comprehensive income (loss) to other income on the consolidated statements of operations when incurred. The Company may pay a premium or receive a discount upon the purchase of available-for-sale securities. Interest earned and gains realized on available-for-sale securities and amortization of discounts received and accretion of premiums paid on the purchase of available-for-sale securities are included in investment income.

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The following table is a summary of amortized cost, unrealized gain and loss, and the fair value of available-for-sale securities as of December 31, 2020, and 2019 (in thousands):

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments:
Corporate debt	$	6,706	$	—	$	—	$	6,706
U.S. Treasury securities	4,999		—		—		4,999
Total	$	11,705	$	—	$	—	$	11,705
Reported as:
Short-term investments	$	11,705	$	—	$	—	$	11,705
Total	$	11,705	$	—	$	—	$	11,705

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments:
Corporate debt	$	22,582	$	3	$	(9)	$	22,576
U.S. Treasury securities	37,789		22		—		37,811
Commercial paper	6,446		—		—		6,446
Total	$	66,817	$	25	$	(9)	$	66,833
Reported as:
Short-term investments	$	66,817	$	25	$	(9)	$	66,833
Total	$	66,817	$	25	$	(9)	$	66,833

Short-term investments include accrued interest of $0.1 million and $0.4 million as of December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, there were gross realized gains on investments of $55,000 and no gross realized losses. There were no gross realized gains or losses on investments for the year ended December 31, 2019. Realized gains are reflected in interest and other income, net, in the consolidated statements of operations, using the specific-identification method. Investments are classified as short-term or long-term depending on the underlying investment’s maturity date. The Company had no investments with a maturity date greater than 12 months as of December 31, 2020 and 2019. All investments with unrealized losses at December 31, 2020, have been in a loss position for less than twelve months or the loss is not material and were temporary in nature. The Company does not intend to sell the investments that are in an unrealized loss position before recovery of their amortized cost basis.

5. BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets (in thousands)
	December 31,
	2020		2019
Insurance litigation recovery	$	7,500	$	—
Prepaid expenses	3,126		2,624
Royalty receivables	1,252		—
Prepaid clinical trial	928		2,710
Income tax receivable	—		1,259
Other current assets	229		83
Prepaid expenses and other current assets	$	13,035	$	6,676

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Property and equipment, net (in thousands)
	December 31,
	2020		2019
Computer equipment and software	$	3,297	$	3,297
Equipment	384		384
Furniture and fixtures	336		336
Leasehold improvements	1,891		1,891
	5,908		5,908
Less: Accumulated depreciation and amortization	(4,310)		(3,459)
Property and equipment, net	$	1,598	$	2,449

Depreciation expense was $0.9 million and $1.2 million for the years ended December 31, 2020 and 2019, respectively.

Accrued liabilities (in thousands)
	December 31,
	2020		2019
Litigation settlement liability (see Note 9)	$	7,500	$	—
Accrued employee related costs	9,403		7,682
Patent litigation settlement liability (see Note 9)	5,000		—
Clinical trial accruals	616		1,680
Accrued consulting and other professional fees	2,657		4,867
Accrued sales deductions	1,571		1,822
Other	417		66
Accrued liabilities	$	27,164	$	16,117

6. INVENTORY

If the Company identifies excess, obsolete, or unsalable product, the Company will write down its inventory to net realizable value in the period it is identified. During the years ended December 31, 2020 and 2019, the Company recorded a provision for the write-down of inventory to cost of sales of $0.6 million and $0.9 million, respectively. Inventory consists of the following (in thousands):

	December 31,
	2020		2019
Raw materials	$	795	$	1,057
Work-in-process	4,403		1,925
Finished goods	2,096		2,285
Total inventory	$	7,294	$	5,267

7. LICENSE AGREEMENTS

In November 2012, the Company granted Forest Laboratories Holdings Limited “Forest”, an indirect, wholly-owned subsidiary of Allergan plc (collectively “Allergan”) an exclusive license, with right to sublicense, certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. In connection with these rights, Allergan markets and sells NAMZARIC and NAMENDA XR for the treatment of moderate to severe dementia related to Alzheimer’s disease.

Pursuant to the agreement, Allergan made an upfront payment of $65.0 million. The Company earned and received additional cash payments totaling $95.0 million upon achievement by Allergan of certain development and

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regulatory milestones. Under the agreement, external costs incurred related to the prosecution and litigation of intellectual property rights are reimbursable. Reimbursable external costs are recorded as a reduction to selling, general and administrative, net. For the twelve months ended December 31, 2020 and 2019, there were no reimbursable external costs for prosecution or litigation of intellectual property rights were not material.

In addition, the Company may earn tiered royalty payments based on net sales of NAMZARIC and NAMENDA XR. Beginning in May 2020, the Company became entitled to receive royalties at rates in the low double digits to mid-teens from Allergan for sales of NAMZARIC in the United States. The Company recognized $3.3 million in NAMZARIC royalty revenue for the twelve months ended December 31, 2020, and recognized no royalty revenue for the twelve months ended December 31, 2019. Allergan’s obligation to pay royalties with respect to fixed-dose memantine-donepezil products, including NAMZARIC, continues until the later of (i) 15 years after the commercial launch of the first fixed-dose memantine-donepezil product by Allergan in the United States or (ii) the expiration of the Orange Book listed patents for which Allergan obtained rights from the Company covering such product, but is eliminated in any quarter where there is significant competition from generics. Based on Allergan’s and the Company’s current settlement agreements with the NAMZARIC ANDA filers to date, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer’s generic version of NAMZARIC is January 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest license date have the option to launch an authorized generic version of NAMZARIC beginning on January 1, 2026 instead of launching their own generic version of NAMZARIC on January 1, 2025. For further discussion of NAMZARIC ANDA filers, see Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies.” Beginning in June 2018, the Company was entitled to receive royalties at rates in the low to mid-single digits for sales of NAMENDA XR in the United States. The Company does not expect to receive royalties on net sales of NAMENDA XR, due to the entry of generic versions of NAMENDA XR. Royalties under the license agreement will be recognized when the related sales occur, in accordance with the sales-based royalty exception.

8. LEASES

Lease Commitments

The Company performed an evaluation of its contracts in accordance with Topic 842 and determined that, except for its facility, vehicle, and office equipment leases, described below, none of its other contracts contain a lease. The Company evaluated all its leases and determined they were operating leases.

In January 2018, the Company amended its Emeryville, California, office facility lease agreement to extend the term to April 30, 2025, and relocate and expand its office space to 37,626 rentable square feet within the same building. The lease contains an option to extend the term for one additional five-year period. The extension option has not been considered in the determination of the right-of-use asset or the lease liability as the Company did not consider it reasonably certain that it would exercise such option. The lease provides for a tenant improvement allowance of approximately $1.1 million, which the Company fully utilized during the third quarter of 2018.

In 2018, the Company entered into a three-year lease for office equipment that commenced in June 2018 and will be required to make cash payments totaling $0.2 million during the term of the lease.

In March 2019, the Company entered into a three-year vehicle lease agreement, pursuant to which it currently leases 67 vehicles. Delivery of the vehicles commenced during the second quarter of 2019. The term for each leased vehicle commences upon the delivery of the vehicle and is for a period of 12 months, with renewal terms at the Company’s discretion that can extend the lease term up to 50 months.

As of December 31, 2020, the Company did not have additional operating leases that have not yet commenced.

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Supplemental balance sheet information related to operating leases were as follows (in thousands):

	December 31,
	2020		2019
Assets
Operating lease right-of-use assets	$	6,657	$	8,048
Total right-of-use assets	$	6,657	$	8,048
Liabilities
Current portion included in other current liabilities	$	1,855	$	1,669
Long-term portion of operating lease liabilities	6,453		8,272
Total operating lease liabilities	$	8,308	$	9,941

The Company’s total lease cost was approximately $2.8 million and $2.4 million for the years ended December 31, 2020 and 2019, respectively. The components of lease costs, which were included in selling, general and administrative, net in its consolidated statements of operations, were as follows (in thousands):

	Years Ended December 31,
	2020		2019
Operating lease cost	$	2,373	$	2,037
Variable lease cost	464		320
Total lease cost	$	2,837	$	2,357

As of December 31, 2020, the maturities of operating lease liabilities were as follows (in thousands):

	Operating leases
2021	$	2,622
2022	2,446
2023	2,191
2024	2,247
2025	764
Thereafter	—
Total lease payments	10,270
Less: Imputed interest	(1,962)
Operating lease liabilities	$	8,308

As of December 31, 2020, the weighted average remaining lease term is 4.1 years and the weighted average operating discount rate used to determine the operating lease liability was 10.5%.

9. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

The Company has entered into agreements for the supply of active pharmaceutical ingredients with Moehs Ibérica, S.L. and AMSA S.p.A., and the manufacture of commercial supply of GOCOVRI with Catalent Pharma Solutions, LLC. Under the terms of the agreements, the Company will supply the vendors with non-cancelable firm commitment purchase orders. The Company has also entered into other agreements with certain vendors for the provision of services, including services related to data access and packaging, under which the Company is contractually obligated to make certain payments to the vendors.

The Company enters into contracts in the normal course of business that include, among others, arrangements with CROs for clinical trials, vendors for preclinical research, and vendors for manufacturing. These contracts generally provide for termination upon notice, and therefore the Company believes that its obligations under these agreements are not material.

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As of December 31, 2020, the Company had non-cancelable purchase commitments of $2.4 million due within one year.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown, because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Indemnification

In accordance with the Company’s amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. The Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for claims. In addition, in the normal course of business, the Company enters into contracts and agreements that may contain a variety of representations and warranties and provide for general indemnifications.

Litigation and Other Legal Proceedings

In November 2012, the Company granted Forest an exclusive license to certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. Under the terms of that license agreement, Forest has the right to enforce such intellectual property rights which are related to its right to market and sell NAMZARIC and NAMENDA XR for the treatment of moderate to severe dementia related to Alzheimer’s disease. The Company has a right to participate in, but not control, such enforcement actions by Forest.

In 2018 and as of the issuance date of these consolidated financial statements, multiple generic companies have launched generic versions of NAMENDA XR.

As of the issuance date of these consolidated financial statements, a number of companies have submitted ANDAs including one or more certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(iv) to the FDA requesting approval to manufacture and market generic versions of NAMZARIC, on which the Company is entitled to receive royalties from Forest beginning in May 2020.

As of the issuance date of these consolidated financial statements, the Company and Forest have settled with all such NAMZARIC ANDA filers, including all first filers on all the available dosage forms of NAMZARIC. Subject to those agreements, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer’s generic version of NAMZARIC is January 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest date have the option to launch an authorized generic version of NAMZARIC beginning on January 1, 2026 instead of launching their own generic version of NAMZARIC on January 1, 2025. The Company and Forest intend to continue to enforce the patents associated with NAMZARIC.

On February 16, 2018, Osmotica Pharmaceutical US LLC and Vertical Pharmaceuticals LLC (“Osmotica”) filed an action against the Company in U.S. District Court for the state of Delaware, requesting a declaratory judgment that Osmotica’s newly-approved product OSMOLEX ER® (amantadine) extended release tablets do not infringe certain of the Company’s patents. On September 20, 2018, the Company filed its first amended answer including infringement counterclaims against Osmotica asserting Osmotica has infringed nine Company patents under 35 U.S.C. §§ 271(a), (b), and/or (c) and 35 U.S.C. § 271(e)(2)(A) and seeking various forms of relief, including damages, treble damages, injunctive relief, and an order pursuant to 35 U.S.C. § 271(e)(4)(A) that the effective date of any approval of Osmotica’s NDA for OSMOLEX ER be a date that is not earlier than the latest expiration date of the Company patents involved in the lawsuit. On December 1, 2020, the Company entered into a purchase agreement (the “Asset Purchase Agreement”) with Osmotica pursuant to which: both parties gave each other mutual releases and agreed to dismiss their respective claims relating to the patent litigation; the Company will acquire the global rights to OSMOLEX ER and existing inventory for $7.5 million and the assumption of certain liabilities; and Osmotica will not engage in the U.S. in the

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development, manufacture, or sale of any product that is a generic version of any dosage strength of OSMOLEX ER for a period of

five years from the closing of the Asset Purchase Agreement. The Company also entered into a supply agreement pursuant to which Osmotica will be the sole manufacturer of OSMOLEX ER. The Asset Purchase Agreement subsequently closed on January 4, 2021. Management determined, in accordance with ASC 450, that as of December 31, 2020, a probable loss had occurred as a result of the litigation settlement. As a result, the Company recorded a patent litigation settlement liability of $5.0 million, based on management’s best estimate, which is included in other current liabilities on the consolidated balance sheets and reported as selling, general and administrative, net, in the consolidated statements of operations for the twelve months ended December 31, 2020.

On July 1, 2020, the Company received a letter dated June 29, 2020, notifying the Company that Zydus Worldwide DMCC (“Zydus Worldwide”) submitted to the FDA an ANDA for Amantadine Extended-Release Capsules, 68.5 mg and 137 mg that contains certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to the Company’s U.S. Patent Nos. 8,389,578; 8,741,343; 8,796,337; 8,889,740; 8,895,614; 8,895,615; 8,895,616; 8,895,617; 8,895,618; 9,867,791; 9,867,792; 9,867,793; 9,877,933; and 10,154,971, that these patents are invalid or will not be infringed by the manufacture, use or sale of Zydus Worldwide’s Amantadine Extended-Release Capsules, 68.5 mg and 137 mg. On August 13, 2020, the Company filed a lawsuit against Zydus Worldwide and Zydus Pharmaceuticals (USA), Inc. (collectively “Zydus”) alleging infringement of those patents and U.S. Patent No. 10,646,456 by Zydus in the United States District Court for the District of New Jersey. U.S. Patent No. 10,646,456 was not listed in the Orange Book at the time Zydus Worldwide filed its ANDA, but on or about September 3, 2020, the Company received a letter dated September 2, 2020, notifying the Company that Zydus Worldwide submitted a certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to the Company’s U.S. Patent No. 10,646,456 with respect to its ANDA for Amantadine Extended-Release Capsules, 68.5 mg and 137 mg. On January 30, 2021, Adamas Pharma, LLC entered into a definitive agreement (the “Settlement Agreement”) with Zydus pursuant to which the parties agreed to end the lawsuit and dismiss it without prejudice, and the Court dismissed the lawsuit on February 3, 2021. Pursuant to the Settlement Agreement, Adamas Pharma, LLC grants Zydus a license to make, use, sell, offer to sell and import a generic version of GOCOVRI (amantadine) extended release capsules (including for any new indications approved under the GOCOVRI NDA), effective as of March 4, 2030, or earlier in certain circumstances typical for such agreements. The Settlement Agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period ending July 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year ended December 31, 2019. The Company and Adamas Pharma LLC intend to continue to enforce the patents associated with GOCOVRI.

On April 1, 2019, the Company was served with a complaint filed in the United States District Court for the Northern District of California (Case No. 3:18-cv-03018-JCS) against the Company and several Allergan entities alleging violations of Federal and state false claims acts (“FCA”) in connection with the commercialization of NAMENDA XR and NAMZARIC by Allergan. The lawsuit is a qui tam complaint brought by a named individual, Zachary Silbersher, asserting rights of the Federal government and various state governments. The lawsuit was originally filed in May 2018 under seal, and the Company became aware of the lawsuit when it was served. The complaint alleges that patents held by Allergan and the Company covering NAMENDA XR and NAMZARIC were procured through fraud on the United States Patent and Trademark Office and that these patents were asserted against potential generic manufacturers of NAMENDA XR and NAMZARIC to prevent the generic manufacturers from entering the market, thereby wrongfully excluding generic competition resulting in an artificially high price being charged to government payors. The Company’s patents in question were licensed exclusively to Forest. The complaint includes a claim for damages of “potentially more than $2.5 billion dollars,” treble damages “under the federal FCA and most of the State FCAs,” and “statutory penalties that can be assessed for each false claim.” This action is ongoing. The federal and state governments have declined to intervene in this action. To the Company’s knowledge, the individual plaintiff is pursuing the lawsuit in his individual capacity. This case is currently stayed pending the Company and Allergan’s Petition for Permission to Appeal Under 28 U.S.C. § 1292(b) in the United States Court of Appeals for the Ninth Circuit (Case No. 21-80005), which was filed on February 8, 2021, and seeks permission for an interlocutory appeal of the District Court’s December 11, 2020 order denying the Company’s and Allergan’s motion to dismiss the complaint. The Company believes it has strong factual and legal defenses and intends to defend itself vigorously.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On May 13, 2019, a putative class action lawsuit alleging violations of the federal securities laws was filed by Plymouth County Contributory Retirement System against the Company and certain of the Company’s current and former directors and officers in California Superior Court for the County of Alameda (Case No. RG19018715). The lawsuit alleges violations of the Securities Act of 1933 by the Company and certain of the Company’s current and former directors and officers for allegedly making false statements and omissions in the registration statement and prospectus filed by the Company in connection with its January 24, 2018, secondary public offering of common stock. On October 29, 2020, Adamas signed a Memorandum of Understanding to settle this lawsuit for a payment of $7.5 million to eligible settlement class members in resolution of claims asserted against the Company, its officers, directors, and the other defendants. The settlement will be paid by the Company’s Director & Officer liability insurance. As a result of signing the Memorandum of Understanding and the potential liability becoming probable and estimable, the Company has recorded a litigation settlement liability of $7.5 million, which is included in accrued liabilities on the consolidated balance sheets. Additionally, the Company has recorded an insurance litigation recovery of $7.5 million within prepaid expenses and other current assets on the consolidated balance sheets, which represents the estimated insurance proceeds agreed with the Company’s insurance carrier in excess of the Company’s retention. The Company and the other defendants continue to deny each of the plaintiff’s claims and all liability. The Company has agreed to the settlement to resolve the disputes, avoid the costs and risks of further litigation, and avoid further distractions to management. This settlement remains subject to final documentation and approval by the court. A final non-appealable closure of this court action is expected in mid-2021.

On December 10, 2019, another putative class action lawsuit alleging violations of the federal securities laws was filed by Ali Zaidi against the Company and certain of the Company’s current and former directors and officers in federal court in the Northern District of California (Case No. 4:19-cv-08051). This lawsuit alleges violations of the Securities Exchange Act of 1934 by the Company and certain of the Company’s current and former officers. On March 16, 2020, a shareholder derivative lawsuit was filed by Patrick Van Camp in federal court in the Northern District of California (Case No. 4:20-cv-01815) naming the Company and certain of the Company’s current and former directors and officers as defendants. This lawsuit alleges breaches of fiduciary duty and violations of the Securities Exchange Act of 1934 by certain of the Company’s current and former directors and officers. The Company is named as a nominal defendant only. On April 6, 2020, another, virtually identical, shareholder derivative lawsuit was filed by James Druzbik in federal court in the Northern District of California (Case No. 4:20-cv-02320) naming the Company and certain of the Company’s current and former directors and officers as defendants. This lawsuit contains the same allegations, claims, and defendants as the first derivative action. The Company is named as a nominal defendant only. Other similar cases may be filed in the future. In all of these actions, Plaintiffs seek unspecified monetary damages and other relief. These actions are ongoing. The Company believes it has strong factual and legal defenses to all actions and intends to defend itself vigorously.

From time to time, the Company may be party to legal proceedings, investigations, and claims in the ordinary course of its business. Other than the matters described above, the Company is not currently party to any material legal proceedings.

10. LONG-TERM DEBT

Royalty-Backed Loan Agreement

In May 2017, the Company, through a new wholly-owned subsidiary, Adamas Pharma, LLC, entered into a Royalty-Backed Loan with HCR, whereby the Company initially borrowed $35 million, followed by an additional $65 million received in the fourth quarter 2017 upon FDA’s recognition in the Orange Book of seven-year orphan drug exclusivity, which GOCOVRI earned upon approval on August 24, 2017. Principal and interest will be payable quarterly from the proceeds of a 12.5% royalty on U.S. net sales of GOCOVRI and up to $15 million of the Company’s annual royalties from Allergan on U.S. net sales of NAMZARIC starting in May 2020, pursuant to the Company’s license agreement with Allergan. The royalty rate on net sales of GOCOVRI will drop to 6.25% after the principal amount of the loan has been repaid in full, until the Company has made total payments of 200% of the funded amounts. The Company may elect to voluntarily prepay the loan at any time, or may be required to prepay subject to specified prepayment trigger events as described below, in which case the amount due will be 200% of the funded amounts, less total payments made to date. Royalty rates are subject to increase to 17.5% and 22.5% if total principal and interest payments have not reached minimum specified levels at measurement dates on December 2021 and December 2022, respectively. Under the

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terms of the loan, HCR has recourse to Adamas Pharma, LLC, not the Company. The loan agreement matures in December 2026 but as the repayment of the loan amount is contingent upon the sales volumes of GOCOVRI and royalties from Allergan, the repayment term may be shortened depending on the actual sales of GOCOVRI and actual royalties received from Allergan.

The loans bear interest at an annual rate of 11% on the outstanding principal amount and includes an interest-only period until the interest payment date following the ninth full calendar quarter after the $65 million additional loan received in the fourth quarter 2017. To the extent that royalties were insufficient to pay interest in full during the first nine quarters of the loan, any unpaid portion of the quarterly interest payment was added to the principal amount of the loans. This payment-in-kind period ended in the first quarter of 2020.

In connection with the Royalty-Backed Loan, in 2017 the Company paid HCR a lender expense amount of $0.4 million and incurred additional debt issuance costs totaling $0.8 million. The lender expense and additional debt issuance costs have been recorded as a debt discount and are being amortized and recorded as interest expense over the estimated term of the loan using the effective interest method. The Company recorded interest expense, including amortization of the debt discount, related to the Royalty-Backed Loan, of $14.0 million and $15.0 million for the twelve months ended December 31, 2020 and 2019, respectively. Interest expense over the life of the Royalty-Backed Loan includes an annual interest rate of 11% on the outstanding principal, a royalty rate of 6.25% on net sales of GOCOVRI after the principal amount is paid, and amortization of the debt discount. The effective interest rate as of December 31, 2020 on the amounts borrowed under the Royalty-Backed Loan, including the amortization of the debt discount, was 12.8%.

The assumptions used in determining the expected repayment term of the loan and amortization period of the debt discount require that the Company make estimates that could impact the short and long-term classification of these costs, as well as the period over which these costs will be amortized and the effective interest rate.

The Company may be required to make mandatory prepayments of the borrowings under the Royalty-Backed Loan upon the occurrence of specified prepayment trigger events, including: (1) the occurrence of any event of default or (2) the occurrence of a change in control. Upon the prepayment of all or any of the outstanding principal balance, the Company shall pay, in addition to such prepayment, a prepayment premium. As HCR, as the holder of the loans, may exercise the option to require prepayment by the Company, the prepayment premium is considered to be an embedded derivative which is required to be bifurcated from its host contract and accounted for as a separate financial instrument. The valuation of the embedded derivative is described further in Note 3 - Fair Value Measurements.

Payment obligations under the Royalty-Backed Loan are as follows (in thousands):

	December 31,
	2020		2019
Total repayment obligation	$	200,000	$	200,000
Less: Interest to be accreted in future periods	(49,230)		(63,217)
Less: Payments made	(20,806)		(9,068)
Carrying value of loans payable	$	129,964	$	127,715
Less: Current portion of long-term debt	(3,657)		(2,041)
Non-current portion of long-term debt	$	126,307	$	125,674

The estimated fair value of the long-term debt, as measured using Level 3 inputs, approximates $109.4 million as of December 31, 2020. The estimated fair value was calculated in the same methodology as the valuation of the embedded derivative as described further in Note 3 - Fair Value Measurements.

There are no contractual minimum principal payments due until the loan matures in December 2026 as the repayment of the loan amount is contingent upon the sales volumes of GOCOVRI and royalties from Allergan on U.S. net sales of NAMZARIC.

On December 1, 2020, Adamas Pharma, LLC entered into an agreement with HCR to amend certain key terms of the Royalty-Backed Loan to be effective upon the closing of the Company’s Asset Purchase Agreement with Osmotica. The Asset Purchase Agreement subsequently closed on January 4, 2021, and is described further in Note 9 -

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Commitments and Contingencies. For further discussion of the key terms amended under the Royalty-Backed Loan, see Note 17 - Subsequent Events.

Paycheck Protection Program

On April 15, 2020, the Company received proceeds from a loan in the amount of $2.7 million (the “PPP Loan”) from JPMorgan Chase Bank, N.A. (the “Lender”), pursuant to the Small Business Association (“SBA”) Paycheck Protection Program (or “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). At the time the Company applied for the PPP loan, the Company believed it qualified to receive the funds pursuant to the then published qualification requirements. On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance regarding qualification requirements for public companies. Based on the Company’s assessment of the new guidance, on April 29, 2020, the Company repaid the principal and interest on the PPP loan.

11. CONVERTIBLE PREFERRED STOCK

The Company’s amended and restated certificate of incorporation filed on April 15, 2014, authorizes 5,000,000 shares of preferred stock, of which there were no shares outstanding as of December 31, 2020 and 2019.

12.  STOCKHOLDERS’ EQUITY

Common Stock

The amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of common stock. Common stockholders are entitled to dividends as and when declared by the board of directors, subject to the rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date. Each share of common stock is entitled to one vote.

Sales Agreement

In November 2019, the Company entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as sales agent, pursuant to which the Company may, from time to time, issue and sell at its option, shares of the Company’s common stock for an aggregate offering price of up to $50.0 million under an at-the-market offering (“ATM Offering”). Sales of the common stock, if any, will be made pursuant to a shelf registration statement that was declared effective by the Securities and Exchange Commission (“SEC”) on December 2, 2019. Cowen is acting as sole sales agent for any sales made under the Sales Agreement and the Company will pay Cowen a commission of up to 3% of the gross proceeds. The Company’s common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. The Company is not obligated to make any sales of shares of common stock under the Sales Agreement. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. No shares were sold under the Sales Agreement during the fiscal year ended December 31, 2019. During the fiscal year ended December 31, 2020, 217,403 shares were sold at an average price of $4.94, for net proceeds of $1.0 million.

Shares Reserved for Future Issuance

Shares of the Company’s common stock reserved for future issuance are as follows:

	December 31,
	2020	2019
Common stock awards issued and outstanding	7,172,029	6,874,633
Authorized for future issuance under 2014 Equity Incentive Plan	3,518,414	2,376,613
Authorized for future issuance under 2016 Inducement Plan	469,419	236,269
Employee stock purchase plan	1,018,060	926,943
Total	12,177,922	10,414,458

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13. STOCK-BASED COMPENSATION

Stock Compensation Plans

In October 2002, the Company established its 2002 Employee, Director, and Consultant Stock Plan and in December 2007, the Company established its 2007 Stock Plan. No further grants were then made under the 2002 Plan.

In February 2014, the Company’s board of directors adopted, and in March 2014 the Company’s stockholders approved, the 2014 Equity Incentive Plan (the “2014 Plan”), which became effective on the completion of the IPO. No further grants were then made under the 2007 Plan. Under the 2014 Plan, 1,993,394 shares of the Company’s common stock were made available for issuance which included all shares that, as of the effective time, were reserved for issuance pursuant to the 2007 Plan, and is subject to further increase for shares that were subject to outstanding options under the 2007 Plan and the 2002 Plan as of the effective time that thereafter expire, terminate, or otherwise are forfeited or reacquired. The number of shares of the Company’s common stock reserved for issuance pursuant to the 2014 Plan will automatically increase on the first day of each fiscal year for a period of up to ten years, commencing on the first day of the fiscal year following 2014, in an amount equal to 4% of the total number of shares of the Company’s capital stock outstanding on the last day of the preceding fiscal year, or a lesser number of shares as determined by the Company’s board of directors. On January 1, 2020, the common stock available for issuance under the 2014 Plan increased by 1,118,591 shares. As of December 31, 2020, the number of shares available for issuance under the 2014 Plan was 3,518,414.

Options granted under the 2014 Stock Plan may have terms of up to ten years. All options issued to date have had a ten year life. The exercise price of an ISO shall not be less than 100% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. The exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, respectively, as determined by the board of directors. The exercise price of a NSO shall not be less than the par value per share of common stock. Options and restricted stock units granted generally vest over four years. Certain grants have other vesting periods approved by the Company’s Board of Directors or an authorized committee.

In March 2016, the Company’s board of directors approved the 2016 Inducement Plan (the “Inducement Plan”) under which 450,000 shares of the Company’s common stock were made available for issuance. An amendment to the Inducement Plan was approved to increase the number of shares available for issuance by an additional 450,000 shares in each of January 2017, November 2017, March 2019, and February 2020, and an additional 600,000 shares in October 2020, for a total of 2,400,000 shares, resulting in a total of 2,850,000 shares of common stock issuable under the Inducement Plan. As of December 31, 2020, the number of shares available for issuance under the Inducement Plan was 469,419. Options granted under the Inducement Plan may have terms of up to ten years. All options issued to date have had a ten year life. Consistent with the 2014 Plan, options and restricted stock units granted generally vest over four years. The Inducement Plan was adopted by the board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

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Stock Option Activity

Stock option activity under all of the Company’s stock compensation plans is summarized as follows:

	Outstanding Options			Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
	Number of Shares	Weighted Average Exercise Price
Stock Options
Balances, December 31, 2019	5,516,684	$	12.06
Options granted	1,562,148	3.71
Options exercised	(237,425)	0.74
Options forfeited	(558,612)	12.48
Options expired	(693,580)	17.98
Balances, December 31, 2020	5,589,215	$	9.43	5.56	$	2,806
Vested and expected to vest, December 31, 2020	5,369,025	$	9.57	5.43	$	2,700
Exercisable, December 31, 2020	3,387,312	$	11.69	3.53	$	1,740

The aggregate intrinsic value of options outstanding, vested and expected to vest, and exercisable were calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of December 31, 2020 of $4.33. The intrinsic value of options exercised, calculated as the difference between the exercise price and the fair value of the Company’s common stock on the date of exercise, was approximately $0.9 million and $0.9 million for the years ended December 31, 2020 and 2019, respectively.

During the years ended December 31, 2020 and 2019, the Company granted stock options to employees to purchase 1,562,148 and 1,721,508 shares of common stock, respectively, with a weighted-average grant date fair value of $2.19 and $4.01, respectively. As of December 31, 2020, there was total unrecognized compensation cost related to unvested options of approximately $6.6 million. This cost is expected to be recognized over a weighted average remaining vesting period of 2.7 years. The total fair value of employee stock options vested for the years ended December 31, 2020 and 2019 was $4.6 million and $9.6 million, respectively.

Restricted Stock Unit Activity

Restricted stock unit activity under all of the Company’s stock compensation plans is summarized as follows:

	Outstanding Units
		Weighted-Average Grant Date Fair Value
Restricted Stock Units	Number of Shares
Unvested, December 31, 2019	1,357,949	$	7.79
Granted	928,998	3.29
Vested	(258,819)	9.46
Forfeited	(445,314)	7.50
Unvested, December 31, 2020	1,582,814	$	4.95

The aggregate intrinsic value of RSUs outstanding on December 31, 2020 was $6.9 million based on the fair value of the Company’s common stock on that date. The aggregate intrinsic value of RSUs vested for the years ended December 31, 2020 and 2019 was $0.9 million and $1.0 million, respectively. As of December 31, 2020, there was total unrecognized compensation cost related to unvested RSUs of approximately $4.7 million. This cost is expected to be recognized over a weighted average remaining vesting period of 2.2 years.

Employee Stock Purchase Plan

In February 2014, the Company’s board of directors adopted and, in March 2014, the Company’s stockholders approved, the 2014 Employee Stock Purchase Plan (the “ESPP”), which became effective on the completion of the Company’s IPO. The ESPP authorized the issuance of 262,762 shares. Under the ESPP, employees, subject to certain restrictions, may purchase shares of common stock at 85% of the fair market value at either the beginning of the offering

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period or the date of purchase, whichever is less. Purchases are limited to the lesser of 15% of each employee’s eligible annual compensation or $25,000. Through the end of 2020, the Company has issued a total of 612,357 shares under the ESPP. The number of shares available for future issuance under the plan were 1,018,060 at December 31, 2020. Beginning January 1, 2015 and continuing through and including January 1, 2024, the amount of common stock reserved for issuance under the ESPP will increase annually on that date by the lesser of (i) one percent (1%) of the total number of shares of common stock outstanding on such December 31, (ii) 520,000 shares of common stock, or (iii) a number of shares as determined by the board of directors prior to the beginning of each year, which shall be the lesser of (i) or (ii) above. On January 1, 2020, the common stock available for issuance under the ESPP increased by 279,648 shares.

Stock-Based Compensation Expense

The following table reflects stock-based compensation expense recognized for the years ended December 31, 2020 and 2019 (in thousands):

	Years Ended December 31,
	2020		2019
Research and development	$	385	$	1,732
Selling, general and administrative	6,046		11,120
Total stock-based compensation expense	$	6,431	$	12,852

Stock-based compensation of $0.3 million and $0.2 million was capitalized into inventory for the twelve months ended December 31, 2020 and 2019. Stock-based compensation capitalized into inventory is recognized as cost of sales when the related product is sold.

The Company’s method of valuation for share-based awards is based on the Black-Scholes model. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. A description of the assumptions follows:

•The expected stock price volatility assumption was determined by examining the historical volatilities of a group of industry peers, as well as taking into consideration the Company’s own historical volatility since its IPO in 2014. Beginning in 2021, the Company will calculate expected volatility based solely on the historical volatility of its own common stock as it will have a sufficient amount of historical information.

•The risk-free interest rate is based on the U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

•The expected term of the options granted represents the average period the stock options are expected to remain outstanding. The Company has elected to use the “simplified method” for estimating the expected term, which is calculated as the mid-point between the vesting period and the contractual term of the options.

•The expected dividend yield assumption was based on the fact that the Company has never paid cash dividends and currently has no intention to pay cash dividends.

Stock-based compensation expense in the consolidated statements of operations is based on awards ultimately expected to vest and is reduced for estimated forfeitures, based on historical experience.

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The Company estimated the fair value of employee stock options and ESPP shares on the date of grant using the Black-Scholes model with the following weighted-average assumptions:

	Years Ended December 31,
	2020	2019
Stock Options
Expected price volatility	65% - 66%	65% - 69%
Risk-free interest rate	0.37% - 1.75%	1.52% - 2.58%
Expected term (in years)	5.50 - 6.25	5.50 - 6.25
Dividend yield	—	—
Employee Stock Purchase Plan
Expected price volatility	67% - 80%	53% - 56%
Risk-free interest rate	0.10% - 0.18%	1.60% - 2.35%
Expected term (in years)	0.50	0.50
Dividend yield	—	—

Stock-based compensation expense related to employee stock options for the years ended December 31, 2020 and 2019 was $3.2 million and $9.4 million, respectively. Stock-based compensation expense related to the ESPP plan for the years ended December 31, 2020 and 2019 was $0.2 million and $0.4 million, respectively. Stock-based compensation expense related to restricted stock units was $2.9 million and $3.1 million for the years ended December 31, 2020 and 2019, respectively.

Included in stock-based compensation expense for the year ended 2019 was expense of approximately $2.2 million recognized as a result of the modification of certain stock options and restricted stock units associated with the termination of employment in September 2019 of the Company’s Chief Executive Officer and notification of retirement in August 2019 of the Company’s Chief Financial Officer.

Non-Employee Stock-Based Compensation

During both the years ended 2020 and 2019, the Company granted no options to purchase common stock and no restricted stock units to consultants and recorded no stock compensation expense.

14. INCOME TAXES

Loss before benefit for income tax is summarized as follows (in thousands):

	Years Ended December 31,
	2020		2019
United States	$	(57,378)	$	(105,186)
International	(25)		—
Total	$	(57,403)	$	(105,186)

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21% to pretax loss from operations as a result of the following:

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	December 31,
	2020		2019
Statutory federal income tax rate	$	(12,054)	$	(22,079)
State income taxes, net of federal tax benefits	(4,390)		(8,473)
Tax credits	(435)		(1,398)
Stock compensation	2,646		2,648
Nondeductible compensation	164		278
Other	426		198
Change in valuation allowance	13,643		28,826
Income tax provision	$	—	$	—

Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2020		2019
Deferred tax assets
Net operating loss carryforwards	$	105,264	$	99,449
Research and development tax credits	20,609		20,174
Accruals and reserves	9,780		7,004
Stock compensation	8,017		9,291
Depreciation and amortization	1,062		1,108
Lease liabilities	2,380		2,889
Other	6,014		—
Gross deferred tax assets	153,126		139,915
Less: Valuation allowance	(151,219)		(137,576)
Net deferred tax assets	1,907		2,339
Deferred tax liabilities
Right of use assets	(1,907)		(2,339)
Net deferred tax liabilities	(1,907)		(2,339)
Net deferred taxes	$	—	$	—

The deferred income tax assets have been fully offset by a valuation allowance, as realization is dependent on future earnings, if any, the timing and amount of which are uncertain. The net change in the valuation allowance was $13.6 million and $28.8 million for the years ended December 31, 2020 and 2019, respectively.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realization of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood, and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. The Tax Act repealed corporate alternative minimum tax (“AMT”) for tax years beginning after December 31, 2017, and provided that any existing AMT credit carryovers were refundable beginning in 2018 through 2022. The Company has received the refund in full relating to its AMT credit carryover as of December 31, 2020. The Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying balance sheets.

As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $375.1 million available to reduce future taxable income and state net operating loss carryforwards of approximately $345.2 million. The federal net operating loss carryforward begins expiring in 2024, and state net operating loss carryforward begins expiring in 2028.

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The Company has federal research and development tax credit carryforwards of approximately $6.9 million. If not utilized, the carryforwards will begin expiring in 2023. The Company has state research and development credit carryforwards of approximately $4.6 million which do not expire. The Company also has orphan drug credit carryforwards of $14.4 million which begin to expire in 2035.

Under federal and similar state tax statutes, changes in the Company’s ownership may limit its ability to use its available net operating loss and tax credit carryforwards. The annual limitation, as a result of a change of control, may result in the expiration of net operating losses and credits before utilization.

The Company’s ability to use its remaining net operating loss and tax credit carryforwards may be further limited if the Company experiences a Section 382 ownership change in connection with future changes in its stock ownership. The Company has completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards through April 2018 and found that there is no forfeiture of the Company’s attributes.

Uncertain Tax Positions

The total amounts of unrecognized tax benefits for the years ended December 31, 2020 and 2019 were $5.2 million and $5.1 million, respectively. If recognized, none of the unrecognized tax benefits would affect the effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	December 31,
	2020		2019
Balance at the beginning of the year	$	5,065	$	4,697
Additions based on current period tax positions	119		368
Balance at the end of the year	$	5,184	$	5,065

The Company’s policy is to account for interest and penalties as income tax expense. The Company accrued no interest related to unrecognized tax benefits during the years ended December 31, 2020 and 2019.

The Company files income tax returns in the U.S. federal jurisdiction, Pennsylvania, California, other state jurisdictions, and India. The Company is subject to U.S. federal income tax examination for the calendar years ending 2003 through 2020 due to net operating losses that have been carried forward for tax purposes. Additionally, the Company is subject to state income tax examinations for the 2003 through 2020 calendar years due to net operating losses that are being carried forward for tax purposes. The Company is subject to audit by the Indian tax authorities from 2014 onward. The Company is not currently under audit in any major tax jurisdiction.

15. NET LOSS PER SHARE

For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. The following table presents the calculation of the basic and diluted net loss per share (in thousands, except per share data):

	Years Ended December 31,
	2020		2019
Net loss attributable to common stockholders, basic and diluted	$	(57,403)	$	(105,186)
Weighted average common shares used in calculating net loss per common share, basic and diluted	28,305		27,677
Net loss per share attributable to common stockholders, basic and diluted	$	(2.03)	$	(3.80)

The following total outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented, because including them would have been anti-dilutive (in thousands):

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	December 31,
	2020	2019
Options to purchase common stock	5,589	5,517
Restricted stock units	1,583	1,358
Total	7,172	6,875

16. SUBSEQUENT EVENTS

On January 4, 2021, the Company closed its Asset Purchase Agreement with Osmotica for the acquisition of OSMOLEX ER, as described further in Note 9 - Commitments and Contingencies. At closing, the Company paid $7.3 million, including a $7.5 million base purchase price less $0.2 million for the assumption of certain liabilities.

On January 4, 2021, upon the closing of the Asset Purchase Agreement with Osmotica, the Company’s December 1, 2020 agreement to amend certain key terms of its Royalty-Backed Loan with HCR also became effective. Pursuant to the amendment, upon its effectiveness of January 4, 2021, the Royalty-Backed Loan was amended, inter alia, to: (i) provide for repayment from a royalty on OSMOLEX ER on the same terms as, and in addition to, the royalty for GOCOVRI; (ii) eliminate the potential royalty rate step-up to 17.5%; (iii) revise the prepayment provisions after a change of control provision to provide that the full obligation to HCR is fully satisfied by making a prepayment sufficient to bring the cumulative payments to HCR to $175 million, if such prepayment is made on or prior to December 31, 2022, or $195 million if made thereafter; (iv) extend the maturity date to March 31, 2027; and (v) add a covenant requiring the Company to maintain minimum cash, cash equivalents and marketable securities of at least $25 million.

Subsequent to December 31, 2020, and through February 16, 2021, the Company issued an aggregate of 1,335,896 shares of common stock under its 2019 Sales Agreement, at an average price of $5.57, for net proceeds of approximately $7.2 million.

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of December 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in conformity with generally accepted accounting principles and includes those policies and procedures that:

•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment, management has concluded that, as of December 31, 2020, our internal control over financial reporting is effective based on those criteria.

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.  OTHER INFORMATION

None.

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PART III

Certain information required by Part III is omitted from this annual report on Form 10-K and is incorporated herein by reference to our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, or the Proxy Statement, which we intend to file pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, within 120 days after December 31, 2020.

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item concerning our directors is incorporated by reference to the information set forth in the section titled “Election of Directors” and “Corporate Governance” in our Proxy Statement. Information required by this item concerning our executive officers is incorporated by reference to the information set forth in the section titled “Executive Officers and Key Employees” in our Proxy Statement. Information regarding Section 16 reporting compliance, if any, is incorporated by reference to the information set forth in the section titled “Delinquent Section 16(a) Reports” in our Proxy Statement.

Our written Code of Conduct and Ethics applies to all of our directors and employees, including our executive officers, including without limitation our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Conduct and Ethics is available on our website at http://www.adamaspharma.com in the Investors section under “Corporate Governance”. Changes to or waivers of the Code of Conduct and Ethics will be disclosed on the same website. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver of, any provision of the Code of Conduct and Ethics in the future by disclosing such information on our website.

ITEM 11.  EXECUTIVE COMPENSATION

The information required by this item regarding executive compensation is incorporated by reference to the information set forth in the sections titled “Non-Employee Director Compensation,” “Executive Compensation” and “Compensation Committee Interlocks and Insider Participation” in our Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference to the information set forth in the section titled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item regarding certain relationships and related transactions and director independence is incorporated by reference to the information set forth in the sections titled “Certain Relationships and Related Persons Transactions” and “Corporate Governance”, respectively, in our Proxy Statement.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item regarding principal accountant fees and services is incorporated by reference to the information set forth in the section titled “Principal Accountant Fees and Services” in our Proxy Statement.

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PART IV

ITEM 15.  EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a)(1)  Financial Statements

Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.

(a)(2)  Financial Statement Schedules

Financial statement schedules have been omitted in this report because they are not applicable, not required under the instructions, or the information requested is set forth in the consolidated financial statements or related notes thereto.

(a)(3)  Exhibits

EXHIBIT INDEX

Exhibit Number		Incorporation By Reference
	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date	Filed / Furnished Herewith
2.1	Asset Purchase Agreement by and between Adamas Pharmaceuticals, Inc. and Osmotica Pharmaceutical US LLC.					X
3.1	Amended and Restated Certificate of Incorporation of Adamas Pharmaceuticals, Inc.	8-K	001-36399	3.1	4/15/2014
3.2	Amended and Restated Bylaws of Adamas Pharmaceuticals, Inc.	S-1	333-194342	3.4	3/5/2014
4.1	Reference is made to Exhibits 3.1 through 3.2.
4.2	Form of Common Stock Certificate of Adamas Pharmaceuticals, Inc.	S-1	333-194342	4.1	3/26/2014
4.3	Fourth Amended and Restated Investor Rights Agreement, dated as of June 30, 2011, by and among the registrant and certain of its stockholders.	S-1	333-194342	10.5	3/5/2014
4.4	Description of Capital Stock.	10-K	001-36399	4.4	2/25/2020
10.1*	Adamas Pharmaceuticals, Inc. 2007 Stock Plan, as amended, and Form of Stock Option Grant Notice, Option Agreement and Form of Notice of Exercise.	S-1	333-194342	10.2	3/5/2014
10.2*	Adamas Pharmaceuticals, Inc. 2014 Employee Stock Purchase Plan.	S-1	333-194342	10.4	3/26/2014
10.3*	Adamas Pharmaceuticals, Inc. 2014 Equity Incentive Plan.	S-1	333-194342	10.3	4/7/2014
10.4*	Adamas Pharmaceuticals, Inc. Form of Stock Option Grant Notice and Option Agreement.	10-Q	001-36399	10.24	8/11/2015
10.5*	Adamas Pharmaceuticals, Inc. Form of Restricted Stock Unit Grant Notice and Award Agreement.	10-K	001-36399	10.24	2/23/2016
10.6*	Adamas Pharmaceuticals, Inc. Amended and Restated 2016 Inducement Plan.					X
10.7*	Form of Restricted Stock Unit Grant Notice and Award Agreement under the Adamas Pharmaceuticals, Inc. 2016 Inducement Plan.	S-8	333-210255	99.6	3/17/2016

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Exhibit Number		Incorporation By Reference
	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date	Filed / Furnished Herewith
10.8*	Form of Stock Option Grant Notice and Option Agreement under the Adamas Pharmaceuticals, Inc. 2016 Inducement Plan.	S-8	333-210255	99.7	3/17/2016
10.9	Office Lease Agreement by and between the registrant and CA-Emeryville Properties Limited Partnership, dated as of October 25, 2006.	S-1	333-194342	10.7	3/5/2014
10.10	First Amendment to Lease by and between the registrant and NOP Watergate LLC (as successor in interest to CA-Emeryville Properties Limited Partnership), dated as of April 29, 2009.	S-1	333-194342	10.8	3/5/2014
10.11	Second Amendment to Office lease Agreement by and between the registrant and Emeryville Office, L.L.C. (as successor to NOP Watergate, LLC), dated as of January 18, 2011.	S-1	333-194342	10.9	3/5/2014
10.12	Third Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of June 17, 2011.	S-1	333-194342	10.10	3/5/2014
10.13	Fourth Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of January 31, 2013.	S-1	333-194342	10.11	3/5/2014
10.14	Fifth Amendment to Lease by and between the registrant and Emeryville Office, L.L.C., dated as of May 23, 2014.	10-Q	001-36399	10.3	8/7/2014
10.15	Sixth Amendment to Lease by and between the registrant and KBSIII Towers At Emeryville, LLC, dated as of October 27, 2015.	10-K	001-36399	10.23	2/23/2016
10.16	Seventh Amendment to Lease by and between the registrant and KBSIII Towers At Emeryville, LLC, dated as of January 16, 2018.	10-K	001-36399	10.38	2/22/2018
10.17	Eighth Amendment to Lease by and between the registrant and KBSIII Towers At Emeryville, LLC, dated as of August 8, 2018.	10-Q	001-36399	10.1	11/1/2018
10.18**	License Agreement by and between the registrant and Forest Laboratories Holdings Limited, dated as of November 13, 2012.	S-1/A	333-194342	10.6	4/7/2014
10.19*	Adamas Pharmaceuticals, Inc. Amended and Restated Executive Severance Plan.					X
10.20*	Offer Letter by and between Adamas Pharmaceuticals, Inc. and Gregory Went, dated as of March 8, 2006.	S-1	333-194342	10.12	3/5/2014
10.21*	Transition, separation, and consulting agreement by and between Adamas Pharmaceuticals, Inc. and Gregory T. Went, Ph.D., dated September 11, 2019.	10-Q	001-36399	10.2	11/7/2019
10.22*	Compensation arrangements with Executive Officers.					X
10.23*	Offer Letter by and between Adamas Pharmaceuticals, Inc. and Vijay Shreedhar, Ph.D., dated May 14, 2019.	10-Q	001-36399	10.2	8/8/2019

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Exhibit Number		Incorporation By Reference
	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date	Filed / Furnished Herewith
10.24*	Employment Offer by and between Adamas Pharmaceuticals, Inc. and Neil F. McFarlane, dated September 12, 2019.	10-Q	001-36399	10.3	11/7/2019
10.25*	Form of Indemnity Agreement between the registrant and its directors and officers.	S-1	333-194342	10.17	3/5/2014
10.26*	Compensation arrangements with respect to Non-Employee Directors.	10-Q	001-36399	10.3	5/7/2020
10.27**	Loan Agreement dated May 11, 2017 between Adamas Pharma, LLC and Healthcare Royalty Partners III, L.P.	10-Q	001-36399	10.4	8/8/2017
10.28	Secured Promissory Note dated May 11, 2017 between Adamas Pharma, LLC and Healthcare Royalty Partners III, L.P.	10-Q	001-36399	10.5	8/8/2017
10.29	Secured Promissory Note dated November 27, 2017 between Adamas Pharma, LLC and Healthcare Royalty Partners III, L.P.	10-K	001-36399	10.37	2/22/2018
10.30***	Amendment No. 2 to the Loan Agreement dated January 2, 2020 between Adamas Pharma, LLC and Healthcare Royalty Partners III, L.P.	10-K	001-36399	10.37	2/25/2020
10.31***	Amendment No. 3 to the Loan Agreement dated December 1, 2020 between Adamas Pharma, LLC and Healthcare Royalty Partners III, L.P.					X
10.32**	Amended and Restated Commercial Supply Agreement by and between Adamas Pharmaceuticals, Inc. and Catalent Pharma Solutions, LLC.	10-Q	001-36399	10.1	11/2/2017
10.33**	First Amendment to Amended and Restated Commercial Supply Agreement by and between Adamas Pharmaceuticals, Inc. and Catalent Pharma Solutions, LLC.	10-Q	001-36399	10.3	8/8/2019
10.34**	Amended and Restated API Supply Agreement by and between Adamas Pharma, LLC and Moehs Ibérica, S.L.	10-Q	001-36399	10.2	11/2/2017
10.35***	Binding Term Sheet by and between Adamas Pharma, LLC and Sandoz, Inc.	10-K	001-36399	10.41	2/25/2020
21.1	List of the subsidiaries of the Registrant.					X
23.1	Consent of Independent Registered Public Accounting Firm.					X
24.1	Power of Attorney (included on the signature page hereto).					X
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.					X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.					X

97

Exhibit Number		Incorporation By Reference
	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date	Filed / Furnished Herewith
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(1).					X
101.INS	Inline XBRL Instance Document					X
101.SCH	Inline XBRL Taxonomy Extension Schema Document					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					X
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)					X

____________________________

(1)This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

* Management compensatory contract or arrangement.

** Confidential treatment has been granted for certain portions of this exhibit.

*** Certain confidential information contained in this document, marked by brackets, is omitted because it is both (i) not material and (ii) would cause competitive harm to Adamas Pharmaceuticals, Inc.

ITEM 16.  FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Adamas Pharmaceuticals, Inc. (Registrant)
Date:	February 23, 2021	/s/ Neil F. McFarlane
		Neil F. McFarlane Chief Executive Officer (Principal Executive Officer)
Date:	February 23, 2021	/s/ Christopher B. Prentiss
		Christopher B. Prentiss Chief Financial Officer (Principal Financial and Accounting Officer)

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Neil F. McFarlane and Christopher B. Prentiss, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her, and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Neil F. McFarlane	Chief Executive Officer	February 23, 2021
Neil F. McFarlane	(Principal Executive Officer)
/s/ Christopher B. Prentiss	Chief Financial Officer	February 23, 2021
Christopher B. Prentiss	(Principal Financial and Accounting Officer)
/s/ David L. Mahoney	Chairman of the Board and Director	February 23, 2021
David L. Mahoney
/s/ Michael F. Bigham	Director	February 23, 2021
Michael F. Bigham
/s/ Martha J. Demski	Director	February 23, 2021
Martha J. Demski
/s/ Mardi C. Dier	Director	February 23, 2021
Mardi C. Dier
/s/ William W. Ericson	Director	February 23, 2021
William W. Ericson
/s/ John A. MacPhee	Director	February 23, 2021
John A. MacPhee
/s/ Spyridon Papapetropoulos	Director	February 23, 2021
Spyridon Papapetropoulos, M.D., Ph.D.
/s/ Anna S. Richo	Director	February 23, 2021
Anna S. Richo

100

EX-2.1

Exhibit 2.1

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would likely be competitively harmful if publicly disclosed.

Execution Version

ASSET PURCHASE AGREEMENT

between:

Osmotica Pharmaceutical US LLC, a Delaware limited liability company,

Osmotica, Kereskedelmi és Szolgáltató Korlátolt Felelõsségû Társaság, a corporation

organized under the laws of Hungary,

Osmotica Holdings US LLC, a Delaware limited liability company, and

Adamas Pharmaceuticals, Inc., a Delaware corporation

____________________________

Dated as of December 1, 2020

____________________________

A-1

TABLE OF EXHIBITS AND SCHEDULES

Exhibit A	Certain Definitions
Exhibit B	Form of Assumption Agreement
Exhibit C	Form of Bill of Sale
Exhibit D	Forms of Patent and Trademark Assignment Agreements
Exhibit E	Transition Services Agreement
Exhibit F	Purchaser FDA Transfer Letter
Exhibit G	Seller FDA Transfer Letter
Exhibit H	Commercial Supply Agreement
Exhibit I	Quality Agreement
Exhibit J	Stipulation of Dismissal
Schedule 1.1	Specified Assets
Schedule 4.6	Purchase Price Adjustment
Schedule 1.6	Nonassigned Assets
Schedule 1.10(a)	Allocation of Purchase Price

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement is being entered into as of December 1, 2020 (the “Effective Date”), by and between Osmotica Pharmaceutical US LLC, a Delaware Limited Liability Company and Osmotica Kereskedelmi és Szolgáltató Korlátolt Felelõsségû Társaság, a corporation organized under the laws of Hungary (collectively, the “Seller”), Osmotica Holdings US LLC, a Delaware Limited Liability Company(the “Seller Guarantor”) and Adamas Pharmaceuticals, Inc., a Delaware corporation (“Purchaser”). Seller and Purchaser are referred to collectively in this Agreement as the “Parties.” Certain other capitalized terms used in this Agreement are defined in Exhibit A.

Recitals

A.    Seller is a pharmaceutical company that develops, markets and sells pharmaceutical products, including Osmolex ER® brand extended-release amantadine tablets as approved under NDA No. 209410 in each of 129 mg, 161 mg, 193 mg and 258 mg dosage strengths.

B.    Purchaser and Seller are parties to a declaratory judgment and infringement counterclaim patent litigation captioned, Osmotica Pharmaceutical US LLC, et al. v. Adamas Pharmaceuticals, Inc. et al., Civil Action No. 1:18-cv-00278-CFC, pending in the United States District Court for the District of Delaware (the “Infringement Litigation”).

C.    The Parties wish: to provide for the purchase by Purchaser of certain assets from Seller and the Specified Affiliates, to provide for certain related transactions, and to settle the Infringement Litigation, all on the terms and subject to the conditions and other provisions set forth in this Agreement and in the Ancillary Agreements.

Agreement

The Parties, intending to be legally bound, agree as follows:

1.Sale and Purchase of Assets; Related Transactions.

1.1Sale and Purchase of Assets. On the terms and subject to the conditions and other provisions set forth in this Agreement, at the Closing, Seller will (or Seller will cause the Specified Affiliates to) sell, convey, transfer, assign and deliver to Purchaser and Purchaser will purchase from Seller, free and clear of all Liens except for Permitted Liens, all rights, title and interest of Seller and its Affiliates in and to all of the following assets, in each case, as in existence as of the Closing Date (the assets listed in Section 1.1(a) through Section 1.1(j), collectively, the “Specified Assets”):

(a)the Patent Rights, registered Trademark Rights, Product Know-How, domain names, telephone numbers and copyrights in publications or pending publications, in each case, set forth in Schedule 1.1(a) (the “Specified IP Rights”);

(b)all rights of Seller and its Affiliates under the contracts set forth in Schedule 1.1(b) (the “Specified Contracts”), provided Seller shall retain the rights held by them prior to the

1

Closing under any Specified Contract expressly providing them continuing indemnity and exculpation rights for pre-Closing occurrences for which they remain liable under this Agreement;

(c)the packaging materials, finished product inventories and product samples and work-in-process inventories of or for the Specified Products in existence as of the Closing Date and set forth in Schedule 1.1(c) (collectively, the “Specified Inventory”);

(d)the tooling specific to the Specified Products and no other products (the “Specified Product Tooling”) set forth in Schedule 1.1(d) (with possession of the Specified Product Tooling to be retained by Seller or its Affiliates in order to continue to manufacture the Specified Products in accordance with the Commercial Supply Agreement);

(e)the investigational new drug application number 103538 for the Specified Products and the new drug application number 209410 for the Specified Products and all supplements thereto, in each case, set forth in Schedule 1.1(e) (the “Specified Authorizations”), all pre-clinical data, clinical data and laboratory data primarily relating to the Specified Products and referenced in the Specified Authorizations, the Regulatory Documentation transferred under Section 1.1(i), or the lab notebooks referenced in Section 1.1(h), and the safety database maintained by Seller as of the Closing Date for the Specified Products;

(f)all claims of Seller and its Affiliates against third parties arising out of or specifically relating to the Specified Assets to the extent such claims arise on or after the Closing Date;

(g)Labeling (including any Specified Product Labeling materials and documents relating to the Specified Products), informational letters, sales training materials, trade show materials, advertising, marketing, sales, artwork and promotional materials, including hard copies and digital source files, in each case, that are in the physical possession of and under the control of Seller or its Affiliates as of the Closing Date and only to the extent related solely to the promotion or sale of the Specified Product and no other products, and any publications, advertising, sales training, guidance, marketing and other promotional materials and literature, submissions and correspondence sent to or received from the FDA Office of Prescription Drug Promotion (OPDP), in each case, set forth in Schedule 1.1(g);

(h)lab books, any relevant training materials or product presentations, market research data, market intelligence reports, statistical programs (if any) used for marketing and sales research with respect to the Specified Products; and customer lists, target or call lists, data collected by the AccessOsmolex program, lists of patients enrolled in the patient assistance program for the Specified Product, in each case, that are under the control of Seller and its Affiliates as of the Closing Date and set forth in Schedule 1.1(h);

(i)all Regulatory Documentation; and

(j)All prepaid FDA fees and other amounts due any Governmental Entity with respect to the Specified Product or paid by Seller as of the Closing Date set forth in Schedule 1.1(j).

2

1.2Additional Batches of Product. As part of the Purchase Price, Seller agrees to manufacture and deliver to Purchaser [*] under and in accordance with the Commercial Supply Agreement (hereinafter “Initial Batches”) [*] under the following terms:

(a)The [*] Initial Batches shall [*];

(b)With the exception of [*], all provisions of the Commercial Supply Agreement shall apply to the Initial Batches;

(c)If any Initial Batch is [*]; and

(d)If Seller has [*].

1.3Additional Specified Assets. If, at any time during the period commencing on the Closing Date and ending on the date that is two years after the Closing Date, either Party identifies (including by written notice thereof from Purchaser) any tangible and intangible assets, properties and rights, of any nature whatsoever, that was in the possession of and under the control of Seller or any Specified Affiliate as of the Closing Date that are solely related to the Specified Products and were used by the Seller to conduct the Specified Business as conducted as of the Closing Date, other than commercially available software products under standard end-user object code license agreements and except as set forth on Part 2.2 of the Disclosure Schedule, that are not listed in Schedule 1.1 or otherwise previously assigned and delivered to Purchaser, then such newly-identified assets will be included in the definition of Specified Assets for purposes of this Agreement and will be assigned and delivered to Purchaser in accordance with Section 1.4.

1.4Assignment of Additional Specified Assets. Such newly-identified Specified Assets in Section 1.3 will each be delivered to Purchaser promptly after the identification thereof in accordance with a plan and process to be agreed by the Parties at the relevant time.

1.5Excluded Assets. Notwithstanding anything to the contrary contained in this Agreement, Seller will not be required to (and will not be required to cause the Specified Affiliates to) sell or transfer to Purchaser and the Specified Assets will not include, any of the following or any right or interest in or to any of the following (collectively, the “Excluded Assets”):

(a)any [*];

(b)any Tax Returns and Tax records of Seller or its Affiliates relating to the Specified Assets or the Specified Business; and

(c)all rights of Seller or its Affiliates to [*].

1.6Consents. Notwithstanding any provision in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign or transfer any Specified Contract or any other Specified Asset listed in Schedule 1.6 that is not assignable or transferable without the consent of any Person (other than Seller, Purchaser or any of their respective Affiliates) to the extent that such consent shall not have been given prior to the Closing (each, a “Nonassigned Asset”); provided, however, that Seller shall use commercially reasonable efforts to obtain, and Purchaser shall use commercially reasonable efforts to assist and cooperate with Seller, in

3

connection therewith, all necessary consents to the assignment and transfer of each Nonassigned Asset; provided, further, that none of Seller, Purchaser or any of their respective Affiliates shall be required to pay money to any third party, commence any Legal Proceeding or offer or grant any negative concessions in connection with such efforts. With respect to any Nonassigned Asset, for a period beginning on the Closing Date and ending on the date that is six (6) months following the Closing Date, Seller shall, and shall cause its Affiliates to, use commercially reasonable efforts to provide to Purchaser substantially comparable benefits thereof and shall enforce, at the request of and for the benefit of Purchaser, and at the expense of Purchaser, any rights of Seller or its Specified Affiliates arising thereunder against any Person, including the right to seek any available remedies or to elect to terminate in accordance with the terms thereof upon the advice of Purchaser.

1.7Purchase Price. As consideration for the sale of the Specified Assets to Purchaser, at the Closing:

(a)Pursuant to the wire instructions provided to Purchaser, Purchaser will pay to Seller (without deduction or setoff of any nature) by wire transfer of immediately available funds, a nonrefundable, noncreditable payment of $7,500,000 (the “Purchase Price”), subject to the Purchase Price Adjustment in Section 4.6(d);

(b)Purchaser will assume the Assumed Liabilities by delivering to Seller an Assumption Agreement substantially in the form of Exhibit B (the “Assumption Agreement”);

1.8Excluded Liabilities. The Parties acknowledge and agree that Purchaser will not assume any liabilities of Seller or the Specified Affiliates other than Assumed Liabilities, and that Seller or the Specified Affiliates, as applicable, will remain responsible for all the liabilities of Seller or the Specified Affiliates, as applicable, other than the Assumed Liabilities (such liabilities, “Excluded Liabilities”). Excluded Liabilities will also include, and Purchaser will not assume as an Assumed Liability, the following liabilities:

(a)All liabilities for (i) Taxes (x) of Seller or (y) with respect to the Specified Assets or the Specified Business solely for any Pre-Closing Tax Period or pre-closing portion of any Straddle Period (as determined pursuant to Section 1.10(a) and (ii) Seller’s portion of Transfer Taxes payable pursuant to Section 1.9;

(b)All liabilities, obligations or commitments relating to the patient assistance program and any other patient assistance or support program covering the Specified Products, including the sale of any Specified Products at reduced prices pursuant to such programs from and after Closing pursuant to commitments made prior to Closing;

(c)Any liability of Seller or any of its Affiliates under this Agreement and any other Ancillary Agreement or agreement entered into by Seller or its Affiliates in connection with the transactions contemplated by this Agreement, and any liability of Seller or any of its Affiliates for expenses and fees arising out of the negotiation, preparation, approval or authorization of this Agreement or the consummation (or preparation for the consummation) of the transactions contemplated hereby (including all attorneys’ and accountants’ fees and brokerage fees (if any));

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(d)Any liability, obligation or commitment of Seller or any of its Affiliates, including liabilities for (i) product liability, (ii) liability for adverse reactions, liability for recalls, liability for product and packaging complaints, whether direct or as a result of successor liability, (iii) death or personal injury, (iv) infringement or misappropriation; in each case arising prior to, on or after the Closing Date to the extent arising out of any unit of Specified Product that was sold prior to the Closing Date;

(e)Any liability, obligation or commitment arising prior to the Closing Date by reason of any violation or alleged violation of any Legal Requirement prior to the Closing Date by Seller or its Affiliates, in each case, to the extent arising out of Seller’s and its Affiliates’ use, ownership or operation of the Specified Business or sale of Specified Product prior to the Closing Date; and

(f)Any accounts payable relating to the operation of the Specified Business by Seller or any of its Affiliates prior to the Closing Date.

1.9Sales and Transfer Taxes. Seller will bear and pay any sales, use, value added, transfer, documentary charges, stamp, recording fees, filing fees or similar Taxes, charges, fees or expenses (including any interest, penalties or additions thereto) that are payable in connection with the sale of the Specified Assets to Purchaser (collectively, “Transfer Taxes”), the assumption by Purchaser of the Assumed Liabilities or any of the other transactions contemplated by this Agreement. Purchaser shall at its own expense prepare and file all related Tax Returns, and if required by applicable Legal Requirements, Seller shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation; provided, however, that Seller shall only be required to join the execution of such Tax Returns if Seller is reasonably satisfied with the form and content of such Tax Returns or other documentation.

1.10Allocation of Purchase Price; Allocation of Taxes.

(a)The Parties agree that consideration referred to in Section 1.7 (including the Assumed Liabilities to the extent properly taken into account under Section 1060 of the Code and any other consideration for Tax purposes) will be allocated amongst the Specified Assets and the Ancillary Agreements as set forth in Schedule 1.10(a) (the “Allocation”). The Seller shall prepare the Allocation consistent with the principles set forth on Schedule 1.10(a) and shall deliver such allocation to the Buyer within ninety (90) days after the Closing Date. Within thirty (30) days following delivery of such Allocation, the Buyer may deliver written comments to the Seller and the Seller shall consider in good faith any written comments timely provided by the Buyer. The Seller shall prepare any adjustments required to the allocation pursuant to this Agreement. The Buyer shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as the Seller may reasonably request to prepare the Allocation and any adjustments thereto.

(b)The Allocation will be conclusive and binding upon the Parties for Tax purposes, and no Party will make any statement or declaration to any taxing authority (including on any Tax Return) or take or permit any of its Affiliates or representatives to take any position on any Tax Return, with any taxing authority or in any judicial Tax proceeding that is inconsistent with the Allocation unless required by a determination within the meaning of Section 1313 of the

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Code (or analogous provision of state, local or non-U.S. Legal Requirement). Each Party will timely notify the other Parties, and will timely provide the other Parties with reasonable assistance (at the cost of the requesting Party), to defend the Allocation in the event of an examination, audit or other proceeding regarding the Allocation provided, that this shall not prevent a Party from settling audits or other Tax proceedings.

(c)Except as otherwise provided in Section 1.9, all real property Taxes, personal property Taxes, and similar ad valorem obligations or Taxes, if any, levied with respect to the Specified Assets for a taxable period that includes (but does not end on) the Closing Date (the “Straddle Period”) shall be apportioned as follows: (i) Seller shall be apportioned an amount equal to the total amount of such Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Straddle Period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period and (ii) Buyer shall be apportioned an amount equal to the excess of the total amount of such Tax for the entire Straddle Period over the amount determined in clause (i) hereof. Seller shall be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period, and Purchaser shall be liable for the proportionate amount of such Taxes that is attributable to the Post-Closing Tax Period as determined pursuant to this Section 1.10(c).

(d)Purchaser shall not make any Tax withholding from the Purchase Price or any other consideration that is paid (or deemed paid) to Seller pursuant to Section 1.7, except as required by applicable Legal Requirements. To the extent that amounts are withheld or deducted for Taxes by Purchaser, such amounts shall be delivered by Purchaser, as applicable, to the appropriate taxing authority. To the extent the Purchaser or its Affiliates, as applicable, determines that any Tax withholding is required pursuant to this Agreement or any Ancillary Agreement, then prior to deducting and withholding any such amounts (and in any event no later than five (5) Business Days prior to making any payment hereunder), the Purchaser or its Affiliates, as applicable, shall notify the payee of any amounts that the Purchaser, its Affiliates, or any other applicable withholding agent, as applicable, intends to withhold from any payments hereunder and provide the payee with reasonable support for the basis of such withholding. The parties shall reasonably cooperate with each other, as and to the extent reasonably requested by the other party, to minimize or eliminate any potential deductions and withholdings pursuant to this Agreement or any Ancillary Agreement. As promptly as possible after the date Purchaser delivers any applicable withholding Taxes (pursuant to this Section 1.10(d)) to the appropriate taxing authority, Purchaser shall provide Seller with certified copies of Tax receipts evidencing such payment or other evidence of such payments reasonably satisfactory to Seller.

(e)On or no more than thirty (30) days prior to the Closing Date, U.S. Seller shall deliver a certification of non-foreign status dated as of the Closing Date in form and substance reasonably satisfactory to Purchaser and conforming to the requirements of Treasury Regulation section 1.1445-2(b)(2)(i).

1.11Ancillary Agreements. At the Closing, the Parties will enter into the following additional agreements (the “Ancillary Agreements”):

(a)the Assumption Agreement substantially in the form of Exhibit B;

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(b)Bill of Sale substantially in the form of Exhibit C;

(c)Patent and Trademark Assignment Agreements substantially in the forms of Exhibit D;

(d)a Transition Services Agreement substantially in the form of Exhibit E;

(e)the Purchaser FDA Transfer Letter substantially in the form of Exhibit F;

(f)the Seller FDA Transfer Letter substantially in the form of Exhibit G;

(g)the Commercial Supply Agreement substantially in the form of Exhibit H; and

(h)the Quality Agreement substantially in the form of Exhibit I.

1.12Closing. The closing of the purchase of the Specified Assets by Purchaser (the “Closing”) will take place through the exchange of documents and the delivery of the Purchase Price and the Specified Assets at a mutually agreed time and on the date that will be the latest of (a) two Business Days after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Section 5 and Section 6 (other than those conditions that by their nature are to be satisfied at the Closing), (b) thirty-five (35) days following the date of this Agreement (provided that the conditions set forth in Section 5 and Section 6 have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), and (c) such other date as Purchaser and Seller may agree to in writing. For purposes of this Agreement, “Closing Date” means the date as of which the Closing actually takes place.

1.13Later Discovered Contracts. For a period of 180 days following the Closing Date, in the event that there are any contracts that relate solely to the Specified Business that would have been transferred to Purchaser as part of this Agreement but for the fact that such contract was not discovered until after the Closing Date (each, a “Later Discovered Contract”), to the extent permitted under the terms and conditions of such Later Discovered Contract and applicable Legal Requirements, Seller agrees to cooperate in assigning to Purchaser such Later Discovered Contract or the applicable rights or obligations under such Later Discovered Contract at the reasonable request of Purchaser.

1.14Covenant Not to Sue. Seller will not, and will so cause its Affiliates not to sue, or assert any claim or counterclaim against Purchaser or its Affiliates or their respective sublicensees that claims or otherwise asserts that Purchaser or its Affiliates or their respective sublicensees is or are liable for infringing any Seller IP Rights in connection with the exploitation of the Specified Products or any other product that is owned or controlled by Purchaser or its Affiliates as of the Closing Date that contains amantadine as one of its active pharmaceutical ingredients in any country or region.

1.15Possession. Seller shall (a) place Purchaser in actual possession and operating control of all Specified Assets that are tangible assets (other than the Specified Product Tooling, possession of which is to be retained by Seller or its Affiliates in order to continue to manufacture

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the Specified Products in accordance with the Commercial Supply Agreement), including any documents within the Specified Assets that are not in electronic form; (b) deliver to Purchaser in electronic form all other documents included in the Specified Assets; (c) cause its patent counsel to deliver promptly all patent files for all Patent Rights included in the Specified Assets as reasonably directed by Purchaser; and (d) deliver possession of all remaining Specified Assets and in any event, unless as otherwise agreed by the Parties, including under the Transition Services Agreement, at Closing or as soon as reasonably practicable following the Closing.

2.Representations and Warranties of Seller.

Seller represents and warrants, as of the Effective Date and the Closing Date, to Purchaser that:

2.1Organization. Seller is (a) a Delaware Limited Liability Company and (b) a corporation organized under the laws of Hungary, in each case, duly organized, validly existing, and in good standing under the laws of each jurisdiction of its organization and, where applicable, each jurisdiction in which its ownership of the Specified Assets or operation of the Specified Business so requires, and has the requisite company power and authority to own, use, and operate the Specified Assets except where such failure would not have a material adverse effect on the value of the Specified Assets taken as a wholeexcept as disclosed on Part 2.1 of the Disclosure Schedule. Each Specified Affiliate is an entity duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization and has requisite company power and authority to own, use, and operate the Specified Assets except where such failure would not have a material adverse effect on the value of the Specified Assets taken as a whole.

2.2Title to Assets. Seller and each Specified Affiliate, as applicable, has, and at the Closing, will deliver to Purchaser, good, marketable and valid title to the Specified Assets, free and clear of any Liens, except for: (i) Liens for current Taxes (1) not yet due and payable or (2) that are being contested in good faith through appropriate proceedings and for which adequate reserves have been established; (ii) Liens referred to in the Specified Contracts; and (iii) statutory or common law Liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies, and other like Liens, arising in the ordinary course of business (the items referred to in the preceding clauses “(i)” through “(iii)” are collectively referred to herein as the “Permitted Liens”). The Specified Assets include all of the tangible and intangible assets, properties and rights, of any nature whatsoever, in the possession of and under the control of Seller or any Specified Affiliate as of the Closing Date that are solely related to the Specified Products and used by the Seller to conduct the Specified Business as conducted as of the Closing Date, other than commercially available software products under standard end-user object code license agreements and except as set forth on Part 2.2 of the Disclosure Schedule. Seller has not received notice in writing or, to the Knowledge of Seller, oral notice that any Person has asserted a claim of ownership or right of possession or use in and to any of the Specified Product, the Specified Business or the Specified Assets, other than Permitted Liens.

2.3Intellectual Property.

(a)Definitions. For purposes of this Agreement, the following terms shall be defined as follows:

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(i)“Copyrights” means all copyrights and copyrightable works (including databases and other compilations of information, mask works and semiconductor chip rights), including all rights of authorship, use, publication, reproduction, distribution, performance, transformation, moral rights and rights of ownership of copyrightable works, and all registrations and rights to register and obtain renewals and extensions of registration, together with all other interests accruing by reason of international copyright.

(ii)“IP Rights” means any and all of the following in any country or region: (A) Copyrights, Patent Rights, Trademark Rights, trade secrets, domain name registrations, moral rights, know-how and other intellectual property rights; and (B) the right (whether at law, in equity, by contract or otherwise) to enjoy or otherwise exploit any of the foregoing, including the rights to sue for and remedies against past, present and future infringements or misappropriations of any or all of the foregoing, and rights of priority and protection of interests therein under the laws in any jurisdiction worldwide.

(iii)“Seller IP Rights” means all IP Rights in which Seller or its Affiliates (other than Acquirors) have an ownership interest and that would be infringed, misappropriated, or otherwise violated by the sale, marketing, distribution or use of any of the Specified Products.

(iv)“Patent Rights” means all invention disclosure documents, issued patents (including national, regional and international utility, utility model, plant and design patents, and certificates of invention), patent applications (including additions, provisional applications, as well as continuation, continuation-in-part, divisionals, continued prosecution applications, reissues, and re-examination applications and any patent applications that claim priority to, or the benefit of, pending patent applications), registrations, applications for registrations and any term extension or other action by a Governmental Entity that provides rights beyond the original expiration date of any of the foregoing (including patent term adjustments, patent term extensions, supplementary protection certificates and the like).

(v)“Trademark Rights” means all trademarks, registered trademarks, applications for registration of trademarks, service marks, registered service marks, applications for registration of service marks, trade names, registered trade names and applications for registration of trade names, service names, brand names, trade dress rights, logos, taglines, slogans, Internet domain names and Internet domain name registrations and web addresses, together with the goodwill associated with any of the foregoing; and including all intent to use any of the foregoing if not registered or subject to a pending application

(b)Registered IP. Part 2.3(b) of the Disclosure Schedule sets forth a true, complete and accurate list of all of the Patent Rights and all registered Trademark Rights (or Trademark Rights for which applications for registration have been filed) owned by Seller or any Specified Affiliates that claim, cover or are embodied in, or are otherwise necessary for the sale, marketing, distribution or use of, any of the Specified Products as of the date of this Agreement, setting forth the current owner, the respective application, registration or filing number, and all expiration dates of such applications, registrations or filings.

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(c)Inbound Licenses and Rights. There are no agreements in effect as of the Closing Date under which any third party has licensed or sublicensed (exclusively or non-exclusively), granted or conveyed to Seller or any Specified Affiliates any right, title or interest in or to any IP Rights, Patent Rights or registered Trademark Rights (or Trademark Rights for which applications for registration have been filed) which claim, cover or are embodied in, or are otherwise necessary for the manufacture, sale, marketing, distribution or use of, any of the Specified Product or are otherwise material to the manufacture, marketing or sale of the Specified Product as being currently conducted, other than “shrink wrap” or “click through” license agreements accompanying widely available computer software that have not been modified or customized for Seller or any Specified Affiliate.

(d)Ownership. Seller or a Specified Affiliate owns or co-owns the Specified IP Rights, free and clear of all Liens (other than Permitted Liens), except the Liens listed in Part 2.3(d) of the Disclosure Schedule, which Liens shall be cleared upon Closing. No Person, including the U.S. Patent and Trademark Office is making an adverse claim of ownership to the Specified IP Rights or is challenging the right, title or interest of Seller or any Specified Affiliate in, to or under any Specified IP Rights, or the validity or enforceability of any Patent Rights included in the Specified IP Rights. There is no opposition, cancellation, proceeding, objection or claim pending with regard to any Specified IP Rights, other than patent and trademark application examination proceedings before the U.S. Patent and Trademark Office. The Specified IP Rights are not subject to any outstanding order of, judgment of, decree of or agreement with any Governmental Entity adversely affecting the use thereof by Seller or the Specified Affiliates or their rights thereto.

(e)Protection of IP Rights. To Seller’s Knowledge, Seller and the Specified Affiliates have taken reasonable measures to protect and maintain the material Product Know-How within Specified IP Rights that constitutes Trade Secrets. To Seller’s Knowledge, all current and former officers and employees of, and consultants and independent contractors to, Seller and the Specified Affiliates who have contributed to the creation or development of any Specified IP Rights have executed and delivered to Seller or a Specified Affiliate an agreement regarding the protection of proprietary information and the assignment or license to Seller or a Specified Affiliate, as applicable, of any Specified IP Rights arising from services performed for Seller or a Specified Affiliate, by such persons.

(f)No Infringement of Third Party IP. Except as set forth in Part 2.3(f) of the Disclosure Schedule, and without regard to the Infringement Litigation, to Seller’s Knowledge, the Specified Product does not infringe, misappropriate, or violate any valid and enforceable IP Rights of any other Person. Other than in connection with the Infringement Litigation, neither Seller nor any Specified Affiliates has received any written charge, complaint, claim, demand, notice or other written communication from any Person alleging that it is infringing, misappropriating, or violating any IP Rights of such Person in connection with any of the Specified Product or the conduct of the Specified Business.

(g)No Third Party Infringement of Specified IP Rights. To the Knowledge of Seller, no Specified IP Rights are being infringed, misappropriated or violated by any Third Party.

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(h)Royalty Obligations. Neither Seller nor any Specified Affiliate is obligated to pay to any Third Party any royalties, fees, commissions or other amounts for the use by Seller or any Specified Affiliate of any Specified IP Rights.

(i)Effects of this Transaction. Neither the execution, delivery or performance of this Agreement or the Ancillary Agreements nor the consummation of any of the transactions contemplated by this Agreement or any Ancillary Agreement will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare: (i) the release, disclosure or delivery of any Specified IP Rights by or to any escrow agent or other Person; (ii) the grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any of the Specified IP Rights; or (iii) by the terms of any Specified Contract, a reduction of payments Seller or a Specified Affiliate would otherwise be entitled to with respect to any Specified IP Rights.

2.4Specified Contracts.

(a)Seller has made available to Purchaser true, correct and complete copies of each of the Specified Contracts set forth on Schedule 1.1(b).

(b)Each Specified Contract is, to the Knowledge of Seller, in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of each party thereto, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies (the “Bankruptcy, Equity and Indemnity Exception”).

(c)Neither Seller nor any of its Affiliates is in material breach of any Specified Contract, and, to the Knowledge of Seller, no other party to any such contract is in material breach of such contract and no event has occurred that, with the giving of notice or lapse of time or both, would constitute a material breach or default thereunder (nor, to the Knowledge of Seller, does there exist any condition that, upon the passage of time or the giving of notice or both, would reasonably be expected to cause such a material breach or default thereunder or permit termination, material modification, loss of any material benefit, or acceleration of any material obligations of Seller or its Affiliates pursuant thereto). During the past two years, Seller has not provided to or received from any other party to a Specified Contract written notice of any such alleged default. Seller has not given any written notice to a third party that is a party to any Specified Contract that it intends to terminate such Specified Contract and has not received any written notice from any such third party stating that such third party intends to terminate any Specified Contract

2.5Compliance with Legal Requirements.

(a)With respect to the Specified Product, Specified Assets and Specified Business, Seller and its Affiliates have been in compliance in all material respects with all Legal Requirements. Seller and its Affiliates have not received any written communication from any Governmental Entity or any written notice, claim, request for information or complaint from any other Person alleging any failure to comply with or any liability under any Legal Requirement relating to the Specified Product, Specified Assets, or the Specified Business, and to the

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Knowledge of Seller no such written notice, claim, request for information or complaint is pending or threatened.

(b)Neither Seller or any of its Affiliates, or, to the Knowledge of Seller, the Seller or any of its Affiliate’s employees or other representatives (a) has used or is using any funds for any unlawful contributions, unlawful gifts, unlawful entertainment orother unlawful expenses; (b) has made any direct or indirect unlawful payments to any foreign or domestic Governmental Entity; (c) has violated and is not violating any Anti-Corruption Laws; (d) has established or maintained, or is maintaining, any unlawful or unrecorded fund of monies or other properties; (e) has made, or is making, any false or fictitious entries on its accounting books and records; (f) has made, or is making, any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature, or has paid, or is paying, any fee, commission or other payment that has not been properly recorded on its accounting books and records as required by the Anti-Corruption Laws; or (g) has otherwise given or received anything of value to or from any official of any Governmental Entity, an intermediary for payment to any individual including officials of any Governmental Entity, any political party or customer for the purpose of obtaining or retaining business.

(c)Seller holds all material Authorizations issued by or on behalf of any Governmental Entity necessary to own, lease or operate the Specified Assets and conduct the Specified Business as it is currently being conducted and in which the Specified Business has been conducted during the 12 months prior to the date of this Agreement (the “Permits”). Any such Permits held by Seller are currently in full force and effect. Seller and its Affiliates are in compliance in all material respects with all terms and conditions of such Permits, and with all other applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in applicable Legal Requirements.

(d)Seller has made available to Purchaser copies of any environmental reports, audits, permits, licenses, registrations and other environmental, health or safety documents relating to the Specified Assets or Specified Product that are in Seller’s possession or control.

2.6Regulatory Matters.

(a)Except as otherwise provided in this Section 2.6, each of the Specified Product is being or has been researched, developed, tested, manufactured, packaged, labeled, handled, stored, supplied, distributed, marketed, commercialized, imported, exported, and sold in compliance in all material respects with all applicable Health Laws, except, in each case, where such failure would not have a material adverse effect on the value of the Specified Assets taken as a whole.

(b)The Specified Authorizations are current and in full force and effect, and no suspension, revocation, or cancellation of such Specified Authorizations is pending or threatened in writing. Seller has made available to Purchaser true and complete copies of all material governmental correspondence (including copies of official notices, citations or decisions) in the files of Seller or the Specified Affiliates relating to the Specified Authorizations.

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(c)Seller has made available to Purchaser complete and correct copies of each Specified Authorization.

(d)Neither Seller nor any of its Affiliates or, to the Knowledge of Seller, any of their officer or employees, has received any written communication from FDA or any other Governmental Entity (including any warning letter or untitled letter) that alleges that the Specified Business is not in compliance with any applicable requirements under the Health Laws, except, in each case, where such allegation would not have a material adverse effect on the value of the Specified Assets taken as a whole.

(e)There are no, and since February 16, 2018, have not been, any investigations, suits, claims, actions or other Legal Proceeding pending or threatened in writing against Seller or, to the Knowledge of Seller, any Specified Affiliate relating to the Specified Product and arising under applicable Health Laws. Neither Seller, nor to the Knowledge of Seller, any of its officers, employees or Specified Affiliates has been, or is currently, subject to any enforcement proceedings by the FDA or any other Governmental Entity as relates to the Specified Business. Since February 16, 2018, there has not been and there is not now in effect any Form FDA 483 observation, civil, criminal or administrative action, suit, demand, claim, complaint, hearing, investigation, demand letter, warning letter, untitled letter, proceeding or request for information pending regarding the Specified Product against Seller or, to Seller’s Knowledge, any of its officers, employees or Specified Affiliates, and Seller has no current liability (whether actual or contingent) for failure to comply with the applicable Health Laws with respect to the operation of the Specified Business.

(f)Seller and the Specified Affiliates have maintained records relating to the research, development, testing, manufacture, handling, Labeling, packaging, storage, supply, promotion, distribution, marketing, commercialization, import, export, and sale of the Specified Products in material compliance with the applicable Health Laws, except, in each case, where any failure to do so would not have a material adverse effect on the value of the Specified Assets taken as a whole. Since February 16, 2018, Seller and the Specified Affiliates have submitted to the FDA and other Governmental Entities all required material notices and annual or other reports for the Specified Product, except, in each case, where any failure to do so would not have a material adverse effect on the value of the Specified Assets taken as a whole.

(g)Neither Seller, nor to the Knowledge of Seller any of its officers, employees, agents, or Specified Affiliates, has made an untrue statement of material fact or fraudulent statement to the FDA or any other Governmental Entity, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Entity, or committed an act, made a statement, or failed to make a statement, including with respect to any scientific data or information, that, at the time such disclosure was made or failure to disclose occurred, would reasonably be expected to provide a basis for the FDA or any other Governmental Entity to invoke the FDA Application Integrity Policy respecting “Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities,” set forth in FDA’s Compliance Policy Guide Sec. 120.100 (CPG 7150.09) or any similar policy, in each case as related to the Specified Product.

(h)All manufacturing operations relating to the Specified Product conducted by or, to the Seller’s Knowledge, on behalf of, Seller are being, and for three (3) years prior to the

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Effective Date, have been, conducted in compliance with applicable provisions of Current Good Manufacturing Practice requirements as set forth in 21 U.S.C. § 351(a)(2)(B), 21 C.F.R. Parts 210 and 211, except, in each case, where any failure to do so would not have a material adverse effect on the value of the Specified Assets taken as a whole. The Specified Product has not been voluntarily recalled, suspended, or discontinued by Seller at the request of the FDA or any other Governmental Entity, nor has Seller received any written notice from FDA or any other Governmental Entity that it has commenced, or threatened to initiate, any action to withdraw approval, place sales or marketing restrictions on, or request the recall of any of the Specified Products, or that it has commenced or threatened to initiate any action to enjoin or place restrictions on the production of any of the Specified Products.

(i)All pre-clinical and clinical studies relating to the Specified Products conducted by or on behalf of Seller have been conducted in compliance with the applicable requirements of the FDA’s Good Laboratory Practice and Good Clinical Practice requirements, including regulations under 21 C.F.R. Parts 50, 54, 56, 58, 312 and applicable guidance documents, as amended from time to time, the Animal Welfare Act, and all applicable similar Legal Requirements, except, in each case, where any failure to do so would not have a material adverse effect on the value of the Specified Assets taken as a whole. Seller has not received any written notice that the FDA, any other Governmental Entity, or any institutional review board has recommended, initiated or threatened to initiate any action to suspend or terminate any clinical trial sponsored by Seller of the Specified Products.

(j)Seller, and to the Knowledge of Seller, its officers, employees, agents and Specified Affiliates have, since February 16, 2018 promoted the Specified Products in compliance with all applicable Health Laws and other Legal Requirements, except, in each case, where any failure to do so would not have a material adverse effect on the value of the Specified Assets taken as a whole. Neither Seller, nor any of its officers, employees, agents or Specified Affiliates have received any written notice, civil, criminal or administrative action, suit, demand, claim, complaint, hearing, investigation, demand letter, warning letter, untitled letter, proceeding or request for information from FDA or any Governmental Entity pending or in effect against Seller or any of its officers and employees concerning noncompliance with Health Laws and other Legal Requirements with regard to promotion of the Specified Product.

(k)Neither Seller nor, to the Knowledge of Seller, its officers, employees, agents, contractors, and Specified Affiliates, in each case, involved in the conduct of the Specified Business, have (i) been debarred or have been convicted of any crime or engaged in any conduct that did result in debarment under 21 U.S.C. § 335a or disqualification as a clinical investigator under 21 C.F.R. § 312.70 or any similar Legal Requirements or (ii) been excluded or convicted of any crime which would reasonably be expected to result in being excluded from participating in the Federal health care programs under Section 1128 of the Social Security Act of 1935, as amended, or any similar Legal Requirements. Neither Seller nor, to the Knowledge of Seller, any of its Affiliates is a party to a corporate integrity agreement in relation to the Specified Business.

2.7Legal Proceedings. Except as set forth in Part 2.7 of the Disclosure Schedule, there is no and since February 16, 2018, there has been no lawsuit or other material Legal Proceeding pending or, to the Knowledge of Seller, being overtly and specifically threatened

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against Seller or any of its Affiliates, in each case, that (a) involves the Specified Assets or the Specified Business; or (b) challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the sale of the Specified Assets or any of the transactions contemplated by this Agreement or the Ancillary Agreements. There is no and during the past three years there have been no orders or judgments of a Governmental Entity to which Seller or any of its Affiliates is subject in respect of the Specified Business or the Specified Assets.

2.8Non-Contravention; Consents.

(a)The execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements to which it is a party and the sale of the Specified Assets by Seller and the Specified Affiliates to Purchaser will not: (i) conflict with or result in a breach of the organizational documents of Seller or the Specified Affiliates; (ii) materially contravene or result in a material violation or breach of any Legal Requirement applicable to the Specified Assets, any Specified Contract, or Seller or any of its Affiliates; (iii) result in the loss of or imposition of any Lien upon any of the Specified Assets (except for the Permitted Liens); or (iv) materially contravene, result in the material violation or breach of, constitute a default under, or result in the termination, cancellation or acceleration (whether after the giving of notice or the lapse of time or both) of any right or obligation of Seller or any of its Affiliates under any Specified Contracts and that would not be material to the Specified Business or Specified Assets. Except as set forth in Part 2.8(b) of the Disclosure Schedule, neither Seller nor any Specified Affiliate is required to obtain any Consent from any Person, under any material Specified Contract, at or prior to the Closing in connection with the execution and delivery of this Agreement or the Ancillary Agreements or the sale of the Specified Assets to Purchaser.

(b)Other than as set forth on Part 2.8(b) of the Disclosure Schedule, no material notice to, filing with, Authorization of, exemption by, or Consent of any Governmental Entity is required for Seller or the Specified Affiliates to transfer the Specified Assets to Purchaser and otherwise consummate the transactions contemplated hereunder.

2.9Authority; Binding Nature of Agreement. Seller has all necessary limited liability company or corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations under this Agreement and the Ancillary Agreements to which it is a party; and the execution, delivery and performance by Seller of this Agreement and the Ancillary Agreements to which it is a party have been duly authorized by all necessary action on the part of Seller and its board of directors. This Agreement constitutes, and, upon execution thereof, each of the Ancillary Agreements to which Purchaser is a party will constitute, the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to the Bankruptcy, Equity and Indemnity Exception.

2.10Inventory. The Specified Inventory is saleable or usable in the ordinary course of business, subject to its shelf life, and with respect to such inventory that is finished product inventory, such inventory: (a) [*]. Part 2.10 of the Disclosure Schedule contains a list and description of each lot of the Specified Inventory, whether held by Seller or by a Third Party on behalf of Seller, in each case with its expiry, batch number, strength and quantity. To Seller’s Knowledge, Seller has not (a) intentionally induced or encouraged or attempted to induce or encourage any customers (including wholesalers and distributors) to purchase or maintain

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inventory of the Specified Products in quantities in excess of their current needs, (b) shipped Specified Products to customers substantially in excess of historic levels or otherwise, through special payment incentives or otherwise, or (c) changed any practice which would reasonably be expected to result in decreased orders from customers, as compared to the normal historical orders from such customers. To the Knowledge of Seller, there exists no build-up of any customer’s inventory level beyond such customer’s normal historical inventory level.

2.11Taxes.

(a)Seller and the Specified Affiliates have paid all material Taxes required to be paid by it, the non-payment of which could reasonably be expected to result in (i) a Lien on any Specified Asset or (ii) Purchaser becoming liable or responsible therefor (other than pursuant to this Agreement). There are no Liens with respect to Taxes upon any of the Specified Assets other than Permitted Liens.

(b)Seller and the Specified Affiliates have filed all material Tax Returns that are required to be filed by them (taking into account any extensions of time to file) with respect to the Specified Assets. Insofar as such Tax Returns related to the Specified Assets, such Tax Returns were true, correct and complete in all material respects and were prepared in material compliance with all applicable Legal Requirements. To the Knowledge of Seller, no proposed adjustment, audit or administrative or judicial proceeding is pending or threatened in writing with respect to any Tax or Tax Return relating to any of the Specified Assets in cases where an adverse outcome with respect to such adjustment or proceeding could result in a Lien on a Specified Asset or result in Purchaser or any of its Affiliates having any liability therefor other than pursuant to this Agreement.

(c)This Section 2.11 contains the sole representations and warranties with respect to any Tax matters and no representation in this Section 2.11 shall be with respect to the availability or use of any Tax attribute or Tax credit in any taxable period (or portion thereof) beginning after the Closing Date.

2.12Brokers. No broker, finder or other third party has any right to a commission or other fee as the result of any arrangement or agreement by or on behalf of Seller in connection with this Agreement or any of the transactions contemplated hereunder.

2.13Related Party Transactions. Except as set forth in Part 2.13 of the Disclosure Schedule, to the Knowledge of Seller there are no obligations of Seller relating to the Specified Contracts with, current or former officers, directors, equityholders or employees of Seller or family members other than (a) for payment of ordinary course salaries and bonuses for services rendered, and (b) reimbursement of customary and reasonable expenses incurred on behalf of Seller. To the Knowledge of Seller, no officer, director, equityholder or employee of Seller or their respective Affiliates is directly or indirectly interested in any Specified Contract other than the Specified Affiliate that is a party to any Specified Contract. Except as set forth in Part 2.13 of the Disclosure Schedule, to the Knowledge of Seller, neither Seller nor any of its Affiliates, directors, officers or employees possess, directly or indirectly, any financial interest in, or is a director, officer or employee of, any Person that is a material supplier, distributor, customer, contractor, lessor, lessee or competitor with respect to the Specified Business of Seller and its Affiliates.

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2.14Suppliers. Part 2.14(a) of the Disclosure Schedule lists all material suppliers (collectively, the “Significant Suppliers”) to the Specified Business (other than those suppliers providing legal, accounting or tax services to the Specified Business), that are the sole source of supply, of raw materials, supplies, and other goods for the Specified Business for the twelve (12) month period ended December 31, 2020. Except as set forth on Part 2.14(b) of the Disclosure Schedule, Seller has not received any indication from any Significant Supplier stating that such supplier will stop, or materially decrease the rate of supplying materials, supplies or other goods to Seller with respect to the Specified Business.

2.15Prescribing Institutions or Healthcare Providers. Part 2.15 of the Disclosure Schedules sets forth a list of Seller’s prescribing institutions or healthcare providers (the “Significant Prescribing Institutions or Healthcare Providers”) of the Specified Business for the twelve (12) months ended December 31, 2019, and for the nine-month period September 30, 2020. Seller has not received any written notice from any Significant Prescribing Institutions or Healthcare Providers stating that such customer will stop, or materially decrease the rate of, buying products or services from the Specified Business.

2.16Absence of Certain Developments. Except as expressly contemplated by this Agreement or as set forth on Part 2.16 of the Disclosure Schedule, since February 16, 2018, (a) Seller has conducted its Specified Business only in the ordinary course of business consistent with past practice, and (b) there have not been any events, facts, conditions, occurrences, effects or changes that have resulted, individually or in the aggregate, in a Specified Product Material Adverse Effect.

2.17Product Liability. Except as set forth on Part 2.17 of the Disclosure Schedule, no product liability, recall or warranty claim (whether based in contract or tort and whether relating to personal injury, including death, property damage or economic loss) is pending and no product liability claim has been settled, terminated or received by Seller in the prior three years and, to the Knowledge of Seller, no such claims have been threatened in writing against Seller, in each case relating to, or arising from, the manufacture, sale or use of any of the Specified Products. There is no judgment, order or decree outstanding against Seller relating to product liability claims with respect to any of the Specified Products.

2.18No Other Representations or Warranties. Except for any representations and warranties set forth in this Section 2, Seller expressly disclaims any representation or warranty of any kind or nature, express or implied, as to the liabilities, operations, condition, value or quality (financial and otherwise) of the Specified Assets, Specified Business or Specified Products. No material or information provided by or communications made by Seller or any Affiliate of Seller or their respective representatives, including any oral, written or electronic response to any information request provided to Purchaser, will cause or create any warranty, express or implied, as to the liabilities, operations, condition, value or quality of the Specified Assets, Specified Business or Specified Products, except as otherwise expressly set forth herein. The representations and warranties set forth in this Section 2 constitute the sole and exclusive representations and warranties of Seller in connection with the Specified Assets, Specified Business or Specified Products and the transactions contemplated by this Agreement, and any representations or warranties implied by law shall be excluded.

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3.Representations and Warranties of Purchaser.

Purchaser hereby represents and warrants, as of the Effective Date and the Closing Date, to Seller as follows:

3.1Organization. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has requisite corporate power and authority to conduct its business as it is now being conducted.

3.2Authority; Binding Nature of Agreement. Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, the Assumption Agreement and the other Ancillary Agreements to which it is a party, and to perform its obligations hereunder and thereunder; and the execution, delivery and performance by Purchaser of this Agreement, the Assumption Agreement and the other Ancillary Agreements to which it is a party have been duly authorized by all necessary action on the part of Purchaser and its board of directors. Purchaser has provided to Seller a copy of the resolutions of the board of directors of Purchaser authorizing the execution, delivery and performance by Purchaser of this Agreement, the Assumption Agreement and the Ancillary Agreements. No vote of the holders of Purchaser equity interests is required to authorize the purchase by Purchaser of the Specified Assets, or any of the other transactions contemplated by this Agreement. This Agreement constitutes, and, upon execution thereof, each of the Assumption Agreement and the other Ancillary Agreements to which it is a party will constitute, the valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the Bankruptcy, Equity and Indemnity Exception.

3.3Non-Contravention; Consents.

(a)Neither the execution, delivery or performance of this Agreement, the Assumption Agreement or any of the other Ancillary Agreements, nor the consummation of any of the transactions contemplated by this Agreement, the Assumption Agreement or any of the other Ancillary Agreements, will (i) conflict with or result in any violation of any provision of the certificate of formation, operating agreement or other charter or organizational documents of Purchaser; (ii) result in a breach or default by Purchaser under any material contract to which Purchaser is a party; (iii) result in a violation of any Legal Requirement or order to which Purchaser is subject; or (iv) result in the creation of a Lien on any material asset of Purchaser (except for Permitted Liens). Purchaser is not and will not be required to obtain any Consent from any Person in connection with the execution, delivery or performance of this Agreement, the Assumption Agreement or any of the other Ancillary Agreements or the consummation of any of the transactions contemplated by this Agreement or thereby.

(b)No material notice to, filing with, Authorization of, exemption by, or Consent of any Governmental Entity is required for Purchaser to acquire the Specified Assets from Seller or the Specified Affiliates and to otherwise consummate the transactions contemplated hereunder.

3.4Legal Proceedings. There is no lawsuit or other Legal Proceeding pending or, to Purchaser’s knowledge, being threatened against Purchaser as of the date of this Agreement that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise

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interfering with, the purchase of the Specified Assets or any of the transactions contemplated by this Agreement or the Ancillary Agreements.

3.5Brokers. No broker, finder or other third party has any right to a commission or other fee as the result of action by or on behalf of Purchaser in connection with this Agreement or any of the transactions contemplated hereunder.

4.Covenants.

4.1Conduct of Business. Except as approved in writing by Purchaser, during the Pre-Closing Period or as required by applicable Legal Requirements:

(a)Seller will (and will cause its Affiliates to) (i) conduct the operations of the Specified Business in the ordinary course and comply with all Legal Requirements in all material respects; (ii) use commercially reasonable efforts to preserve the Specified Business, the Specified Product and their goodwill, and maintain good relations with the parties to the Specified Contracts, in each case, consistent with Seller’s past practice prior to the Effective Date; (iii) maintain its books, accounts and records exclusively related to the Specified Product and the Specified Business in accordance with past custom and practice and generally accepted accounting principles as used; and

(b)Seller will not (i) pledge, sell, lease, transfer, license or dispose or otherwise make subject to a Lien (other than any Permitted Lien) any of the Specified Assets; (ii) terminate or materially amend, grant a sublicense under or assign any of the material Specified Contracts or Specified Authorizations or enter into any new material contract that would constitute a Specified Contract at the Closing except in the ordinary course of business; (iii) waive any claims or rights of material value that relate to the Specified Business; (iv) engage in any new promotional sales or discount or other activity with customers that has or would reasonably be expected to have the effect of accelerating to pre-Closing periods sales of the Specified Product that would otherwise be reasonably expected to occur in post-Closing periods; (v) other than in the ordinary course of business (e.g., in connection with normal safety updates or annual reports), make, or materially amend, any filings with FDA or any other Governmental Entity related to the Specified Product or the Specified Business; (vi) enter into any transaction or arrangement solely related to the Specified Assets, the Specified Product or the Specified Business, including for the avoidance of doubt any new patient assistance program; or (vii) agree in writing to do any of the foregoing ((i) – (vii)).

4.2Filings, Consents and Regulatory Approvals. Subject to the terms and conditions of this Agreement, each of the Parties hereto shall (and shall cause their respective Affiliates, if applicable, to): work together to make all filings with and give all required notices to all Governmental Entities, including all applicable requirements under FDA regulation 21 C.F.R. 314.72, in connection with the transfer of the Specified Products and the Specified Authorizations. The Parties agree to use reasonable efforts to take any other actions required by the FDA or any other Governmental Entity to effect such filings, notifications and transfers. Purchaser and Seller shall file the Purchaser FDA Transfer Letter and the Seller FDA Transfer Letter, respectively, with FDA promptly, but in any event within two (2) Business Days, after the Closing.

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4.3Cooperation. From and after the Closing Date, Seller shall, and shall cause its Affiliates and its employees, consultants and contractors to, provide support and cooperate reasonably with Purchaser in any Legal Proceeding challenging the validity, enforceability or scope of any Patent Rights within the Specified IP Rights owned or controlled by Purchaser that covers or is otherwise related to the research, development, manufacture, use or commercialization of the Specified Products or any Legal Proceedings relating to the enforcement of such Patent Rights within the Specified IP Rights or alleging infringement, misuse, inequitable conduct, or unclean hands against a third party that making, using, selling, offering to sell, or importing a product that is competitive with the Specified Product. Such support and cooperation shall include using reasonable efforts to make employees of Seller or its Affiliates and the inventors of any Patent Rights included in the Specified Assets available to Purchaser to support any Legal Proceedings relating to such Patent Rights or the Specified Products. Purchaser will reimburse Seller for (a) out-of-pocket costs reasonably incurred in connection with support provided by any employee of Seller and its Affiliates and (b) all costs and expenses reasonably incurred in connection with support provided by any non-employee of Seller and its Affiliates, in each case ((a) and (b)), by Seller or its Affiliates under this Section 4.3.

4.4Books and Records. From and after the Closing Date, each of Seller and Purchaser shall preserve and retain all books and records as currently maintained by Seller in the ordinary course of business and relating to the Specified Business for the longer of (i) seven years or (ii) the applicable statute of limitation, provided, that, Seller or Purchaser, as applicable, may destroy such books and records in accordance with its standard record retention policies and schedules. In connection therewith, from and after the Closing Date, each of Seller and Purchaser shall make available to the other Party, at the other Party’s expense, during normal business hours and upon reasonable prior written notice, but without unreasonably disrupting Seller or Purchaser’s business, access to such books and records (other than income Tax Returns of the Seller or its Affiliates) relating to the Specified Business necessary to permit Seller or its Affiliates or Purchaser and its Affiliates, as applicable, to respond to any third party subpoena, examination or audit.

4.5Accounts Receivable. The Parties acknowledge and agree that all Accounts Receivable outstanding on the Closing Date and arising out of sales of the Specified Products prior to the Closing Date shall remain the property of Seller or its Affiliates and may be collected solely by or for the benefit of Seller or its Affiliates subsequent to the Closing. In the event that, subsequent to the Closing, Purchaser or an Affiliate of Purchaser receives any payments from any obligor with respect to an Account Receivable, then Purchaser shall, within 30 days of receipt of such payment, remit the full amount of such payment to Seller. In the event that, subsequent to the Closing, Seller or any of its Affiliates receive any payments from any obligor with respect to an Account Receivable of Purchaser for any period after the Closing Date, then Seller shall, within 30 days of receipt of such payment, remit the full amount of such payment to Purchaser. In the case of the receipt by Seller of any payment from any obligor of both Seller and Purchaser, then, unless otherwise specified by such obligor, such payment shall be applied first to amounts owed to Seller with the excess, if any, remitted to Purchaser.

4.6Returns, Chargebacks and Rebates.

(a)Returns. As of the Closing, [*].

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(b)Chargebacks. As of the Closing, [*].

(c)Rebates. As of the Closing, [*].

(d)Purchase Price Adjustment. In consideration for Purchaser’s assumption for those certain Assumed Liabilities in accordance with Section 1.4(iii), the Purchase Price shall be [*] (the “Purchase Price Adjustment”) mutually agreed upon by the Parties and set forth in Schedule 4.6.

(e)Cooperation. Following the Closing, Seller and Purchaser shall cooperate to exchange reasonable documentation concerning [*].

4.7Confidentiality.

(a)The provisions of the Confidentiality Agreement shall remain in effect until the Closing, at which point the Parties shall cause the Confidentiality Agreement to be terminated to be of no further force or effect.

(b)From and after the Closing:

(i)all Confidential Information relating solely to the Specified Products, Specified Business or Purchaser (or its Affiliates or representatives), including its contractors, suppliers, vendors, distributors and similar third parties (“Purchaser Confidential Information”) shall be used by Seller or its Affiliates solely as required to (A) perform its obligations or exercise or enforce its rights under this Agreement or any Ancillary Agreement or (B) comply with applicable law (including in connection with any legal, regulatory, judicial or administrative process) (each of (A) and (B), a “Seller Permitted Purpose”), and for no other purpose. For a period of five years after the Closing Date, Seller shall not disclose, or permit the disclosure of, any of the Purchaser Confidential Information to any Person except those Persons (x) to whom such disclosure is necessary in connection with any Seller Permitted Purpose, (y) are advised of the contents of this Article and (z) are bound to the Receiving Party by obligations of confidentiality at least as restrictive as the terms of this Article. Seller shall treat, and will cause its Affiliates and the representatives of Seller or any of its Affiliates to treat, the Purchaser Confidential Information as confidential, using the same degree of care as Seller normally employs to safeguard its own confidential information from unauthorized use or disclosure, but in no event less than a reasonable degree of care.

(ii)all Confidential Information disclosed by Seller that does not solely relate to the Specified Products or Specified Business or that otherwise relates to Seller (or its Affiliates or representatives), including its contractors, suppliers, vendors, distributors and similar third parties (the “Seller Confidential Information”) shall be used by Purchaser solely as required to (A) perform its obligations or exercise or enforce its rights under this Agreement or any Ancillary Agreement, or (B) comply with applicable law (including in connection with any legal, regulatory, judicial or administrative process) (each of (A) and (B), a “Purchaser Permitted Purpose”), and for no other purpose. For a period of five years after the Closing Date, Purchaser shall not disclose, or permit the disclosure of, any Seller Confidential Information to any Person except those Persons (x) to whom such disclosure is necessary in connection with a Purchaser

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Permitted Purpose, (y) are advised of the contents of this Article and (z) are bound to the Receiving Party by obligations of confidentiality at least as restrictive as the terms of this Article. Purchaser shall treat, and will cause its Affiliates and the representatives of Purchaser or any of its Affiliates to treat, the Seller Confidential Information as confidential, using the same degree of care as Purchaser normally employs to safeguard its own confidential information from unauthorized use or disclosure, but in no event less than a reasonable degree of care.

(iii)“Confidential Information” means (i) all confidential or proprietary information disclosed by one Party (or its representatives or Affiliates) (collectively, the “Disclosing Party”) to the other Party (or its representatives or Affiliates) (collectively, the “Receiving Party”) (A) in connection with this Agreement or any Ancillary Agreement or (B) under the Confidentiality Agreement, (ii) all memoranda, notes, analyses, compilations, studies and other materials prepared by or for the Receiving Party to the extent containing or reflecting the information in the preceding clause (A) and (iii) the terms of this Agreement and each Ancillary Agreement. Notwithstanding the foregoing, Confidential Information shall not include information that, in each case, as demonstrated by competent written documentation:

(A)was already known to the Receiving Party or its Affiliates, other than (x) under an obligation of confidentiality, at the time of disclosure by the Disclosing Party or (y) by Seller (or its Affiliates or representatives) with respect to the Specified Product or the Specified Business;

(B)was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party;

(C)became generally available to the public or otherwise part of the public domain after its disclosure to the Receiving Party other than through any act or omission of the Receiving Party in breach of this Agreement or the Confidentiality Agreement;

(D)is subsequently disclosed to the Receiving Party by a third party without obligations of confidentiality with respect thereto; or

(E)is subsequently independently discovered or developed by the Receiving Party without the aid, application or use of Confidential Information.

(c)Permitted Disclosures. Notwithstanding any provision to the contrary set forth in this Agreement, the Receiving Party may disclose Confidential Information of the Disclosing Party to the extent that such disclosure is reasonably necessary in the following instances:

(i)disclosure of the existence and applicable terms of this Agreement and the Ancillary Agreements to actual or bona fide potential investors, acquirors, sublicensees, lenders, and other financial or commercial partners, and their respective attorneys, accountants, banks, investors, and advisors, solely for the purpose of evaluating or carrying out an actual or potential investment, acquisition, sublicense, debt transaction, or collaboration; provided that, in each such case, such Persons are bound by obligations of confidentiality, non-disclosure, and non-

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use provisions at least as restrictive or protective of the Parties as those set forth in this Agreement or otherwise customary for such type and scope of disclosure; or

(ii) if required by applicable Legal Requirements, including as may be required in connection with any filings made with, or by the disclosure policies of a major stock exchange; provided that the Party seeking to disclose the Confidential Information of the other Party: (x) use all reasonable efforts to inform the other Party prior to making any such disclosures and cooperate with the other Party in seeking a protective order or other appropriate remedy (including redaction); and (y) whenever possible, request confidential treatment of such information.

(d)Residual Knowledge. Notwithstanding any provision to the contrary set forth in this Agreement, Confidential Information will not include any knowledge, technique, experience, or know-how that is retained in the unaided memory of any authorized representative of the Receiving Party after having access to such Confidential Information prior to or following the Closing Date.

4.8Conditions.

(a)Seller will use commercially reasonable efforts (i) to cause the conditions set forth in Section 5 to be satisfied on a timely basis and (ii) otherwise to cause the Closing to take place as soon as reasonably practicable.

(b)Purchaser will use commercially reasonable efforts (i) to cause the conditions set forth in Section 6 to be satisfied on a timely basis and (ii) otherwise to cause the Closing to take place as soon as reasonably practicable.

4.9NDC Numbers; Telephone Lines.

(a)Purchaser may continue to sell Specified Products bearing Seller’s NDC numbers for the purpose of utilizing the labels and packaging, and advertising, marketing, sales and promotional materials, for the Specified Products and any tablets included in the Specified Inventory as they exist on the Closing Date. Following the Closing, [*].

(b)To the extent that Seller is [*].

4.10Purchaser Use of Seller Names.

(a)During the period commencing on the Closing Date and lasting until the later of (i) [*] and (ii) [*] (the “Limited License Period”), [*].

(b)Promptly upon the expiration of the Limited License Period, Purchaser shall, and shall cause its Affiliates to, [*].

(c)In no event shall Purchaser or any of its Affiliates (i) [*] or (ii) [*].

(d)The quality of the acquired inventory of Specified Products sold by Purchaser under any Seller Names must be of the same quality of the Specified Products sold by

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Seller prior to the Closing Date. Without limiting the foregoing, Purchaser agrees that it and its Affiliates and sublicensees will: (i) use reasonable efforts to ensure that all Specified Products that are sold bearing the Seller Names are sold in compliance with all Health Laws; (ii) not use such Seller Names in a way that might materially prejudice their distinctiveness or validity or the goodwill of Seller therein and includes the trademark registration symbol ® or ™ as appropriate; and (iii) not use any trademarks or trade names so resembling any of such Seller Names as to be likely to cause confusion or deception. Purchaser hereby agrees to indemnify Seller and the other Seller Indemnified Party from and against any and all Damages incurred or suffered in connection with, or resulting from, use of any Seller Names by Purchaser or any of its Affiliates (or any third party acting on behalf of Purchaser or any of its Affiliates) permitted under this Section 4.10.

(e)Notwithstanding the transfer of any labels or packaging, or any advertising, marketing, sales and promotional materials, Purchaser acknowledges that this Agreement does not, and shall not, convey, transfer or assign any right, title, license or interest in any trademarks of Seller or any of its Affiliates other than the Trademarks Rights included in the Specified IP Rights and Purchaser retains all such rights.

4.11No Implied Rights. Nothing in this Agreement will be interpreted to grant a Party any rights under any intellectual property rights owned or controlled by the other Party, in each case, that are not expressly granted herein, whether by implication, estoppel, or otherwise. Any rights not expressly granted to Purchaser by Seller under this Agreement are hereby retained by Seller.

4.12Product Complaints and Recalls. From and after the Closing, the Parties will handle complaints, recalls, and market withdrawals as set forth in the Commercial Supply Agreement

4.13Restrictions.

(a)Seller agrees that, at all times during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date, [*].

(b)The covenants set forth in Section 4.13(a) shall be construed as a series of separate covenants, one for each state, city or other political subdivision of the United States. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenants set forth in Section 4.13(a) hereof. If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. To the extent that the provisions of Section 4.13(a) hereof are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable law.

(c)The Parties agree that (i) if Seller or any of its Affiliates breach the provisions of this Section 4.13, the damage to Purchaser may be substantial and money damages will not afford Purchaser an adequate remedy, and (ii) if Seller or any of its Affiliates are in breach of any provision of this Section 4.13, or threatens a breach of any provision of this Section 4.13

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(including by initiating a course of action that would reasonably be expected to lead to a breach), then Purchaser shall be entitled, in addition to all other rights and remedies as may be provided by applicable law and notwithstanding anything in this Agreement to the contrary, to seek specific performance and injunctive and other equitable relief to prevent or restrain a breach of any provision of this Section 4.13.

4.14Notice to Customers. Following the date hereof, Purchaser and Seller shall reasonably cooperate with each other to prepare a joint notification to all applicable customers that have not received prior notice of the transfer of the Specified Products to Purchaser. As soon as reasonably practicable after the Closing and in no event later than one Business Day following the Closing Date, such joint notice shall be sent by Purchaser; provided, however, that Purchaser shall have given Seller a reasonable opportunity to review such notice.

4.15Tax Matters.

(a)Refunds. If Purchaser receives a refund, abatement or credit of Taxes for which Seller made a payment (including pursuant to this Agreement) or otherwise received a refund, abatement or credit of Taxes of which Seller is entitled to pursuant to this Agreement, then Purchaser shall promptly pay to Seller the full amount of the refund, abatement or credit (including any accrued interest paid in respect of such refunded Tax). To the extent such refund, abatement or credit of Taxes relates to a Straddle Period, Purchaser shall pay to Seller a portion of such refund, abatement or credit of Taxes calculated consistent with the principles of Section 1.10(c).

(b)Tax Contests. Purchaser and Seller agree to cooperate and to cause their Affiliates to cooperate with each other to the extent reasonably required after the Closing Date in connection with any Tax proceedings or audits conducted by a Governmental Entity relating to any Taxes with respect to the Specified Assets or the Specified Business for any taxable period ending on or prior to the Closing Date and any Straddle Period (each a “Tax Contest”). Promptly (but no more than twenty (20) days) after Purchaser or any of its Affiliates receives notice of any Tax Contest, Purchaser shall notify Seller in writing (which notice shall include copies of any notices, correspondence and any other documents received by Purchaser or its Affiliates with respect to such Tax Contest) of the Tax Contest. If Seller’s Tax liability or rights to any refunds could be affected by the Tax Contest or if Seller could have an indemnification obligation under this Agreement, Seller shall have the sole right to conduct, control, defend, settle or compromise the defense of the Tax Contest at its own expense, whether the Tax Contest began before or after the Closing Date; and Purchaser shall provide Seller with all necessary powers of attorney and other necessary documents and assistance to allow Seller to effectively conduct and control such defense. Seller shall not be responsible for any Taxes to the extent attributable to any action taken by Purchaser or its Affiliates with respect to any Tax Contest without Seller’s written consent (not to be unreasonably withheld, conditioned, or delayed). This Section 4.15(b) shall govern the control of all Tax Contests.

(c)Bulk Transfers. Notwithstanding anything to the contrary in this Agreement, each party waives compliance with the provisions of any bulk transfer or similar laws of any jurisdiction in connection with the transactions contemplated by this Agreement.

5.Conditions Precedent to Purchaser’s Obligation to Close.

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Purchaser’s obligation to purchase the Specified Assets and to take the other actions required to be taken by Purchaser at the Closing is subject to the satisfaction, at the Closing, of each of the following conditions (any of which may be waived by Purchaser, in whole or in part, in writing):

5.1Accuracy of Representations. Those representations and warranties of Seller set forth in Section 2 that refer specifically to and are made as of a specified date shall have been true and correct in all material respects (disregarding any materiality or Specified Product Material Adverse Effect qualifications within such representations and warranties) as of the date specified, and all other representations and warranties of Seller set forth in Section 2 shall be true and correct in all material respects (disregarding any materiality or Specified Product Material Adverse Effect qualifications within such representations and warranties) as of the Closing Date as if made on and as of the Closing Date, except, in each case, for any failure or failures to be true and correct in all material respects that, individually or in the aggregate, have not had and would not reasonably be expected to have a Specified Product Material Adverse Effect.

5.2Performance of Covenants. Seller shall have performed or complied with in all material respects all covenants required by this Agreement to be performed by Seller on or before the Closing Date.

5.3No Specified Product Material Adverse Effect. Since the date of this Agreement, no Specified Product Material Adverse Effect shall have occurred.

5.4Additional Documents. Each of the following documents shall have been delivered to Purchaser:

(a)each of the Ancillary Agreements required to be executed by Seller or the applicable Specified Affiliate;

(b)a certificate, executed by an executive officer of Seller and dated the Closing Date, confirming on behalf of Seller and not in such executive officer’s personal capacity, that the conditions set forth in Sections 5.1 and Section 5.2 have been satisfied; and

(c)copies of the resolutions duly adopted by Seller’s board of directors or other managing Person authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, certified by the secretary of Seller.

6.Conditions Precedent to Seller’s Obligation to Close.

Seller’s obligation to sell and transfer the Specified Assets to Purchaser and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at the Closing, of each of the following conditions (any of which may be waived by Seller, in whole or in part, in writing):

6.1Accuracy of Representations. The representations and warranties of Purchaser set forth in Section 3 shall be true and correct in all material respects (disregarding any materiality

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qualifications within such representations and warranties) as of the Closing Date as if made on and as of the Closing Date.

6.2Performance of Covenants. Purchaser shall have performed or complied with in all material respects all covenants required by this Agreement to be performed by Purchaser on or before the Closing Date.

6.3Additional Documents. Each of the following additional documents shall have been delivered to Seller:

(a)each of the Ancillary Agreements required to be executed by Purchaser;

(b)a certificate, executed by an executive officer of Purchaser and dated the Closing Date, confirming on behalf of Purchaser and not in such executive officer’s personal capacity, that the conditions set forth in Sections 6.1 and 6.2 have been satisfied; and

(c)copies of the resolutions duly adopted by Purchaser’s board of directors or other managing Person authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, certified by the secretary of Purchaser.

7.Termination.

7.1Right to Terminate Agreement. This Agreement may be terminated prior to the Closing:

(a)by the mutual written consent of the Parties;

(b)by any Party (by delivery of a written termination notification in accordance with Section 7.2) at any time after January 8, 2021 (the “End Date”) if the Closing has not taken place on or before the End Date, subject to extension for any applicable cure period under Section 7.1(c), unless the failure of the Closing to take place on or before such date is attributable to a Force Majeure Event or breach by such Party of any of its obligations set forth in this Agreement;

(c)by Seller (by delivery of a written termination notification in accordance with Section 7.2) if there shall have been a breach on the part of Purchaser of any of its representations, warranties or covenants such that the condition set forth in Section 6.1 or Section 6.2, as the case may be, would not be satisfied or cannot be cured by Purchaser as of the End Date, or, if capable of being cured, (i) Seller shall have given written notice of such breach to Purchaser; (ii) at least twenty (20) days shall have elapsed since the delivery of such written notice to Purchaser; and (iii) such breach shall not have been cured; provided, that Seller may not terminate this Agreement pursuant to this Section 7.1(c) if Seller is in material breach of this Agreement so as to cause any conditions set forth in Section 5.1 or Section 5.2 not to be satisfied; or

(d)by Purchaser (by delivery of a written termination notification in accordance with Section 7.2) if there shall have been a breach on the part of Seller of any of its representations, warranties or covenants such that the condition set forth in Section 5.1 or Section 5.2, as the case may be, would not be satisfied or cannot be cured by Seller as of the End Date, or,

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if capable of being cured; (i) Purchaser shall have given written notice of such breach to Seller; (ii) at least twenty (20) days shall have elapsed since the delivery of such written notice to Seller; and (iii) such breach shall not have been cured; provided, that Purchaser may not terminate this Agreement pursuant to this Section 7.1(d) if Purchaser is in material breach of this Agreement so as to cause any conditions set forth in Section 6.1 or Section 6.2 not to be satisfied.

7.2Termination Procedures. If any Party wishes to terminate this Agreement pursuant to Section 7.1, such Party will deliver to the other Party a written termination notification stating that such Party is terminating this Agreement and setting forth a brief statement of the basis on which such Party is terminating this Agreement.

7.3Effect of Termination. Upon the termination of this Agreement pursuant to Section 7.1, no Party will have any obligation or other liability to any other Party, except that (i) the Parties will remain bound by the provisions of Section 4.7, this Section 7.3, and by the provisions of the Confidentiality Agreement and (ii) no Party will be relieved of any liability for fraud or for any Willful Breach of any representation, warranty, or covenant contained herein.

8.Indemnification.

8.1Survival of Representations. All of the representations and warranties of Seller and Purchaser set forth in this Agreement and in any certificate delivered pursuant to this Agreement shall (a) survive the Closing and (b) terminate and expire, and will cease to be of any force or effect, at 11:59 p.m. (Pacific time) on the December 31, 2021 (the “Expiration Date”); provided that, the Fundamental Representations set forth in this Agreement shall survive until the date that is four years following the Closing Date (the “Fundamental Representations Expiration Date”). All covenants and agreements of Seller and Purchaser contained in this Agreement that are to be performed following the Closing shall continue in effect and expire in accordance with their respective terms. If the Closing occurs, neither Party will have liability with respect to any claim for any breach of any representation or warranty in this Agreement or in any certificate delivered pursuant to this Agreement unless in each case Purchaser or Seller duly delivers to the other Party, in conformity with all of the applicable procedures set forth in Section 8.5, a Claim Notice setting forth a claim for indemnification, in which case the indemnification obligations with respect to the matters set forth in such Claim Notice will survive (and will not be extinguished upon) such Expiration Date or Fundamental Representations Expiration Date, as applicable, until such time as such claim is finally resolved in accordance with this Section 8. It is the express intent of the Parties that, if the applicable survival period for an item as contemplated by this Section 8.1 is shorter or longer than the statute of limitations that would otherwise have been applicable to such item, then, by contract, the applicable statute of limitations with respect to such item shall be reduced or extended to the survival period contemplated by this Agreement. The Parties further acknowledge that the time periods set forth in this Section 8.1 for the assertion of claims under this Agreement are the result of arms’-length negotiation among the Parties and that they intend for the time periods to be enforced as agreed by the Parties. The period of time prescribed for the commencement of any action pursuant to this Agreement based upon the representations and warranties of Seller set forth in this Agreement (other than the Fundamental Representations) shall expire at 5:00 p.m. (Pacific time) on the Expiration Date or Fundamental Representations

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Expiration Date, as applicable, if a Claim Notice with respect thereto has not been given in accordance with the applicable procedures set forth in Section 8.5.

8.2Indemnity by Seller. From and after the Closing Date, Seller and the Seller Guarantor will indemnify and hold harmless Purchaser, its Affiliates and their respective officers, directors, employees, agents and representatives (each a “Purchaser Indemnified Party”) from and against:  any Damages arising out of or resulting from any breach or inaccuracy of the representations and warranties by Seller set forth in Section 2; any Damages arising out of or resulting from any breach by Seller of the covenants of Seller set forth in this Agreement; and (c) any Damages arising out of or resulting from any Excluded Liability.

8.3Indemnity by Purchaser. From and after the Closing Date, Purchaser will indemnify and hold harmless Seller, its Affiliates and their respective officers, directors, employees, agents and representatives (each a “Seller Indemnified Party”) from and against (a) any Damages arising out of or resulting from any breach or inaccuracy of the representations and warranties by Purchaser set forth in Section 3; (b) any Damages arising out of or resulting from any breach by Purchaser of the covenants of Purchaser set forth in this Agreement; (c) any Damages arising out of or resulting from any failure of Purchaser to discharge any Assumed Liabilities, and (d) any liability for the income Taxes of Purchaser or its Affiliates or any member of an affiliated group with which Purchaser files or have filed a Tax Return on a consolidated or combined basis.

8.4Limitations. All claims by Purchaser Indemnified Parties and Seller Indemnified Parties under this Section 8 are subject to the following exclusions and limitations:

(a) No Party will be liable for punitive or special damages or any damages that are speculative or not reasonably foreseeable as a proximate result of the breach by a Party of any of its representations, warranties, covenants or agreements under this Agreement, whether in contract, warranty, negligence, strict liability or otherwise, relating to this Agreement or the Ancillary Agreements unless such damages are awarded to a third party for which indemnification is required under this Agreement.

(b)Notwithstanding any provision to the contrary set forth in this Agreement, Seller will not have any obligation to indemnify the Purchaser under this Section 8 unless and until the Seller Indemnified Parties suffer an aggregate amount of Damages in excess of [*] (the “Basket”) and then if the Damages exceed the Basket, Purchaser will be entitled to recover all such Damages in excess of the Basket up to a cap equal to [*] (the “Cap”); provided that Damages for (i) breach of Fundamental Representations and (ii) claims for indemnification under Section 8.2(b) and Section 8.2(c) will not be subject to the Basket or Cap set forth in this Section 8.4(b). In addition, [*].

8.5Indemnification Procedures.

(a)If a Party entitled to indemnification under this Section 8 (an “Indemnified Party”) wishes to assert an indemnification claim against the Party subject to such indemnification obligation under this Section 8 (the “Indemnifying Party”), then the Indemnified Party will deliver

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to the Indemnifying Party, as soon as reasonably practicable, a written notice (a “Claim Notice”) setting forth:

(i)the specific subsection of Section 8.2 or 8.3, as applicable, upon which the Indemnified Party is basing its claim and, if applicable, the representation and warranty or covenant alleged to have been breached by the Indemnifying Party;

(ii)a reasonably detailed description of the facts and circumstances giving rise to the claim as are then reasonably available; and

(iii)a reasonably detailed description of, and a good faith estimate of the total amount of, the Damages actually incurred or expected to be incurred by the Indemnified Party with respect to such claim, if known and quantifiable;

provided, however, that (A) the failure to deliver a Claim Notice to the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it may have to the Indemnified Party, except to the extent that such failure materially prejudices the Indemnifying Party’s ability to defend the related Matter; and (B) the Indemnified Party will not be permitted to deliver a Claim Notice (and will not be entitled to indemnification pursuant to this Section 8) with respect to breaches of a representation and warranty unless such Claim Notice is delivered before the Expiration Date or Fundamental Representations Expiration Date, applicable to such representation and warranty.

(b)If the Indemnified Party receives notice or otherwise obtains knowledge of any Matter brought by a third party that may reasonably be expected to give rise to an indemnification claim against the Indemnifying Party, then the Indemnified Party will deliver to the Indemnifying Party a written notice describing such Matter in reasonable detail as soon as reasonably practicable; provided, however, that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability that it may have to the Indemnified Party, except to the extent that such failure materially prejudices the Indemnifying Party’s ability to defend the related Matter. The Indemnifying Party will have the right, exercisable by written notice to the Indemnified Party, at its election and at its sole expense, to assume the defense of any such Matter with its own counsel, reasonably acceptable to the Indemnified Party; provided, that the Indemnifying Party shall not have the right to assume control of such defense, if the claim which the Indemnifying Party seeks to assume control (A) seeks non-monetary relief against the Indemnified Party (except where non-monetary relief is merely incidental to a primary claim or claims for monetary damages or would not have an adverse effect on the Indemnified Party), (B) involves criminal allegations against the Indemnified Party, (C) is one in which the Indemnifying Party is also a party and there may be legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party, or (D) is reasonably likely to result in greater liability to the Indemnified Party than the Indemnifying Party, taking into account the limitations on indemnification herein. This Section 8.5(b) shall not apply to any Matters with respect to Taxes, which shall be exclusively governed by Section 4.15(b).

(c)If the Indemnifying Party elects to assume the defense of any Matter under subsection (b) of this Section 8.5, then:

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(i)the Indemnifying Party will not be required to pay or otherwise indemnify the Indemnified Party against any attorneys’ fees or other expenses incurred on behalf of the Indemnified Party in connection with any such Matter following the Indemnifying Party’s election to assume the defense of any such Matter other than the reasonable costs of investigation and of assistance as contemplated by this Section 8.5; provided, however, that if, in the opinion of outside counsel to the Indemnified Party, it is advisable for the Indemnified Party to be represented by separate counsel due to actual or potential conflicts of interest, the Indemnified Party shall have the right to employ counsel to represent it and in that event the reasonable fees and expenses of such separate counsel shall be paid by the Indemnifying Party;

(ii)the Indemnified Party and the Indemnifying Party will each make available to the other all books, records and other documents and materials that are under the control of such Party, its Affiliates, advisors and representatives that may be reasonably considered necessary or desirable for the defense of any such Matter (other than any Dispute between Purchaser and Seller or their respective Affiliates arising out of the transactions contemplated hereby or by the Ancillary Agreements);

(iii)the Indemnified Party and the Indemnifying Party will execute such documents and take such other actions as may be reasonably requested by the other for the purpose of facilitating the defense of, or any settlement, compromise or adjustment relating to, any such Matter;

(iv)the Indemnified Party will otherwise cooperate as reasonably requested by the Indemnifying Party in the defense of any such Matter; provided, however, that such actions and cooperation by the Indemnified Party under clauses “(ii)” through “(iv)” will not unduly disrupt the operations of the Indemnified Party’s business or cause the Indemnified Party to waive any statutory or common law privileges (provided, that, to the extent Purchaser or Seller (as the case may be) withholds information due to a potential waiver of such privilege, such Party shall notify the other Party of the same and shall use commercially reasonable efforts to find a way to allow disclosure of such information, including entering into joint defense agreements or other arrangements, as appropriate and only to the extent such descriptions, disclosures, agreements and arrangements would not reasonably be expected to result in a waiver of such privilege), breach any confidentiality obligations owed to third parties (provided, that Purchaser or Seller (as the case may be) uses reasonable best efforts to obtain waivers thereof) or otherwise cause any confidential information of the Indemnified Party to become public;

(v)the Indemnified Party will not admit any liability with respect to any such Matter without the Indemnifying Party’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed); and

(vi)the Indemnifying Party will have the right to settle, adjust or compromise any such Matter, on such terms as the Indemnifying Party may consider appropriate, with the consent of the Indemnified Party (which will not be unreasonably withheld, conditioned or delayed); provided, however, that the consent of the Indemnified Party shall not be required with respect to any such settlement, adjustment or compromise if the Indemnifying Party agrees in writing to pay or cause to be paid any amounts payable pursuant to such settlement, adjustment or compromise; such settlement, adjustment or compromise contemplates relief only through

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monetary damages; such settlement, adjustment or compromise includes no admission of liability by or other obligation on the part of the Indemnified Party; and such settlement, adjustment or compromise includes as an unconditional term thereof the giving by the third party claimant to the Indemnified Party of a release from all liability in respect thereof; and

(vii)If the Indemnifying Party elects not to or is otherwise not entitled to (pursuant to this Section 8.5) assume the defense of any Matter, then (i) the Indemnified Party will proceed diligently to defend any such Matter with the assistance of counsel, (ii) the Indemnifying Party will be afforded the opportunity to participate in such defense, at the Indemnifying Party’s sole cost and expense and (ii) the Indemnified Party shall not settle, adjust or compromise any such Matter, or admit any liability with respect to any such Matter, without the prior written consent of the Indemnifying Party (which will not be unreasonably withheld, conditioned or delayed).

(viii)This Section 8.5(c) shall not apply to any Matters with respect to Taxes, which shall be exclusively governed by Section 4.15(b).

8.6Sole Remedy. The right to indemnification pursuant to this Section 8 shall be the Parties’ sole and exclusive remedy with respect to matters in any way relating to a breach of this Agreement or any Damages sustained or incurred by Purchaser or its Affiliates, successors, or assigns, except that, to the extent assignment of the applicable Specified Asset pursuant to Section 1.4 would cure a breach of any representation or warranty in this Agreement, assignment thereof will be the sole and exclusive remedy of the Purchaser Indemnified Party for any such breach.

8.7Tax Treatment of Indemnity Payments. The Parties agree to [*].

9.Release of Claims.

9.1Seller on behalf of itself and its Affiliates, and on behalf of Seller’s and its Affiliates’ predecessors, successors and assigns and their respective past and present directors, officers, employees, affiliates and representatives in their capacity as such (collectively, the “Seller Releasor Parties”), unconditionally and irrevocably hereby absolutely releases and forever discharges the Purchaser and its predecessors, successors and assigns and each Affiliate and related entities, and each of their respective past and present directors, officers, employees, and representatives in their capacities as such (collectively the “Purchaser Released Parties”), from any and all loss, liability, obligations, claims, costs, demands, actions and causes of action, suits, debts, accounts, covenants, contracts, controversies, Damages and judgments of every kind, nature and character (including claims for Damages, costs, expenses and attorneys’, brokers’ and accountants’ fees and expenses), in connection with any transaction, affair or occurrence, whether in law, equity or otherwise, whether known or unknown, suspected or unsuspected that such Seller Releasor Parties now has, has ever had or at any time could have asserted against any of the Purchaser Released Parties arising from or relating in any way to the enforcement, alleged infringement, alleged invalidity,alleged misuse, alleged inequitable conduct, or alleged unclean hands with respect to any patents and other matters that are the subject of the Infringement Litigation, other than the Seller Retained Claims (collectively, the “Seller Released Claims”). For the purposes of this Agreement, the term “Seller Retained Claims” means, as to any Seller Releasor Party, any claims, in each case whether currently known or unknown, arising out of any contractual rights

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(and the enforcement thereof) pursuant to this Agreement, any Ancillary Agreement or any other certificate, document or instrument executed pursuant to the terms of this Agreement or any Ancillary Agreement to which the Seller Releasor Party is a party. Each such Seller Releasor Party hereby irrevocably agrees to refrain from, directly or indirectly, asserting any claim or demand or commencing (or allowing to be commenced on such Seller Releasor Party’s behalf) any suit, action or proceeding of any kind, in any agency, court or before any tribunal, against any Purchaser Released Party based upon any Seller Released Claim, it being the intent by such Seller Releasor Party that, subject to the receipt by the Seller of the Purchase Price, and by virtue of the execution of this Agreement, the Purchaser Released Parties will be absolutely, unconditionally and forever discharged of and from any and all obligations related in any way to the Seller Released Claims. Nothing contained in this Agreement shall affect the rights, liabilities or obligations of any Party that are expressly set forth in this Agreement or any Ancillary Agreement and the other documents and agreements to which the Seller Releasor Party is a party in connection with the transactions contemplated by this Agreement.

9.2Purchaser on behalf of itself and its Affiliates, and on behalf of Purchaser’s and its Affiliates’ predecessors, successors and assigns and their respective past and present directors, officers, employees, affiliates and representatives in their capacity as such (collectively, the “Purchaser Releasor Parties”), unconditionally and irrevocably hereby absolutely releases and forever discharges Seller and its predecessors, successors and assigns and each Affiliate and related entities, and each of their respective past and present directors, officers, employees, and representatives in their capacities as such (collectively the “Seller Released Parties”), from any and all loss, liability, obligations, claims, costs, demands, actions and causes of action, suits, debts, accounts, covenants, contracts, controversies, Damages and judgments of every kind, nature and character (including claims for Damages, costs, expenses and attorneys’, brokers’ and accountants’ fees and expenses), in connection with any transaction, affair or occurrence, whether in law, equity or otherwise, whether known or unknown, suspected or unsuspected that such Purchaser Releasor Parties now has, has ever had or at any time could have asserted against any of the Seller Released Parties arising from or relating in any way to the enforcement, alleged infringement, alleged invalidity of, alleged misuse, alleged inequitable conduct, or alleged unclean hands with respect to any patents and other matters that are the subject of the Infringement Litigation, other than the Purchaser Retained Claims (collectively, the “Purchaser Released Claims”). For the purposes of this Agreement, the term “Purchaser Retained Claims” means, as to any Purchaser Releasor Party, any claims, in each case whether currently known or unknown, arising out of any contractual rights (and the enforcement thereof) pursuant to this Agreement, any Ancillary Agreement or any other certificate, document or instrument executed pursuant to the terms of this Agreement or any Ancillary Agreement to which the Purchaser Releasor Party is a party. Each such Purchaser Releasor Party hereby irrevocably agrees to refrain from, directly or indirectly, asserting any claim or demand or commencing (or allowing to be commenced on such Purchaser Releasor Party’s behalf) any suit, action or proceeding of any kind, in any agency, court or before any tribunal, against any Seller Released Party based upon any Purchaser Released Claim, it being the intent by such Purchaser Releasor Party that, subject to the receipt by Purchaser of the Specified Assets, and by virtue of the execution of this Agreement, the Seller Released Parties will be absolutely, unconditionally and forever discharged of and from any and all obligations related in any way to the Purchaser Released Claims. Nothing contained in this Agreement shall affect the rights, liabilities or obligations of any Party that are expressly set forth in this Agreement or any Ancillary

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Agreement and the other documents and agreements to which the Purchaser Releasor Party is a party in connection with the transactions contemplated by this Agreement.

9.3Without limiting the foregoing and subject to Seller’s retention of the Seller Retained Claims and Purchaser’s retention of the Purchaser Retained Claims, each of Seller and Purchaser expressly waives and releases (on behalf of the respective Seller Releasor Parties and Purchaser Releasor Parties) any and all rights and benefits under Section 1542 of the California Civil Code (or any analogous law of any other state), which reads as follows: “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that if known by him or her would have materially affected his or her settlement with the debtor or released party.”

9.4Further, in connection with the resolution of the Infringement Litigation, [*].

9.5The Parties agree to the entry of the Stipulation of Dismissal attached hereto as Exhibit J. To effectuate the final settlement and dismissal of the Infringement Litigation, within five (5) Business Days following Closing, the Parties shall cause the Stipulation of Dismissal to be filed with the United States District Court for the District of Delaware and shall take all other necessary actions to obtain the dismissal of the Infringement Litigation. Each Party shall bear its own costs and expenses in connection with the foregoing. Each Party acknowledges that the approval of the court is required to the make the Stipulation of Dismissal effective.

10.Miscellaneous.

10.1Governing Law. This Agreement will be construed in accordance with, and governed in all respects by, the laws of the State of Delaware (without giving effect to principles of conflicts of law).

10.2Venue and Jurisdiction. If any Legal Proceeding or other legal action relating to this Agreement is brought or otherwise initiated, the venue therefor will be in the courts of the United States District Court for the District of Delaware, the Delaware Court of Chancery of the State of Delaware or, if the Delaware Court of Chancery declines jurisdiction, any other court of the State of Delaware, which will be deemed to be a convenient forum. Purchaser and Seller hereby expressly and irrevocably consent and submit to the jurisdiction of the state and federal courts in the State of Delaware.

10.3WAIVER OF JURY TRIAL. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE ANCILLARY AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN (including with respect to any claim, proceeding or action involving a Financing Source).

10.4Dispute Resolution.

(a)Except to the extent provided in Section 10.4(b), in the event of any dispute, controversy or claim arising out of, relating to or in connection with this Agreement (including any schedule or exhibit hereto) (a “Dispute”), the Parties shall first attempt to settle such Dispute in the

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first instance by mutual discussions between representatives of senior management of each Party. Within 10 Business Days of the receipt by a Party or Parties of a notice from another Party or Parties of the existence of a Dispute (the “Dispute Notice”), the receiving Party or Parties shall submit a written response to the other Party or Parties (the “Response”). The Dispute Notice and the Response shall each include (i) a statement of the applicable Party’s position with regard to the Dispute, and (ii) the name and title of the senior executive who will represent the applicable Party in attempting to resolve the Dispute pursuant to this Section 10.4. Within 15 Business Days of receipt of the Response, the designated executives shall meet and attempt to resolve the Dispute. All discussions, negotiations and documentation exchanged pursuant to this clause shall be confidential and shall be treated as compromise and settlement negotiations, and no oral or documentary representations made by the Parties during such negotiations shall be admissible or used for any purpose in any subsequent Legal Proceedings. If any Dispute is not resolved within 30 Business Days of receipt of the Dispute Notice (or within such longer period as to which the Parties have agreed in writing), then either Party shall be entitled to pursue remedies pursuant to Legal Proceedings.

(b)In the event that the Parties do not perform their obligations under the provisions of this Agreement (including failing to take such actions as are required of them hereunder to consummate this Agreement), the Parties agree that where monetary damages would not be an adequate remedy and no monetary damages are sought, a Party may apply to a court of competent jurisdiction for specific performance. The foregoing is in addition to any other remedy to which the Parties are entitled under this Agreement.

(c)The Parties acknowledge and agree that either Party seeking an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.

10.5Force Majeure. Except as to payments required under this Agreement, neither Party shall be liable in damages for any delay or default in such Party’s performance hereunder if such default or delay is caused by events beyond such Party’s reasonable control, including acts of God, law or regulation or other action or failure to act of any government or agency thereof, war or insurrection, civil commotion, destruction of production facilities or materials by earthquake, fire, flood or weather, labor disturbances, epidemic or failure of suppliers, public utilities or common carriers (any such event, a “Force Majeure Event”); provided, that the Party seeking relief under this Section 10.5 shall immediately notify the other Party in writing of such Force Majeure Event(s) and the expected duration of such Party’s non-performance hereunder. The Parties agree the effects of the COVID-19 pandemic that is ongoing as of the Effective Date (including related government orders) may be invoked as a Force Majeure Event for the purposes of this Agreement even though the pandemic is ongoing, provided that Seller represents that no such Force Majeure Event exists as of the Execution Date. The Party that may invoke this Section 10.5 shall use diligent and commercially reasonable efforts to reinstate performance of its ongoing obligations to the other Party as soon as practicable.

10.6Notices. Any notice or other communication required or permitted to be delivered to either Party under this Agreement must be in writing and will be deemed properly delivered,

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given and received when delivered (by hand, by registered mail, by courier or overnight express delivery service with confirmed delivery by tracking number or by email with confirmed receipt) to the address or email address set forth beneath the name of such Party below (or to such other address or email address as such Party shall have specified in a written notice given to the other Party):

if to Purchaser:

Neil F. McFarlane

Chief Executive Officer

Adamas Pharmaceuticals, Inc.

1900 Powell Street, Suite 1000

Emeryville, CA 94608

nmcfarlane@adamaspharma.com

with a copy to:

General Counsel

Adamas Pharmaceuticals, Inc.

1900 Powell Street, Suite 1000

Emeryville, CA 94608

generalcounsel@adamaspharma.com

and with an additional copy to:

Cooley LLP

4401 Eastgate Mall

San Diego, CA 92121

Attention: Barbara Borden

bborden@cooley.com

if to Seller:

Brian Markison

Chief Executive Officer

Osmotica Pharmaceutical US LLC

Vertical Pharmaceuticals, LLC

400 Crossing Boulevard

Bridgewater, NJ 08807

brianmarkison@osmotica.com

and with a copy to:

General Counsel

Osmotica Pharmaceutical US LLC

Vertical Pharmaceuticals, LLC

400 Crossing Boulevard

Bridgewater, NJ 08807

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legal@osmotica.com

and with additional copies to:

Hannah Freeman

Ropes & Gray LLP

Prudential Tower, 800 Boylston St.

Boston, MA 02199

hannah.freeman@ropesgray.com

10.7Public Announcements. The Parties shall coordinate all public statements regarding this Agreement or any of the transactions contemplated by this Agreement. Notwithstanding the foregoing, except as may be required by any Legal Requirement, no Party will (and no Party will permit any of its advisors or representatives to) issue any press release or make any public statement regarding this Agreement or any of the transactions contemplated by this Agreement, without the other Party’s prior written consent (which will not be unreasonably withheld, conditioned, or delayed). If either Party, in its good faith judgment, believes such disclosure is required, such Party shall use its commercially reasonable efforts to consult with the other Party and its representatives, and to consider in good faith any revisions proposed by the other Party or its representatives, as applicable, prior to making (or prior to any of its Affiliates making) such disclosure, and shall limit such disclosure to only that information which is legally required to be disclosed, except, in each case, as otherwise required by any Legal Requirement.

10.8Assignment. Neither Party may assign any of its rights or delegate any of its obligations under this Agreement (whether voluntarily, involuntarily, or otherwise) to any other Person without the prior written consent of the other Party; provided, however that either Party may assign its rights and obligations under this Agreement (a) to an Affiliate of such Party or (b) in connection with a sale of all or substantially all of the assets of such Party’s business (whether in a stock sale, asset sale, merger, reorganization, or otherwise); provided, further (without limiting Purchaser’s obligations under or relating to this Agreement) Purchaser may assign its right to receive all or any of the Specified Assets (i) to an Affiliate of Purchaser, or (ii) to any of Purchaser’s lenders as collateral security.

10.9Parties in Interest. Except for the rights of Purchaser Indemnified Parties and Seller Indemnified Parties under Section 8, nothing in this Agreement is intended to provide any rights or remedies to any employee of either Party or to any other Person other than the Parties.

10.10Severability. In the event that any provision of this Agreement, or the application of such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, then the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, will not be affected and will continue to be valid and enforceable to the fullest extent permitted by law. In lieu of such invalid, unlawful, void or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such invalid, unlawful, void or unenforceable provision as may be possible and reasonably acceptable to the Parties.

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10.11Entire Agreement. This Agreement, together with the Exhibits and Schedules annexed hereto, the Ancillary Agreements, and the other agreements, certificates and documents delivered in connection herewith or therewith set forth the entire understanding of the Parties and supersede all other agreements and understandings between the Parties relating to the subject matter hereof and thereof.

10.12Waiver. No failure on the part of either Party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of either Party in exercising any power, right, privilege or remedy under this Agreement, will operate as a waiver thereof; and no single or partial exercise of any power, right, privilege or remedy will preclude any other or further exercise thereof or of any other power, right, privilege or remedy. Any agreement on the part of a Party to any waiver with respect to this Agreement shall be valid only if set forth in an instrument in writing signed on behalf of such Party.

10.13Amendments. This Agreement may not be amended, modified, altered or supplemented except by means of a written instrument executed by both Parties.

10.14Counterparts. This Agreement may be executed in several counterparts, each of which will constitute an original and all of which, when taken together, will constitute one agreement. If any signature is delivered by facsimile transmission or by email in PDF, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf the signature is executed) with the same force and effect as if such facsimile or PDF signature were an original thereof.

10.15Interpretation of Agreement.

(a)Each Party acknowledges that it has participated in the drafting of this Agreement, and any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in connection with the construction or interpretation of this Agreement.

(b)Whenever required by the context hereof, the singular number will include the plural, and vice versa; the masculine gender will include the feminine and neuter genders; and the neuter gender will include the masculine and feminine genders.

(c)As used in this Agreement, the words “include” and “including,” and variations thereof, will not be deemed to be terms of limitation, and will be deemed to be followed by the words “without limitation.”

(d)As used in this Agreement, the word “will” will be construed to have the same meaning and effect as the word “shall.”

(e)Any definition of or reference to any agreement, instrument, or other document herein will be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).

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(f)The word “notice” means notice in writing (whether or not specifically stated) and will include notices, consents, approvals and other written communications contemplated under this Agreement.

(g)As used in this Agreement, the words “herein,” “hereof,” and “hereunder” and words of similar import, will each be construed to refer to this Agreement in its entirety and not to any particular provision hereof.

(h)Any reference herein to any person will be construed to include the person’s successors and permitted assigns.

(i)References to any specific law, rule or regulation, or section or other division thereof, will be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof.

(j)Unless the context otherwise requires, references in this Agreement to “Sections,” “Schedules” and “Exhibits” are intended to refer to Sections of and Schedules and Exhibits to this Agreement.

(k)Provisions that require that a Party or the Parties hereunder “agree,” “consent,” “approve,” or the like will require that such agreement, consent, or approval be specific and in writing, whether by written agreement, letter, approved minutes, or otherwise (but excluding e-mail and instant messaging).

(l)The table of contents of this Agreement and the bold-faced headings contained in this Agreement are for convenience of reference only, will not be deemed to be a part of this Agreement and will not be referred to in connection with the construction or interpretation of this Agreement.

(m)As used in this Agreement, the term “or” will be interpreted in the inclusive sense commonly associated with the term “and/or.”

10.16Further Assurances. For a period of two years following the Closing, each Party will, to the extent reasonably requested by the other Party, execute and deliver such documents and instruments and take such other actions as such other Party may reasonably request in order to consummate and make effective the transactions contemplated by this Agreement.

10.17Disclosure Schedule. The Disclosure Schedule has been arranged, for purposes of convenience only, as separate Parts corresponding to the subsections of Section 2 of this Agreement. The representations and warranties contained in Section 2 of this Agreement are subject to the exceptions and disclosures set forth in the Disclosure Schedule. The exceptions listed in the Disclosure Schedule are a part of this Agreement as if fully set forth herein. Each exception listed in any part of the Disclosure Schedule will be deemed to qualify all representations and warranties of Seller contained in Section 2 of this Agreement, regardless of a particular part of the Disclosure Schedule where such exception is listed. No reference to or disclosure of any item or other matter in the Disclosure Schedule shall be construed as an admission or indication that such item or other matter is material (nor shall it establish a standard of materiality for any purpose

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whatsoever) or that such item or other matter is required to be referred to or disclosed in the Disclosure Schedule. The information set forth in the Disclosure Schedule is disclosed solely for the purposes of this Agreement, and no information set forth therein shall be deemed to be an admission by any party hereto to any third party of any matter whatsoever, including of any violation of law or breach of any agreement. The Disclosure Schedule and the information and disclosures contained therein are intended only to qualify and limit the representations, warranties and covenants of Seller contained in this Agreement.

*    *    *    *

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The Parties have caused this Agreement to be executed as of the date first set forth above.

Osmotica Pharmaceutical US LLC
By:	/s/ Brian Markson
	Name: Brian Markison
	Title: Chief Executive Officer
Osmotica, Kereskedelmi és Szolgáltató Korlátolt Felelõsségû Társaság
By:	/s/ Brian Markson
	Name: Gabor Varga
	Title: Managing Director
Osmotica Holdings US LLC
By:	/s/ Brian Markson
	Name: Brian Markison
	Title: Chief Executive Officer

[Signature Page to Asset Purchase Agreement]

The Parties have caused this Agreement to be executed as of the date first set forth above.

Adamas Pharmaceuticals, Inc.
By:	/s/ Neil F. McFarlane
	Name: Neil F. McFarlane
	Title: Chief Executive Officer

[Signature Page to Asset Purchase Agreement]

Exhibit A

Certain Definitions

For purposes of the Agreement:

“Accounts Receivable” means all accounts receivable, notes receivable and other indebtedness due and owed by any third party to Seller or any of its Affiliates arising from sales of the Specified Product by or on behalf of Seller or its Affiliates prior to the Closing Date.

“Acquiror” means any Third Party that (a) was not an Affiliate of Seller on the Closing Date and (b) merges with or acquires Seller or any of its Affiliates in one or more transactions following the Closing Date.

“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such first Person. For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” mean (a) the possession, directly or indirectly, of the power to direct the management or policies of a business entity, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). Notwithstanding the foregoing, Avista Capital Partners and their Affiliates and Altchem Ltd and their Affiliates will not be considered “Affiliates” of Seller under this Agreement or any Ancillary Agreement.

“Agreement” means the Asset Purchase Agreement to which this Exhibit A is attached, including the Disclosure Schedule.

“Allocation” has the meaning set forth in Section 1.10(a).

“Ancillary Agreements” has the meaning set forth in Section 1.11.

“Anti-Corruption Laws” means the Foreign Corrupt Practices Act of 1977, as amended, the Anti-Kickback Act of 1986 or any applicable laws of similar effect, and the related regulations and published interpretations thereunder.

“Assumed Liabilities” means the following obligations and other liabilities (whether known, unknown, accrued, absolute, matured, unmatured, contingent or otherwise) as they may exist at or after the Closing:

(a)    all obligations and other liabilities of [*];

(b)    all obligations and other liabilities of [*];

(c)    all obligations and liabilities for [*];

(d)    All liabilities, obligations or commitments relating to [*];

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(e)    Any liability of [*];

(f)    Any liability, obligation or commitment of [*]; and

(g)    Any liability, obligation or commitment arising [*].

“Assumption Agreement” has the meaning set forth in Section 1.7(b).

“Authorization” means any Consent, order, license, permit and other similar authorization of or from (including any applications to) any Governmental Entity, together with any renewals, extensions, or modifications thereof and additions thereto.

“Bankruptcy, Equity and Indemnity Exception” has the meaning set forth in Section 2.4(b).

“Basket” has the meaning set forth in Section 8.4(b).

“Business Day”shall mean any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the City of New York, United States of America.

“Cap” has the meaning set forth in Section 8.4(b).

“Claim Notice” has the meaning set forth in Section 8.5(a).

“Closing” has the meaning set forth in Section 1.12.

“Closing Date” has the meaning set forth in Section 1.12.

“Code” means the Internal Revenue Code of 1986, as amended.

“Commercial Supply Agreement” means that certain Commercial Supply Agreement by and between Purchaser and Osmotica Pharmaceutical US LLC, dated as of the Closing Date.

“Confidential Information” has the meaning set forth in Section 4.7(b)(iii).

“Confidentiality Agreement” means the Confidentiality Agreement dated October 3, 2020 between Adamas Pharmaceuticals, Inc. and Osmotica Pharmaceutical US LLC and its affiliate Vertical Pharmaceuticals, LLC.

“Consent” means any consent, approval or waiver.

“Copyrights” has the meaning set forth in Section 2.3(a)(i).

“Damages” means losses, Taxes, and damages (including reasonable attorneys’, consulting and other professional fees and expenses associated therewith), in each case, whether or not arising out of third party claims and including all amounts paid in prosecution, investigation, defense or settlement of any of the foregoing, excluding indirect, unforeseeable

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and punitive damages except to the extent paid or payable to a third party; provided, however, that for purposes of computing the amount of Damages incurred by any Person, there will be deducted an amount equal to the amount of any insurance proceeds, indemnification payments from third parties, contribution payments or reimbursements, in each case, that are actually received by such Person or any of such Person’s Affiliates in connection with such Damages or the circumstances giving rise thereto and net of such Person’s costs of recovery (including any reasonable expenses incurred by such Person, the amount of any deductible and the present value of all increases or adjustments to insurance premiums arising from such insurance claim, if applicable).

“Disclosing Party” has the meaning set forth in Section 4.7(b)(iii).

“Disclosure Schedule” means the Disclosure Schedule delivered by Seller to Purchaser contemporaneously with the execution and delivery of the Agreement.

“Dispute” has the meaning set forth in Section 10.4(a).

“Dispute Notice” has the meaning set forth in Section 10.4(a).

“Effective Date” has the meaning set forth in the Preamble.

“Excluded Liabilities” means the following has the meaning set forth in Section 1.8.

“Expiration Date” has the meaning set forth in Section 8.1.

“FDA” means the Food and Drug Administration.

“Force Majeure Event” has the meaning set forth in Section 10.5.

“Fundamental Representations” means the representations and warranties set forth in Section 2.1 (Organization), the first sentence of Section 2.2 (Title to Assets), Section 2.8 (Contravention; Consents), and Section 2.9 (Authority; Binding Nature of Agreement).

“Fundamental Representations Expiration Date” has the meaning set forth in Section 8.1.

“Governmental Entity” means any federal, state, provincial, local, foreign or supranational (a) government; (b) court of competent jurisdiction; (c) governmental official agency, arbitrator, authority or instrumentality; (d) department, commission, board or bureau; or (e) regulatory body, including the FDA, and the United States Drug Enforcement Administration.

“Health Laws” means the Legal Requirements relating to the research, development, testing, manufacture, handling, production, pricing, Labeling, packaging, marketing, promotion, sale, distribution, coverage, or reimbursement of a drug, device, biological or other medical item, supply or service, including the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 321 et seq.), the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the healthcare fraud, false statement and health information privacy and

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security provisions of the Health Insurance Portability and Accountability Act of 1996, as amended, the federal healthcare program civil money penalty and exclusion authorities, the applicable requirements of Medicare, Medicaid and other Governmental Entity healthcare programs, including those of the Veterans Health Administration and U.S. Department of Defense, or other applicable Legal Requirements relating to private health care plans or the privacy and confidentiality of patient health information, and the analogous Legal Requirement of any federal, state, local, or foreign jurisdiction applicable to Seller and the Specified Affiliates.

“Indemnified Party” has the meaning set forth in Section 8.5(a).

“Indemnifying Party” has the meaning set forth in Section 8.5(a).

“IP Rights” has the meaning set forth in Section 2.3(a)(ii).

“Knowledge of Seller” or “to Seller’s Knowledge” shall mean [*].

“Labeling” has the meaning under Section 201(m) of the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 321(m)) and other comparable foreign Legal Requirement relating to the subject matter thereof, including the applicable Specified Product’s label, packaging and package inserts accompanying such Specified Product, and any other written, printed, or graphic materials accompanying such Specified Product, including patient instructions or patient indication guides.

“Later Discovered Contract” has the meaning set forth in Section 1.13.

“Legal Proceeding” shall mean any action, suit, charge, complaint, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Entity or any arbitrator or arbitration panel.

“Legal Requirement” means any constitution, act, statute, law (including common law), ordinance, order, treaty, rule or regulation of any Governmental Entity.

“Lien” means any lien, pledge, claim, charge, mortgage, encumbrance, or other security interest of any kind, whether arising by contract or by operation of applicable Legal Requirement.

“Matter” means any claim, demand, Dispute, action, audit, suit, arbitration, proceeding, investigation or other similar matter.

“Parties” has the meaning set forth in the preamble of this Agreement.

“Patent Rights” has the meaning set forth in Section 2.3(a)(iv).

“Permits” has the meaning set forth in Section 2.5(c).

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“Permitted Liens” has the meaning set forth in Section 2.2.

“Person” means any individual, corporation, general partnership, limited partnership, limited liability company, trust, association, firm, organization, company, business, entity, union, society or Governmental Entity.

“Post-Closing Tax Period” means any taxable period other than a Pre-Closing Tax Period.

“Pre-Closing Tax Period” means any taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any Straddle Period.

“Product Know-How” means any and all technical or business information, know-how, processes, procedures, compositions, devices, methods, formulas, protocols, techniques, software, designs, drawings, dosage regimens, control assays, product specifications, data (including physical, chemical, biological, toxicological, pharmacological, safety, and pre-clinical and clinical data), results, discoveries, improvements, modifications, inventions, know-how, trade secrets or other information, in each case, solely related to the research, preparation, development or commercialization of the Specified Product and embodied in any documentation or other tangible materials, whether or not patentable.

“Purchase Price”has the meaning set forth in Section 1.7(a).

“Purchase Price Adjustment”has the meaning set forth in Section 4.6(d).

“Purchaser” has the meaning set forth in the preamble of this Agreement

“Purchaser Confidential Information” has the meaning set forth in Section 4.7(b)(i).

“Purchaser FDA Transfer Letter” means the letter from Purchaser to FDA in a form attached hereto as Exhibit F pursuant to which Purchaser accepts from Seller the transfer of rights to the Specified Authorizations for the Specified Products.

“Purchaser Indemnified Party”has the meaning set forth in Section 8.2.

“Purchaser Permitted Purpose” has the meaning set forth in Section 4.7(b)(ii).

“Quality Agreement” means the Quality Agreement between Seller and Purchaser in a form attached hereto as Exhibit H.

“Rebate” means a fee (including any distribution fee), assessment, credit, offset, deduction, or other charge claimed by a public or private third party payer (such as an insurer, Medicare/Medicaid, or an other Governmental Entity) or a service provider.

“Receiving Party” has the meaning set forth in Section 4.7(b)(iii).

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“Regulatory Documentation” means (i) all periodic safety reports or benefit risk evaluation reports, (ii) all material correspondence between Seller or any of Seller’s Affiliates, on the one hand, and any Governmental Entity, on the other hand, including any safety reports or updates, complaint files and product quality reviews, (iii) all other governmental reports, inspectional notices, Form 483 observations and customs notices, (iv) all medical inquiries, standard response or non-standard letters or talking points, (v) all complaints, investigations and corrective and preventive actions, (vi) all documents, reports, records, information and materials relating to any post-marketing requirements and post-marketing commitments, and (vii) any outstanding or ongoing regulatory item, in each case ((i) through (vii)), solely relating to the Specified Products and to the extent owned and maintained by Seller or its Affiliates as of the Closing Date.

“Response” has the meaning set forth in Section 10.4(a).

“Seller” has the meaning set forth in the preamble of this Agreement.

“Seller Confidential Information” has the meaning set forth in Section 4.7(b)(ii).

“Seller FDA Transfer Letter” means the letter from Seller to FDA in a form attached hereto as Exhibit G pursuant to which Seller transfers to Purchaser the rights to the Specified Authorizations for the Specified Products.

“Seller Indemnified Party” has the meaning set forth in Section 8.3.

“Seller Names” means Osmotica Pharmaceutical US LLC and Vertical Pharmaceuticals, LLC or any other corporate name included on packaging, labels or other materials for the Specified Products or included in any of the Specified Assets.

“Seller Permitted Purpose” has the meaning set forth in Section 4.7(b)(i).

“Significant Prescribing Institutions or Healthcare Providers” has the meaning set forth in Section 2.15.

“Significant Suppliers” has the meaning set forth in Section 2.14.

“Specified Affiliate” means any Affiliate of Seller that owns or controls any Specified Asset.

“Specified Assets” has the meaning set forth in Section 1.1.

“Specified Authorizations” has the meaning set forth in Section 1.1(e).

“Specified Business” means the business of Seller and its Affiliates with respect to the Specified Product.

“Specified Contracts” has the meaning set forth in Section 1.1(b).

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“Specified Inventory”has the meaning set forth in Section 1.1(c).

“Specified IP Rights” has the meaning set forth in Section 1.1(a).

“Specified Product” means Osmolex ER™ brand extended-release amantadine tablets (in each of 129 mg, 161mg, 193 mg, and 258 mg dosage strengths) as approved under NDA No. 209410.

“Specified Product Material Adverse Effect”means [*].

“Specified Product Tooling” has the meaning set forth in Section 1.1(d).

“Straddle Period” has the meaning set forth in Section 1.10(c).

“Tax” or “Taxes” means any federal, state, local, or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

“Tax Contest” has the meaning set forth in Section 4.15(b).

“Tax Return” means any return, declaration, report, claim for refund, information return, documentation or statement relating to Taxes, filed or required to be filed with any Governmental Entity, including any schedule or attachment thereto, and including any amendment thereof.

“third party” means any Person that is not a Party to this Agreement.

“Trademark Rights” has the meaning set forth in Section 2.3(a)(v).

“Transfer Taxes” has the meaning set forth in Section 1.9.

“Willful Breach” shall mean a material breach of, or failure to perform in a material respect any of the representations, warranties, covenants or other agreements contained in, this Agreement, that is a consequence of an act or failure to act by the breaching or non-performing Party with actual knowledge, or knowledge that a Person acting reasonably under the circumstances should have, that such Party’s act or failure to act would, or would be reasonably expected to, result in or constitute a material breach of or failure of performance in a material respect under this Agreement.

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EX-10.6

Exhibit 10.6

ADAMAS PHARMACEUTICALS, INC.

2016 INDUCEMENT PLAN

ADOPTED BY THE BOARD OF DIRECTORS: MARCH 4, 2016; AS AMENDED: FEBRUARY 20, 2021

TERMINATION DATE: MARCH 3, 2026

1.GENERAL.

(a)Purpose. Awards under the Plan are intended to provide (1) an inducement material for certain individuals to enter into employment with the Company within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules, (2) incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate, and (3) a means by which such persons shall have an opportunity to share in the financial success of the Company.

(b)Eligible Award Recipients. Only Employees who satisfy the standards for inducement grants under Rule 5635(c)(4) of the NASDAQ Listing Rules may be granted Awards under the Plan. A person who previously served as an Employee or Director of the Company shall not be eligible to receive Awards under the Plan, other than following a bona fide period of non-employment.

(c)Available Awards.  The Plan provides for the grant of the following Awards: (i) Options, (ii) Stock Appreciation Rights (iii) Restricted Stock Awards, (iv) Restricted Stock Unit Awards, (v) Performance Stock Awards, (vi) Performance Cash Awards, and (vii) Other Stock Awards. All Options shall be designated as Nonstatutory Stock Options.

2.ADMINISTRATION.

(a)Administration by Board.  The Board will administer the Plan.  The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c) provided that the grant of Awards shall be approved by the Company’s independent compensation committee or a majority of the Company’s independent directors (as defined in Rule 5605(a)(2) of the NASDAQ Listing Rules) in order to comply with the exemption from the stockholder approval requirement for “inducement grants” provided under Rule 5635(c)(4) of the NASDAQ Listing Rules.

(b)Powers of Board.  The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i) To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to a Stock Award.

(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards.  The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.

(iii) To settle all controversies regarding the Plan and Awards granted under it.

(iv) To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or the time at which cash or shares of Common Stock may be issued in settlement thereof).

(v) To suspend or terminate the Plan at any time.  Except as otherwise provided in the Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a Participant’s rights under the Participant’s then-outstanding Award without the Participant’s written consent, except as provided in subsection (viii) below.

(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments relating to certain nonqualified deferred compensation under Section 409A of the Code and/or ensuring that the Plan or Awards granted under the Plan are exempt from, or compliant with, the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law.  If

required by applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Awards available for issuance under the Plan but only to the extent required by law or applicable listing standards. Except as otherwise provided in the Plan or an Award Agreement, no amendment of the Plan will materially impair a Participant’s rights under an outstanding Award without the Participant’s written consent.

(vii) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided, however, that a Participant’s rights under any Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing.  Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent (A) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code; or (B) to comply with other applicable laws or listing requirements.

(viii) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.

(ix) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).

(x) To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2)  Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.

(c)Delegation to Committee.

(i)General.  The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee, as applicable).  Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable).  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

(ii)Rule 16b-3 Compliance.  The Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.

(d)Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.

3.SHARES SUBJECT TO THE PLAN.

(a)Share Reserve.  Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards will not exceed 3,300,000 shares (the “Share Reserve”).  For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that

may be issued pursuant to the Plan.  Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).  Shares may be issued in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.

(b)Reversion of Shares to the Share Reserve.  If a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the shares covered by such Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan.  If any shares of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan.  Any shares reacquired by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.

(c)Source of Shares.  The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.

4.ELIGIBILITY; APPROVAL REQUIREMENTS.

(a)Eligibility.  Awards may only be granted to persons who are Employees described in Section 1(b) of this Plan, where the Award is an inducement material to the individual’s entering into employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Listing Rules. For clarity, Awards may not be granted to (1) Consultants or Directors, for service in such capacities, or (2) any individual who was previously an Employee or Director of the Company, other than following a bona fide period of non-employment.

(b)Approval Requirements. All Awards must be granted either by a majority of the Company’s independent directors or by the Company’s compensation committee comprised of independent directors within the meaning of Rule 5605(a)(2) of the NASDAQ Listing Rules.

5.PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.

Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate.  All Options will be designated Nonstatutory Stock Options at the time of grant.  The provisions of separate Options or SARs need not be identical; provided, however, that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:

(a)Term.  No Option or SAR will be exercisable after the expiration of ten years from the date of its grant or such shorter period specified in the Award Agreement.

(b)Exercise Price.  The exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Award is granted.  Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A of the Code.  Each SAR will be denominated in shares of Common Stock equivalents.

(c)Purchase Price for Options.  The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.  The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment.  The permitted methods of payment are as follows:

(i) by cash, check, bank draft or money order payable to the Company;

(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;

(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;

(iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however, that the Company will accept a cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.  Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or

(v) in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Agreement.

(d)Exercise and Payment of a SAR.  To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such SAR.  The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR, and with respect to which the Participant is exercising the SAR on such date, over (B) the aggregate strike price of the number of Common Stock equivalents with respect to which the Participant is exercising the SAR on such date.  The appreciation distribution may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Award Agreement evidencing such SAR.

(e)Transferability of Options and SARs.  The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine.  In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:

(i)Restrictions on Transfer.  An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant.  The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws.  Except as explicitly provided in the Plan, neither an Option nor a SAR may be transferred for consideration.

(ii)Domestic Relations Orders.  Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulations Section 1.421-1(b)(2).

(iii)Beneficiary Designation.  Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise.  In the absence of such a designation, upon the death of the Participant, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.

(f)Vesting Generally.  The total number of shares of Common Stock subject to an Option or SAR may vest and become exercisable in periodic installments that may or may not be equal.  The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options or SARs may vary.  The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.

(g)Termination of Continuous Service.  Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date which occurs ninety (90) days following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Award Agreement), and (ii) the expiration of

the term of the Option or SAR as set forth in the Award Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR (as applicable) within the applicable time frame, the Option or SAR will terminate.

(h)Extension of Termination Date.  If the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of time (that need not be consecutive) equal to the applicable post termination exercise period after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.  In addition, unless otherwise provided in a Participant’s Award Agreement, if the sale of any Common Stock received on exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of the period of days or months (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.

(i)Disability of Participant.  Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date which occurs 12 months following such termination of Continuous Service (or such longer or shorter period specified in the Award Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in the Award Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.

(j)Death of Participant.  Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the Award Agreement for exercisability after the termination of the Participant’s Continuous Service for a reason other than death, then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date which occurs 18 months following the date of death (or such longer or shorter period specified in the Award Agreement), and (ii) the expiration of the term of such Option or SAR as set forth in the Award Agreement.  If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR (as applicable) will terminate.

(k)Termination for Cause.  Except as explicitly provided otherwise in a Participant’s Award Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate immediately upon such Participant’s termination of Continuous Service, and the Participant will be prohibited from exercising his or her Option or SAR from and after the date of such termination of Continuous Service.

(l)Non-Exempt Employees.  If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six months following the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the Participant’s Award Agreement in another agreement between the Participant and the Company, or, if no such definition, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six months following the date of grant.  The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay.  To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.

6.PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.

(a)Restricted Stock Awards.  Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate.  To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (y) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical.  Each Restricted Stock Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:

(i)Consideration.  A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

(ii)Vesting.  Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.

(iii)Termination of Participant’s Continuous Service.  If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.

(iv)Transferability.  Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.

(v)Dividends.  A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.

(b)Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board will deem appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical.  Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:

(i)Consideration.  At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award.  The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.

(ii)Vesting.  At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.

(iii)Payment.  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.

(iv)Additional Restrictions.  At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

(v)Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.  At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common

Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

(vi)Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.

(c)Performance Awards.

(i)Performance Stock Awards.  A Performance Stock Award is a Stock Award that is payable (including that may be granted, may vest or may be exercised) contingent upon the attainment during a Performance Period of certain Performance Goals.  A Performance Stock Award may but need not require the Participant’s completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or the Board), in its sole discretion.  In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.

(ii)Performance Cash Awards.  A Performance Cash Award is a cash award  that is payable contingent upon the attainment during a Performance Period of certain Performance Goals.  A Performance Cash Award may also require the completion of a specified period of Continuous Service.  At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or the Board), in its sole discretion.  The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property.

(iii)Board Discretion.  The Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.  Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.

(d)Other Stock Awards.  Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6.  Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.

7.COVENANTS OF THE COMPANY.

(a)Availability of Shares.  The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Awards.

(b)Securities Law Compliance.  The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law.

(c)No Obligation to Notify or Minimize Taxes.  The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award.  Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised.  The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award.

8.MISCELLANEOUS.

(a)Use of Proceeds from Sales of Common Stock.  Proceeds from the sale of shares of Common Stock pursuant to Awards will constitute general funds of the Company.

(b)Corporate Action Constituting Grant of Awards.  Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant.  In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement or related grant documents as a result of a clerical error in the papering of the Award Agreement or related grant documents, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement or related grant documents.

(c)Stockholder Rights.  No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common Stock under, the Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to such Award has been entered into the books and records of the Company.

(d)No Employment or Other Service Rights.  Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate the employment of an Employee with or without notice and with or without cause.

(e)Change in Time Commitment.  In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Award to the Participant, the Board has the right in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award.  In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended.

(f)Investment Assurances.  The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that such Participant is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Award has been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.

(g)Withholding Obligations.  Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award; provided,

however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or (v) by such other method as may be set forth in the Award Agreement.

(h)Electronic Delivery.  Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).

(i)Deferrals.  To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in accordance with Section 409A of the Code.  Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company.  The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.

(j)Compliance with Section 409A of the Code.  Unless otherwise expressly provided for in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code.  If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Award Agreement evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement.  Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) will be issued or paid before the date that is six months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original schedule.

(k)Clawback/Recovery.  All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.  In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of an event constituting Cause.  No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.

9.ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.

(a)Capitalization Adjustments.  In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a) and (ii) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards.  The Board will make such adjustments, and its determination will be final, binding and conclusive.

(b)Dissolution or Liquidation.  Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject

to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.

(c)Corporate Transaction.  The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award.  In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:

(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);

(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);

(iii) accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;

(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;

(v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and

(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise.

The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award.

(d)Change in Control.  A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.

10.TERMINATION OR SUSPENSION OF THE PLAN.

The Board may suspend or terminate the Plan at any time.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.  The suspension or termination of the Plan shall not impair rights and obligations under any Award granted while the Plan was in effect except with the consent of the affected Participant.

11.EFFECTIVE DATE OF THE PLAN.

The Plan will become effective on the Effective Date.

12.CHOICE OF LAW.

The law of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

13.DEFINITIONS.  As used in the Plan, the following definitions will apply to the capitalized terms indicated below:

(a) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act.  The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

(b) “Award” means a Stock Award or a Performance Cash Award.

(c) “Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award.

(d) “Board” means the Board of Directors of the Company.

(e) “Capital Stock” means each and every class of common stock of the Company, regardless of the number of votes per share.

(f) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.

(g) “Cause” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events:  (i) such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) such Participant’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) such Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv) such Participant’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) such Participant’s gross misconduct. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Company, in its sole discretion.  Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or such Participant for any other purpose.

(h) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities, (C) on account of the acquisition of securities of the Company by any individual who is, on the IPO Date, either an executive officer or a Director (either, an “IPO Investor”) and/or any entity in which an IPO Investor has a direct or indirect interest (whether in the form of voting rights or participation in profits or capital contributions) of more than 50% (collectively, the “IPO Entities”) or on account of the IPO Entities continuing to hold shares that come to represent more than 50% of the combined voting power of the Company’s then outstanding securities as a result of the conversion of any class of the Company’s securities into another class of the Company’s securities having a different number of votes per share pursuant to the conversion provisions set forth in the Company’s Amended and Restated Certificate of Incorporation; or (D) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share

acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;

(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; provided, however, that a merger, consolidation or similar transaction will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the surviving Entity or its parent are owned by the IPO Entities;

(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; provided, however, that a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the acquiring Entity or its parent are owned by the IPO Entities; or

(iv) individuals who, on the date the Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.

Notwithstanding the foregoing definition or any other provision of the Plan, the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company and the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.

(i) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.

(j) “Committee” means a committee of one or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).

(k) “Common Stock” means the common stock of the Company, having one vote per share.

(l) “Company” means Adamas Pharmaceuticals, Inc., a Delaware corporation.

(m) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services.  However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan.  Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person.

(n) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the

Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however, that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate.  To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors.  Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.

(o) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:

(i) a sale or other disposition of all or substantially all, as determined by the Board, in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;

(ii) a sale or other disposition of at least 90% of the outstanding securities of the Company;

(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or

(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.

(p) “Director” means a member of the Board. Directors are not eligible to receive Awards under the Plan with respect to their service in such capacity.

(q) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.

(r) “Effective Date” means the date this Plan is approved by the Board.

(s) “Employee” means any person employed by the Company or an Affiliate.  However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.

(t) “Entity” means a corporation, partnership, limited liability company or other entity.

(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(v) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.

(w) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable.

(ii) Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.

(iii) In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Section 409A of the Code.

(x) “Incentive Stock Option” means an option intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.  Incentive stock options are not permissible Awards under the Plan.

(y) “IPO Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.

(z) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

(aa) “Nonstatutory Stock Option” means any Option granted pursuant to Section 5 of the Plan that is not intended to qualify as an Incentive Stock Option.

(bb) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.

(cc) “Option” means a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.  Incentive Stock Options are not eligible Awards under the Plan.

(dd) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant.  Each Option Agreement will be subject to the terms and conditions of the Plan.

(ee) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

(ff) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(d).

(gg) “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant.  Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.

(hh) “Own,” “Owned,” “Owner,” “Ownership” means a person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.

(ii) “Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.

(jj) “Performance Cash Award” means an award of cash granted pursuant to the terms and conditions of Section 6(c)(ii).

(kk) “Performance Criteria” means the one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period.  The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board: (i) earnings (including earnings per share and net earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) earnings before interest, taxes, depreciation, amortization and legal settlements; (v) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (vi) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense) and stock-based compensation; (vii) earnings before interest, taxes, depreciation, amortization, legal settlements, other income (expense), stock-based compensation and changes in deferred revenue; (viii) total stockholder return; (ix) return on equity or average stockholder’s equity; (x) return on assets, investment, or capital employed; (xi) stock price; (xii) margin (including gross margin); (xiii) income (before or after taxes); (xiv) operating income; (xv) operating income after taxes; (xvi) pre-tax profit; (xvii) operating cash flow; (xviii) sales or revenue targets; (xix) increases in revenue or product revenue; (xx) expenses and cost reduction goals; (xxi) improvement in or attainment of working capital levels; (xxii) economic value added (or an equivalent metric); (xxiii) market share; (xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance; (xxvii) debt reduction; (xxviii) implementation or completion of projects or processes; (xxix) user satisfaction; (xxx) stockholders’ equity; (xxxi) capital expenditures; (xxxii) debt levels; (xxxiii) operating profit or net operating profit; (xxxiv) workforce diversity; (xxxv) growth of net income or operating income; (xxxvi) billings; (xxxvii) bookings; (xxxviii) the number of users, including but not limited to unique users; (xxxix) employee retention; and (xxxx) other measures of performance selected by the Board.

(ll) “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria.  Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices.  Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.

(mm) “Performance Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award or a Performance Cash Award.  Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.

(nn) “Performance Stock Award” means a Stock Award granted under the terms and conditions of Section 6(c)(i).

(oo) “Plan” means this Adamas Pharmaceuticals, Inc. 2016 Inducement Plan, as it may be amended.

(pp) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).

(qq) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant.  Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.

(rr) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).

(ss) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreement will be subject to the terms and conditions of the Plan.

(tt) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

(uu) “Securities Act” means the Securities Act of 1933, as amended.

(vv) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.

(ww) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan.

(xx) “Stock Award” means any right to receive Common Stock granted under the Plan, including a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award or any Other Stock Award.

(yy) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant.  Each Stock Award Agreement will be subject to the terms and conditions of the Plan.

(zz) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.

EX-10.19

Exhibit 10.19

Adamas Pharmaceuticals, Inc.

Amended and Restated Executive Severance Plan

1.Purpose and Eligibility.This Amended and Restated Executive Severance Plan (the “Plan”) is intended to provide severance benefits to employees of Adamas Pharmaceuticals, Inc. (the “Company”) who hold the title of Vice President or above (each, a “Participant”). The Plan, as amended and restated, is effective as of February 23, 2021.

2.Eligibility for Benefits.

(a)General Rules. Subject to the requirements set forth in the Plan, the Company will grant severance benefits under the Plan to Participants.

(1)For purposes of the Plan, a Participant is a Regular Employee of the Company who holds a position at the level of Vice President or above on the date of termination of his or her employment.

(2)In order to be eligible to receive any benefits under the Plan, a Participant must remain on the job and satisfactorily provide services to the Company until the date of his or her Qualifying Termination or CIC Termination, as applicable, as scheduled by the Company (which date need not be the same for each Participant).

(3)In order to be eligible to receive any benefits under the Plan, a Participant must sign and not revoke a release of claims agreement (the “Release”), in the form provided by the Company.

(b)Exceptions to Benefit Entitlement. An employee, including an employee who otherwise is a Participant, will not receive benefits under the Plan (or will receive reduced benefits under the Plan) in any of the following circumstances, as determined by the Company in its sole discretion:

(1)The employee has executed an individually negotiated employment or separation contract or agreement with the Company relating to severance benefits that is in effect on his or her termination date, in which case such employee’s severance benefit, if any, will be governed by the terms of such individually negotiated employment or separation contract or agreement.

(2)The Company terminates the employee’s employment for Cause.

(3)The employee voluntarily terminates employment with the Company other than for Good Reason in connection with a CIC Termination. Voluntary terminations include, but are not limited to, resignation, retirement or failure to return from a leave of absence on the scheduled date.

(4)The employee’s employment is terminated as a result of his or her death or disability.

(5)The employee is offered an identical or substantially equivalent or comparable position with the Company or an affiliate of the Company. For purposes of the foregoing, a “substantially equivalent or comparable position” is one that offers the employee substantially the same level of responsibility and compensation.

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(6)The employee is rehired by the Company or an affiliate of the Company prior to the date benefits under the Plan are scheduled to commence.

(7)The employee has not signed the Company’s standard form of confidential information and inventions assignment agreement (“Proprietary Agreement”) covering the employee’s period of employment with the Company (and with any predecessor) and/or does not confirm in writing that he or she is and will remain subject to the terms of that agreement.

3.Severance Benefits not in Connection with a Change in Control. In the event of a Qualifying Termination that is not a CIC Termination, a Participant will be eligible for severance benefits consisting of (a) a cash severance payment, and (b) continuation of health benefits for certain periods, as follows:

(a)Cash Severance: The cash severance payment shall be calculated as a multiple of the Participant’s monthly base salary as in effect immediately before termination of employment, and shall be paid in the form of salary continuation on the Company’s regular payroll dates.

(1)For a Tier I Participant and a Tier II Participant, the multiple shall be 12; and

(2)For a Tier III Participant, the multiple shall be 9.

(b)Health Benefits: Health benefits shall consist of the payment directly to the Company’s insurance provider or reimbursement by the Company to the Participant of premiums for continued medical coverage (“COBRA”) for a Participant and his or her eligible dependents for the period during which salary continuation payments are provided in subsection (a) above, or until the Participant and his or her dependents are eligible for other employer-provided medical coverage, if earlier (such applicable period is referred to herein as the “COBRA Payment Period”). The amount of payment or reimbursement shall equal the amount, if any, by which such premiums exceed the amount payable by active employees in the same plan. The Participant must timely enroll for COBRA coverage and must otherwise remain eligible for such coverage under the medical plan(s) then-offered by the Company. Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that the payment or reimbursement of the COBRA premiums would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code or any statute or regulation of similar effect (including, without limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of reimbursing the Participant for the COBRA premiums, the Company will instead pay the Participant, on the first day of each month of the remainder of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premiums for that month, subject to applicable tax withholdings and deductions. If the Participant becomes eligible for coverage under another employer’s group health plan or otherwise ceases to be eligible for COBRA during the COBRA Payment Period, the Participant must immediately notify the Company of such event, and all payments and obligations under this paragraph will cease.

4.Severance Benefits in Connection with a Change in Control. In the event of a CIC Termination, a Participant will be eligible for severance benefits consisting of (a) a cash severance payment, (b) a pro-rata annual bonus payment, (c) continuation of health benefits for certain periods; (d) full acceleration of all equity awards outstanding at the time of the Change in Control, and (e) extension of the time period to exercise vested stock options following termination, as follows:

(a)Cash Severance: The cash severance payment, payable in the form of a lump sum, shall be calculated as a multiple of the sum of (i) the Participant’s annual base salary as in effect

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immediately before termination of employment plus (ii) the Participant’s annual target bonus.

(1)For a Tier I Participant, the multiple shall be 2.0;

(2)For a Tier II Participant, the multiple shall be 1.25; and

(3)For a Tier III Participant, the multiple shall be 1.

(b)Pro-Rata Annual Bonus: The pro-rata annual bonus payment, payable in the form of a lump sum payment, shall be calculated as a pro-rata portion of the current fiscal year annual (short-term) bonus based on the number of full months worked in the fiscal year in which the CIC Termination occurs through the date of the CIC Termination, and assuming performance at target for all metrics.

(c)Health Benefits: Health benefits shall consist of the payment directly to the Company’s (or its successor’s) insurance provider or reimbursement by the Company (or its successor) to the Participant of premiums for COBRA coverage for a Participant and his or her eligible dependents for a period of 24 months (to the extent applicable state COBRA coverage is available beyond the maximum federal COBRA coverage period) in the case of a Tier I Participant, 15 months in the case of Tier II Participants, and 12 months in the case of Tier III Participants, or such earlier time as the Participant is eligible for other employer-provided medical coverage (such applicable period is referred to herein as the “CICCOBRA Payment Period”). The amount of payment or reimbursement shall equal the amount, if any, by which such premiums exceed the amount payable by active employees in the same plan. The Participant must timely enroll for such COBRA coverage and otherwise remain eligible under the medical plan(s) then-offered by the Company. Notwithstanding the foregoing, if at any time the Company determines, in its sole discretion, that the payment or reimbursement of the COBRA premiums would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Code or any statute or regulation of similar effect (including, without limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of reimbursing the Participant for the COBRA premiums, the Company will instead pay the Participant, on the first day of each month of the remainder of the CIC COBRA Payment Period, a fully taxable cash payment equal to the COBRA premiums for that month, subject to applicable tax withholdings and deductions. If the Participant becomes eligible for coverage under another employer’s group health plan or otherwise ceases to be eligible for COBRA during the CIC COBRA Payment Period, the Participant must immediately notify the Company of such event, and all payments and obligations under this paragraph will cease.

(d)Equity Award Acceleration. All time-based equity awards outstanding at the time of a Change in Control of the Company (to the extent such awards are outstanding, assumed, substituted or otherwise continued in connection with a Change in Control, each an “Assumed Award”) shall receive full acceleration of vesting and full release of any restrictions. All performance-based equity awards that are Assumed Awards shall also be fully vested, with performance metrics determined assuming the higher of actual or target-level achievement on all performance metrics.

(e)Extension of Option Exercise Period. Each Assumed Award that is a stock option will remain exercisable by a Participant until the earlier of (i) one (1) year after the Participant’s CIC Termination date; and (ii) the expiration date of the stock option as stated in the applicable stock option agreement. If an Assumed Award is an incentive stock option (as defined in Section 422 of the Code) with an exercise price below the fair market value of a share of the Company’s Common Stock as of the date a Participant signs his or her Participation Notice, such incentive stock option will

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automatically convert to a nonstatutory stock option for tax purposes as of the date of such Participation Notice.

5.Certain Reductions. Any payments under the Plan shall be reduced by any severance benefit payable to the Participant under any other Company plan, program or agreement or that are provided during a period following written notice of a plant closing or mass layoff, pay and benefits in lieu of such notice, or other similar benefits payable to the Participant by the Company or an affiliate that become payable in connection with the Participant’s termination of employment pursuant to (i) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act or any other similar state law, or (ii) any Company policy or practice providing for the Participant to remain on the payroll for a limited period of time after being given notice of the termination of the Participant’s employment, and the Plan Administrator shall so construe and implement the terms of the Plan.

6.Reemployment. In the event of a Participant’s reemployment by the Company or any other affiliate of the Company during the period of time in respect of which severance benefits pursuant to the Plan have been paid, the Company, in its sole and absolute discretion, may require such Participant to repay to the Company all or a portion of such severance benefits as a condition of reemployment.

7.Release Required; Form and Time of Payment. The Release required under Section 2(a)(3) of the Plan must be signed by the Participant, returned to the Company and become effective no later than 60 days after the date of the Participant’s termination of employment (the “Release Deadline”). No severance or other benefits will be paid or provided until the Release becomes effective and non-revocable (the “Release Effective Date”). In the case of salary continuation payments to be made pursuant to Section 3(a) and COBRA premium payments to be made pursuant to Sections 3(b) and 4(c), all payments that otherwise would have been made prior to the Release Effective Date shall be made in the next administratively practicable payroll period following the Release Effective Date. In the case of the lump sum cash payments to be made pursuant to Sections 4(a) and 4(b), such lump sum payments shall be paid in the next available payroll cycle, but in no event later than 15 days after the Release Effective Date.

All payments under the Plan shall be subject to, and made net of, applicable deductions and withholdings.

All payments are subject to the Participant’s continuing compliance with the Proprietary Agreement (as reflected in the Release), and to the Company’s policies on recoupment, as in effect from time to time.

8.Compliance with Section 409A. Any amounts payable solely on account of an involuntary separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) shall be, to the maximum extent possible, excludible from the requirements of Section 409A, either as involuntary separation pay or as short-term deferral amounts. To the extent not so exempt, the Plan (and any definitions in the Plan) will be construed in a manner that complies with Section 409A, and incorporates by reference all required definitions and payment terms. For purposes of Section 409A, each payment of compensation under the Plan shall be treated as a separate payment of compensation.

Any reimbursements or in-kind benefits provided under the Plan shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (a) any reimbursement is for expenses incurred during the period of time specified in the agreement, (b) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may

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not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (c) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (d) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

A termination of employment shall not be deemed to occur for purposes of the Plan providing for the payment of any amounts or benefits that are considered “deferred compensation” under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A. For purposes of any such provision of the Plan relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean ‘separation from service” within the meaning of Section 409A. If payment of any amount of nonqualified deferred compensation is triggered by a separation from service that occurs while the Participant is a “specified employee” (as such terms are defined in Section 409A), and if such amount is scheduled to be paid within six months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days after the appointment of the personal representative or executor of the Participant’s estate following the Participant’s death.

If the Release Deadline would begin in one calendar year and expire in the following calendar year, then any payments contingent on such Release shall be made in such following calendar year (regardless of the year of execution of such Release) if payment in such following calendar year is required in order to comply with Section 409A.

Notwithstanding the foregoing, the Company does not make any guarantees or other assurances of any kind with respect to the tax consequences or treatment of any amounts paid or payable to a Participant under the Plan.

9.Best After-Tax Provision. Except as otherwise expressly provided in an agreement between a Participant and the Company, if any payment or benefit a Participant would receive in connection with a Change in Control from the Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment will be equal to the Reduced Amount. The “Reduced Amount” will be either (A) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax, or (B) the largest portion, up to and including the total, of the Payment, whichever amount ((A) or (B)), after taking into account all applicable federal, state, provincial, foreign, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Participant’s receipt, on an after-tax basis, of the greatest economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reductions in the payments and/or benefits will occur in the following order: (i) cash payments that are treated in full as a parachute payment under Treasury Regulation Section 1.280G-1, Q&A 24; (ii) equity-based payments and acceleration that are treated in full as a parachute payment; (iii) cash payments that are treated in part as a parachute payment; (iv) equity-based payments and acceleration that are treated in part as a parachute payment; and (v) other non-cash forms of benefits. Within any such category of payments and benefits (that is, clause (i), (ii), (iii), (iv) or (v)), a reduction shall occur first with respect to amounts that are not “deferred compensation” within the meaning of Section 409A of the Code and then with respect to amounts that are “deferred compensation.” The professional firm engaged by the Company for general tax purposes as of the day prior to the effective date of the Change in Control shall make all determinations required to be made under this Section 9. If the professional firm so engaged by the

5

Company is serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such professional firm required to be made hereunder. Any good faith determinations of the professional firm made hereunder shall be final, binding and conclusive upon the Company and the Participant.

10.Effect on Other Benefits/At-Will Status.Payments under the Plan shall not be considered compensation for purposes of any other compensation or benefit plan, program, or agreement of the Company or its affiliates. All other compensation and benefit plans and programs shall be governed by the applicable Company plan or agreement. The Plan does not create an employment relationship for any fixed term. The Plan shall not be deemed (i) to give any Participant or other person any right to be retained in the employ of the Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time, with or without cause, which right is hereby reserved.

11.Definitions. For purposes of the Plan, the following terms have the following meanings:

(a)Board. The Board of Directors of the Company.

(b)Cause. A Participant’s (i) commission of any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof; (ii) attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii)  intentional, material violation of any contract or agreement between the Participant and the Company or of any statutory duty owed to the Company; (iv)  unauthorized use or disclosure of the Company’s confidential information or trade secrets; (v)  an act by the Participant which constitutes gross negligence, willful misconduct or insubordination in the course of employment; or (vi) the continued failure of the Participant to perform the essential duties and responsibilities of his or her position, after having received notice of the deficiencies and having had 30 days to cure such defects in performance. The determination that a termination of the employment of a Participant is either for Cause or without Cause will be made by the Company, in its sole discretion.

(c)CIC or Change in Control. A Change in Control of the Company shall have the same meaning for purposes of the Plan as defined in the Company’s 2014 Equity Incentive Plan, provided that such transaction also qualifies as a “change in ownership of a corporation” or a “change in ownership of a substantial portion of a corporation’s assets” as provided in Treasury Regulation Sections 1.409A-3(i)(5)(v) and (vii).

(d)CIC Termination. The voluntary termination by a Participant for Good Reason or the involuntary termination of a Participant other than for Cause, or by reason of death or disability, that occurs in connection with or within 12 months after a Change in Control of the Company.

(e)Good Reason. The occurrence of one of the following events without a Participant’s consent: (i) a decrease in a Participant’s base salary or target bonus by more than 10%, (ii) a material decrease in a Participant’s duties or responsibilities (but excluding a change in title or reporting relationship), (iii) a relocation of the Participant’s primary work location by more than 50 miles, or (iv) the Company’s failure to obtain an agreement from a successor to continue the Plan or to substitute for it a plan or other compensation arrangement that provides equivalent or greater benefits; provided, however, that to resign for Good Reason, a Participant must (1) provide written notice to the Company’s General Counsel within 30 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for his or her resignation for Good Reason, (2) allow the Company at least 30 days from receipt of such written notice to cure such event, and (3) if such event is not reasonably cured within such period,

6

the Participant’s resignation from all positions he or she then holds with the Company is effective not later than 30 days after the expiration of the cure period.

(f)Qualifying Termination. The involuntary termination of a Participant, other than for Cause or by reason of death or disability.

(g)Regular Employee. An employee who is hired to work for the Company for an unspecified period of time. An employee is a Regular Employee only if the employee received and accepted a written offer of employment directly from the Company that expressly offered Regular Employee status.

(h)Representative. One or more members of the Board or persons designated by the Board prior to or in connection with a Change in Control, provided no such persons may be Participants.

(i)Tier I Participant. A Participant who is the Chief Executive Officer at the time of a Qualifying Termination or a CIC Termination, as applicable.

(j)Tier II Participant. A Participant who is the Chief Financial Officer, Chief Business Officer, General Counsel, Chief Medical Officer, Chief Operating Officer, Chief Commercial Officer, Chief Accounting Officer, Head of Corporate Development or any other officer so designated by the Compensation Committee of the Board at the time of a Qualifying Termination or a CIC Termination, as applicable.

(k)Tier III Participant. A Participant who is a Vice President or Senior Vice President and who is not a Tier I Participant or a Tier II Participant at the time of a Qualifying Termination or a CIC Termination, as applicable.

12.Right to Interpret and Administer Plan; Amendment and Termination.

(a)Interpretation and Administration. The Plan Administrator is the Company. As Plan Administrator, the Company is the named fiduciary charged with the responsibility for administering the Plan. The Plan Administrator shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan The Plan Administrator may delegate any or all of its administrative duties to an officer of the Company and any such delegation will convey with it the full discretionary authority of the Plan Administrator to carry out the delegated duties. The Company or the Plan Administrator will indemnify and hold harmless any person to whom it delegated its responsibilities; provided, however, such person does not act with gross negligence or willful misconduct. The rules, interpretations, computations and other actions of the Plan Administrator or its delegate will be binding and conclusive on all persons. Any references in the Plan to the “Plan Administrator” with respect to periods following the closing of a Change in Control shall mean the Representative.

(b)Amendment and Termination. The Plan Administrator reserves the right to amend or terminate the Plan at any time in its discretion; provided, however, that any amendment or termination of the Plan that would adversely affect a particular employee will not be effective as to such employee without his or her written consent if such amendment or termination is to occur upon or at any time following the occurrence of a Qualifying Termination or a CIC Termination, as applicable. In

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addition, the Plan will automatically terminate following the satisfaction of all of the Company’s obligations under the Plan.

13.Other Important Information.

(a)Source of Benefits. The Plan is unfunded, and all severance benefits will be paid from the general assets of the Company or its successor. No contributions are required under the Plan.

(b)Prior Plans Superseded. The Plan supersedes any and all prior separation, change in control, severance and salary continuation arrangements, programs and/or similar plans that may previously have been offered or provided by the Company (and its predecessors-in-interest) to Participants.

(c)Indemnification. The Company agrees to indemnify its officers and employees and the members of the Board from all liabilities from their acts or omissions in connection with the administration, amendment or termination of the Plan, to the maximum extent permitted by applicable law.

(d)Severability. If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.

(e)Headings. Headings in the Plan document are for purposes of reference only and will not limit or otherwise affect the meaning hereof

14.Legal Construction.

The Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”) and, to the extent not preempted by ERISA, the laws of the State of California.

15.Claims, Inquiries and Appeals.

(a)Applications for Benefits and Inquiries. Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or his or her authorized representative). The Plan Administrator is:

Attn: General Counsel

Re: Severance Plan Claim

Adamas Pharmaceuticals, Inc.

1900 Powell Street, Suite 1000

Emeryville, CA 94608

(b)Denial of Claims. In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial. Any electronic notice will comply with the regulations of the U.S. Department of Labor. The notice of denial will be set forth in a manner designed to be understood by the applicant and will include the following:

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(1)the specific reason or reasons for the denial;

(2)references to the specific Plan provisions upon which the denial is based;

(3)a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and

(4)an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review of the claim, as described in Section 15(d) below.

This notice of denial will be given to the applicant within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the application. If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial ninety (90) day period.

This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application.

(c)Request for a Review. Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within sixty (60) days after the application is denied. A request for a review shall be in writing and shall be addressed to:

Attn: General Counsel

Re: Severance Plan Appeal

Adamas Pharmaceuticals, Inc.

1900 Powell Street, Suite 1000

Emeryville, CA 94608

A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent. The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim. The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim. The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)Decision on Review. The Plan Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review. If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial sixty (60) day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review. The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U.S. Department of Labor. In the event that the

9

Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:

(1)the specific reason or reasons for the denial;

(2)references to the specific Plan provisions upon which the denial is based;

(3)a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and

(4)a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA.

(e)Rules and Procedures. The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims. The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.

(f)Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until the applicant (i) has submitted a written application for benefits in accordance with the procedures described by Section 15(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 15(c) above, and (iv) has been notified that the Plan Administrator has denied the appeal. Notwithstanding the foregoing, if the Plan Administrator does not respond to an Participant’s claim or appeal within the relevant time limits specified in this Section 15, the Participant may bring legal action for benefits under the Plan pursuant to Section 502(a) of ERISA.

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ADDITIONAL PLAN INFORMATION

Name of Plan:	Adamas Pharmaceuticals, Inc. Amended and Restated Severance Plan
Employer Sponsoring Plan:	Adamas Pharmaceuticals, Inc. 1900 Powell Street, Suite 1000 Emeryville, CA 94608
Employer Identification Number:	42-1560076
Plan Number:	543
Plan Year:	Calendar Year
Plan Administrator:	Adamas Pharmaceuticals, Inc. c/o General Counsel 1900 Powell Street, Suite 1000 Emeryville, CA 94608 Telephone No. (510) 450-3500
Agent for Service of Legal Process:	Plan Administrator, at the above address
Type of Plan:	Employee Welfare Benefit Plan providing for severance benefits
Plan Costs:	The cost of the Plan is paid by Adamas Pharmaceuticals, Inc.
Type of Administration:	Self-administered by the Plan Administrator

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EX-10.22

Exhibit 10.22

COMPENSATION ARRANGEMENTS WITH EXECUTIVE OFFICERS

Annual Cash Compensation

The Compensation Committee of the board of directors sets the annual base salary for each of Adamas Pharmaceuticals, Inc.’s executive officers. The annual base salary and target bonus award percentage for the executive officers, to be effective March 1, 2021, are as follows:

Executive Officer	Annual Base Salary	Target Bonus Award %
Neil F. McFarlane	$643,800	60%
Vijay Shreedhar	$447,000	45%
Christopher B. Prentiss	$412,000	40%

EX-10.31

Exhibit 10.31

[*] = Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would likely be competitively harmful if publicly disclosed.

Execution Version

AMENDMENT NO. 3 TO LOAN AGREEMENT

This AMENDMENT NO. 3 TO LOAN AGREEMENT (this “Amendment”), dated as of December 1, 2020, is made among ADAMAS PHARMA, LLC, a Delaware limited liability company, (the “Borrower”), and HEALTHCARE ROYALTY PARTNERS III, L.P. a Delaware limited partnership (the “Lender”). Capitalized terms used but not defined herein have the meanings ascribed to such terms in the Loan Agreement (as defined below).

The Borrower and the Lender are parties to a Loan Agreement dated as of May 11, 2017 (as amended by the First Amendment to Loan Agreement dated as of August 14, 2017 and that Amendment No. 2 to Loan Agreement dated as of January 2, 2020, the “Loan Agreement”).

The Borrower has requested that the Lender agree to make certain amendments to the Loan Agreement, as more fully described herein. Although the Lender is under no obligation to do so, it has agreed to such requests, subject to the terms and conditions hereof.

Accordingly, the parties hereto agree as follows:

SECTION 1.Definitions; Interpretation.

(a)Terms Defined in Loan Agreement. All capitalized terms used in this Amendment (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.

(b)Rules of Construction. The rules of construction set forth in Section 1.02 of the Loan Agreement shall be applicable to this Amendment and are incorporated herein by this reference.

SECTION 2.Amendments to the Loan Agreement.

(a)The Loan Agreement shall be amended as follows effective as of the Amendment Effective Date (as defined below):

(i)The Loan Agreement is hereby amended to replace each instance of the term “ADS-5102” with “Specified Products” in the definitions of “Borrower License”, “Borrower Licensee”, “Collection Account”, “Commercially Reasonable and Diligent Efforts”, “Exploit”, “Ex-U.S. Borrower Consideration”, “Marketing Authorization”, , “Permitted Liens”, “Quarterly Payment Amounts” and “Revenue Interest”, in the second clause of Section 4.08(a)(ii) and in the proviso thereto, in the proviso to Section 4.08(a), and in Sections 7.01(b), 7.02(b), 8.03(e), 8.03(f), 8.08(h), 8.14(c), 8.14(d) and 9.01.

(ii)The Loan Agreement is hereby amended to replace the first instance of the term “ADS-5102” in the definition of “Net Sales” with “a Specified Product” and each other instance with “such Specified Product”

(iii)The Loan Agreement is hereby amended (other than with respect to the defined term “ADS-5102 Product Payment Amount”) to replace each instance of the term “ADS-5102 Product Payment Amount” with the term “Product Payment Amount.”

(iv)The defined term “ADS-5102” is hereby amended by adding the following sentence: “Notwithstanding the foregoing, ADS-5102 shall not include Osmolex ER.

(v)Section 1.01 (Definitions). The following terms and their respective definitions set forth in Section 1.01 of the Loan Agreement are hereby deleted in their entirety and replaced with the following:

“    “Amendment Effective Date” means the Amendment Effective Date as defined in that certain Amendment No. 3 to the Loan Agreement, between the Borrower and the Lender.”

“    “Applicable Percentage” means a percentage equal to:

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(i)     prior to the payment in full of the principal and Fixed Interest due on the Loans, the Applicable Percentage will be equal to the highest of (A) 12.5%; and (B) if the aggregate cash amount received by the Lender on the Loans on the Interest Payment Date relating to the Calendar Quarter ending on December 31, 2022 is not equal to or greater than $[*], 22.5%; provided that if the aggregate cash amount received by the Lender on the Loans on the Interest Payment Date relating to the Calendar Quarter ending on June 30, 2023 is equal to or greater than $[*], the Applicable Percentage, if previously increased to 22.5% pursuant to the foregoing, shall decrease to 12.5% on and after December 31, 2022; and

(ii)     after the payment in full of the principal and Fixed Interest due on the Loans, 6.25%.

“     “Combination Product” means any product that is comprised of or contains ADS-5102 and/or Osmolex ER in addition to one or more additional active ingredients (whether co-formulated or co-packaged) that are neither ADS-5102 nor Osmolex ER, as applicable, nor generic or other non-proprietary compositions of matter. Pharmaceutical dosage form vehicles or delivery devices, adjuvants and excipients shall not be deemed “active ingredients”

“    “Commercialization” means, on a country-by-country basis with respect to a Specified Product, any and all activities with respect to the distribution, marketing, detailing, promotion, selling and securing of reimbursement of such Specified Product in a country after Marketing Authorization for such Specified Product in that country has been obtained, which shall include, as applicable, post-marketing approval studies, post-launch marketing, promoting, detailing, marketing research, distributing, customer service, selling such Specified Product, importing, exporting or transporting such Specified Product for sale, and regulatory compliance with respect to the foregoing. When used as a verb, “Commercialize” means to engage in Commercialization.”

“    “Contribution Agreement” means the Amended and Restated Contribution and Servicing Agreement, dated as of the Amendment Effective Date, between the Company and the Borrower.”

“     “Marketing Authorization” means, with respect to any Specified Product, the Regulatory

Approval required by Applicable Law to sell such Specified Product in a country or region.”

““Scheduled Maturity Date” means March 31, 2027.”

(vi)Section 1.01 (Definitions). The following new terms and their respective definitions are hereby inserted to appear alphabetically in Section 1.01 of the Loan Agreement:

“    “Additional Transferred Assets” has the meaning set forth in the Contribution Agreement.

“    “Osmolex ER” means (a) Osmolex ER™ brand extended-release amantadine tablets (in each of 129 mg, 161 mg, 193 mg and 258 mg dosage strengths) as approved under NDA No. 209410, and (b) any other product developed now or in the future by the Company or Borrower covered by a Valid Claim in the Patent Rights assigned to Borrower as part of the Additional Transferred Assets.”

“    “Osmolex ER Product Payment Amount” means, for each Calendar Quarter, an amount equal to the Applicable Percentage multiplied by each of (a) in the U.S., the Net Sales in such Calendar Quarter and (b) outside of the U.S., the Ex-U.S. Borrower Consideration in such Calendar Quarter. For clarity, the Applicable Percentage used to calculate the Osmolex ER Payment Amount for a given Calendar Quarter will be based on the aggregate (x) Net Sales in the U.S. billed or invoiced in such Calendar Quarter and all prior Calendar Quarters in the applicable Calendar Year and (y) Ex-U.S. Borrower Consideration received by Borrower in a given Calendar Quarter.”

2

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“    “Product Payment Amount” means the ADS-5102 Product Payment Amount and the Osmolex ER Product Payment Amount.”

“    “Specified Products” means ADS-5102 and Osmolex ER.”

(vii)Section 3.01(b). Section 3.01(b) is hereby amended by inserting the following parenthetical after the term “Obligations”: “(other than Obligations in respect of the Royalty Tail).”

(viii)Section 3.01(c).    Section 3.01(c) is hereby amended by deleting clause (ii) in its entirety and replacing clause (ii) with the following:

“    (ii) in connection with AHYDO Payments required pursuant to Section 3.02(a)(v), and”

(ix)Section 3.01(d). Section 3.01(d) is hereby amended and restated as follows:

“    (d)    Once the principal balance and Fixed Interest due on the Loans have been repaid in full (other than as a result of any prepayment pursuant to Section 3.03), Borrower shall make quarterly payments on each Interest Payment Date of (i) in the U.S., the Applicable Percentage of Net Sales in the U.S. and (ii) outside of the U.S., the Applicable Percentage of Ex-U.S. Borrower Consideration (collectively, such payments, the “Royalty Tail”) until Lender has received cumulative cash payments of the principal, Fixed Interest, premium (including prepayment premium, if applicable) and Royalty Tail totaling (x) $200,000,000 or (y) following the occurrence of a Change of Control, (1) $175,000,000, if such repayment in full is made on or prior to December 31, 2022, or (2) $195,000,000, if such repayment in full following the occurrence of a Change of Control is made after December 31, 2022.”

(x)Section 3.02(a)(i) and Section 3.02(b)(i). Each of Sections 3.02(a)(i) and 3.02(b)(i) is hereby amended by inserting the following parenthetical after the term “Obligations”: “(other than Obligations in respect of the Royalty Tail).”

(xi)Section 3.02(b)(v). Section 3.02(b)(v) is hereby amended and restated in its entirety as follows:

“    (v)    Concurrently with, or at any time from and after, the prepayment of the Loans pursuant to this Section 3.02(b) or Section 3.02(a), Borrower may terminate the Royalty Tail upon written notice to Lender by paying to the Lender Account an amount sufficient to bring the cumulative cash payments of principal, Fixed Interest, premium (including prepayment premium, if applicable) and Royalty Tail at the date of such prepayment up to a total of (x) $200,000,000 or (y) following the occurrence of a Change of Control, (1) $175,000,000, if such prepayment of the Loans pursuant to this Section 3.02(b) is made on or prior to December 31, 2022, or (2) $195,000,000 if such prepayment of the Loans pursuant to this Section 3.02(b) is made after December 31, 2022. .”

(xii)Section 7.01(g).    Section 7.01(g) is hereby amended by deleting the first word therein and inserting “Except as set forth on Schedule 7.01(g), there” in its place.

(xiii)Section 7.01(w). Section 7.01(w) is hereby amended by deleting “750” and inserting “1000” in its place.

(xiv)Section 7.02(f).    Section 7.02(f) is hereby amended by deleting the first word therein and inserting “Except as set forth on Schedule 7.02(f), there” in its place.

(b)Schedules. A new Schedule 7.01(g) (Certain Proceedings) and a new Schedule 7.02(f) (Certain Proceedings – Company) are hereby added to the Loan Agreement in the forms attached hereto as Schedule 7.01(g) and Schedule 7.02(f), respectively.

3

237190167 v8

(c)References Within Loan Agreement. Each reference in the Loan Agreement to “this Agreement” and the words “hereof,” “herein,” “hereunder,” or words of like import, shall mean and be a reference to the Loan Agreement as amended by this Amendment.

SECTION 3.Conditions of Effectiveness. The effectiveness of Section 2 of this Amendment shall be subject to the satisfaction of each of the following conditions precedent (the date of effectiveness, the “Amendment Effective Date”):

(a)This Amendment. The Lender shall have received this Amendment, executed by the Borrower and the Lender;

(b)Contribution Agreement. The execution and delivery by the Company and the Borrower of that certain Amended and Restated Contribution and Servicing Agreement dated as of the Amendment Effective Date, substantially in the form attached hereto as Exhibit A;

(c)Limited Liability Company Agreement. The execution and delivery by the Company and the Borrower of that certain First Amendment to Limited Liability Company Agreement of Adamas Pharma, LLC dated as of the Amendment Effective Date, substantially in the form attached hereto as Exhibit B; and

(d)Closing under Osmolex Asset Purchase Agreement. The “Closing” under and as defined in that certain Asset Purchase Agreement dated as of December 1, 2020, with Osmotica Pharmaceutical US LLC, Osmotica Keredskedelmi és Szolgáltató Korlátolt Felelõsségû Társaság, a corporation organized under the laws of Hungary, and Osmotica Holdings US LLC, shall have occurred; and

(e)Senior Officer Certificate. The Lender shall have received a certificate signed by a Senior Officer of the Company certifying as to the matters set forth in Section 4.

SECTION 4.Representations and Warranties. To induce the Lender to enter into this Amendment, the Borrower hereby confirms, as of the date hereof and as of the Amendment Effective Date, that:

(a) the execution and delivery of this Amendment and the Performance by the Borrower of its obligations under the Loan Agreement as amended hereby (herein, as so amended, the “Amended Loan Agreement”) are within the Borrower’s powers, have been duly authorized and are not in contravention of law or the terms of its articles of incorporation and, except as have been previously obtained, do not require the consent or approval, material to the amendments contemplated in this Amendment, of any governmental body, agency or authority, and the Amended Loan Agreement will constitute the valid and binding obligations of such undersigned parties enforceable in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether enforcement is sought in a proceeding in equity or at law);

(b)no Default or Event of Default shall have occurred and be continuing, or shall result from this Amendment or the Amended Loan Agreement;

(c)each of the representations and warranties made by the Borrower herein or in or pursuant to the Loan Documents shall be true and correct in all material respects as if made on and as of such date (except (i) that any representation or warranty which by its terms is made as of an earlier date shall be true and correct in all material respects as of such earlier date and (ii) to the extent any representations and warranties are qualified with reference to Schedules 7.01, 7.01(g), 7.01(k), 7.02(f), 7.02(j) and 7.02(n)(7) attached to the Amended Loan Agreement, such representations and warranties shall instead be qualified with reference to such Schedules attached hereto and in the case of representations and warranties as of the Amendment Effective Date, updates to such schedules delivered on or prior to the Amendment Effective Date); and

(d)The Borrower shall have performed in all material respects all agreements and satisfied all conditions which this Amendment and the other Loan Documents provide shall be performed or satisfied by the Borrower or the other Loan Parties on or before the Amendment Effective Date.

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237190167 v8

SECTION 5.Miscellaneous.

(a)Loan Documents Otherwise Not Affected; Reaffirmation. Except as expressly amended pursuant hereto, the Loan Agreement and the other Loan Documents shall remain unchanged and in full force and effect and are hereby ratified and confirmed in all respects. The Lender’s execution and delivery of, or acceptance of, this Amendment shall not be deemed to create a course of dealing or otherwise create any express or implied duty by any of them to provide any other or further amendments, consents or waivers in the future.

(b)No Reliance. The Borrower hereby acknowledges and confirms to the Lender that the Borrower is executing this Amendment on the basis of its own investigation and for its own reasons without reliance upon any agreement, representation, understanding or communication by or on behalf of any other Person.

(c)Costs and Expenses. The Borrower agrees to pay to the Lender within ten (10) days of its receipt of an invoice (or on the Amendment Effective Date to the extent invoiced on or prior to the Amendment Effective Date), the out-of-pocket costs and expenses of the Lender party hereto, and the reasonably fees and disbursements of counsel to the Lender party hereto (including allocated costs of internal counsel), in connection with the negotiation, preparation, execution and delivery of this Amendment and any other documents to be delivered in connection herewith on the Amendment Effective Date or after such date.

(d)Binding Effect. This Amendment binds and is for the benefit of the successors and permitted assigns of each party.

(e)Governing Law. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CON-STRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING GENERAL OBLIGATIONS LAW SECTIONS 5-1401 AND 5-1402 BUT OTHERWISE WITHOUT GIVING EFFECT TO LAWS CONCERNING CONFLICT OF LAWS OR CHOICE OF FORUM THAT WOULD REQUIRE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

(f)Complete Agreement; Amendments. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements with respect to such subject matter. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Agreement and the Loan Documents.

(g)Severability of Provisions. Each provision of this Amendment is severable from every other provision in determining the enforceability of any provision.

(h)Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile, portable document format (.pdf) or other electronic transmission will be as effective as delivery of a manually executed counterpart hereof.

(i)Loan Documents. This Amendment and the other documents related thereto shall constitute Loan Documents.

[Balance of Page Intentionally Left Blank; Signature Pages Follow]

5

237190167 v8

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, as of the date first above written.

BORROWER:
ADAMAS PHARMA, LLC,
as Borrower
By:	ADAMAS PHARMACEUTICALS, INC., its manager
By:	/s/ Neil F. McFarlane
	Name: Neil F. McFarlane
	Title: Chief Executive Officer

[Signature Page to Amendment No. 3 to Loan Agreement]

THE LENDER:
HEALTHCARE ROYALTY PARTNERS III, L.P.,
as Lender
By:	HealthCare Royalty GP III, LLC,
	its general partner
By:	/s/ Clarke B. Futch
	Name: Clarke B. Futch
	Title: Founding Managing Partner

[Signature Page to Amendment No. 3 to Loan Agreement]

EX-21.1

Exhibit 21.1

ADAMAS PHARMACEUTICALS, INC. SUBSIDIARIES

NAME OF SUBSIDIARY	JURISDICTION OF INCORPORATION
Adamas Pharma, LLC	Delaware, USA

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-234570) and Form S-8 (Nos. 333-249872, 333-236619, 333-230058, 333-223147, 333-216313, 333-210255, 333-202467 and 333-195384) of Adamas Pharmaceuticals, Inc. of our reportdated February 23, 2021 relating to the financial statements, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP 

San Jose, California

February 23, 2021

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Neil F. McFarlane, hereby certify that:

1.I have reviewed this annual report on Form 10-K of Adamas Pharmaceuticals, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	February 23, 2021	/s/ Neil F. McFarlane
		Neil F. McFarlane
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Christopher B. Prentiss, hereby certify that:

1.I have reviewed this annual report on Form 10-K of Adamas Pharmaceuticals, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	February 23, 2021	/s/ Christopher B. Prentiss
		Christopher B. Prentiss
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Neil F. McFarlane, Chief Executive Officer of Adamas Pharmaceuticals, Inc. (the “Company”), and Christopher B. Prentiss, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1.The Company’s Annual Report on Form 10-K for the period ended December 31, 2020, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2.The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned have set their hands hereto as of the 23rd day of February, 2021.

/s/ Neil F. McFarlane	/s/ Christopher B. Prentiss
Neil F. McFarlane	Christopher B. Prentiss
Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)

This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

XML

Cover Page - USD ($)	12 Months Ended
	Dec. 31, 2020	Feb. 16, 2021	Jun. 30, 2020
Cover [Abstract]
ICFR Auditor Attestation Flag	false
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2020
Current Fiscal Year End Date	--12-31
Document Transition Report	false
Entity File Number	001-36399
Entity Registrant Name	Adamas Pharmaceuticals Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	42-1560076
Entity Address, Address Line One	1900 Powell Street
Entity Address, Address Line Two	Suite 1000
Entity Address, City or Town	Emeryville
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94608
City Area Code	510
Local Phone Number	450-3500
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	ADMS
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 60,114,071
Entity Common Stock, Shares Outstanding (in shares)		30,568,421
Documents Incorporated by Reference	Part III incorporates information by reference to the definitive proxy statement for the registrant’s 2021 Annual Meeting of Stockholders, to be filed within 120 days of the registrant’s fiscal year ended December 31, 2020.
Entity Central Index Key	0001328143
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 71,660	$ 65,774
Available-for-sale securities	11,705	66,833
Accounts receivable, net	8,042	5,770
Inventory	7,294	5,267
Prepaid expenses and other current assets	13,035	6,676
Total current assets	111,736	150,320
Property and equipment, net	1,598	2,449
Operating lease right-of-use assets	6,657	8,048
Prepaid expenses and other non-current assets	38	1,341
Total assets	120,029	162,158
Current liabilities
Accounts payable	2,144	6,932
Accrued liabilities	27,164	16,117
Current portion of long-term debt	3,657	2,041
Other current liabilities	1,902	1,858
Total current liabilities	34,867	26,948
Long-term debt	126,307	125,674
Long-term portion of operating lease liabilities	6,453	8,272
Other non-current liabilities	2,378	2,157
Total liabilities	170,005	163,051
Commitments and Contingencies (Note 9)
Stockholders’ deficit
Preferred stock, $0.001 par value — 5,000,000 shares authorized, and zero shares issued and outstanding at December 31, 2020 and December 31, 2019	0	0
Common stock, $0.001 par value — 100,000,000 shares authorized, 28,866,956 and 27,964,778 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively	34	33
Additional paid-in capital	455,277	446,942
Accumulated other comprehensive income	0	16
Accumulated deficit	(505,287)	(447,884)
Total stockholders’ deficit	(49,976)	(893)
Total liabilities and stockholders’ deficit	$ 120,029	$ 162,158

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in share)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	28,866,956	27,964,778
Common stock, shares outstanding (in shares)	28,866,956	27,964,778

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues:
Total revenues	$ 74,461,000	$ 54,637,000
Costs and operating expenses:
Cost, Product and Service [Extensible List]	us-gaap:ProductMember	us-gaap:ProductMember
Cost of product sales	$ 2,038,000	$ 2,469,000
Research and development	9,746,000	30,034,000
Selling, general and administrative, net	106,841,000	114,369,000
Total costs and operating expenses	118,625,000	146,872,000
Loss from operations	(44,164,000)	(92,235,000)
Interest and other income, net	748,000	2,093,000
Interest expense	(13,987,000)	(15,044,000)
Net loss	$ (57,403,000)	$ (105,186,000)
Net loss per share, basic and diluted (in dollars per share)	$ (2.03)	$ (3.80)
Weighted average shares used in computing net loss per share, basic and diluted (in shares)	28,305	27,677
Product sales
Revenues:
Total revenues	$ 71,166,000	$ 54,637,000
Royalty revenue
Revenues:
Total revenues	$ 3,295,000	$ 0

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (57,403)	$ (105,186)
Other comprehensive income (loss)
Reclassification of realized gain on available-for-sale securities recognized in interest and other income, net	(34)	0
Unrealized gain on available-for-sale securities	18	280
Total other comprehensive income (loss)	(16)	280
Comprehensive loss	$ (57,419)	$ (104,906)

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2018		27,434,358
Beginning balance at Dec. 31, 2018	$ 89,885	$ 32	$ 432,815	$ (264)	$ (342,698)
Increase (decrease) in shareholders' equity
Exercise of stock options (in shares)		184,626
Exercise of stock options	293		293
Restricted stock units vested (in shares)		151,288
Stock issued under employee stock purchase plan (in shares)		194,506
Stock issued under employee stock purchase plan	775	$ 1	774
Other comprehensive income (loss)	280			280
Stock-based compensation	13,060		13,060
Net loss	(105,186)				(105,186)
Ending balance (in shares) at Dec. 31, 2019		27,964,778
Ending balance at Dec. 31, 2019	(893)	$ 33	446,942	16	(447,884)
Increase (decrease) in shareholders' equity
Exercise of stock options (in shares)		237,425
Exercise of stock options	176		176
Restricted stock units vested (in shares)		258,819
Stock issued under employee stock purchase plan (in shares)		188,531
Stock issued under employee stock purchase plan	437		437
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs (in shares)		217,403
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs	1,041	$ 1	1,040
Other comprehensive income (loss)	(16)			(16)
Stock-based compensation	6,682		6,682
Net loss	(57,403)				(57,403)
Ending balance (in shares) at Dec. 31, 2020		28,866,956
Ending balance at Dec. 31, 2020	$ (49,976)	$ 34	$ 455,277	$ 0	$ (505,287)

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities
Net loss	$ (57,403)	$ (105,186)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	851	1,214
Stock-based compensation	6,431	12,852
Accretion of interest expense	13,987	15,044
Change in fair value of embedded derivative liability	221	805
Net accretion of discounts and amortization of premiums of available-for-sale securities	(135)	(1,219)
Realized gain on available-for-sale securities	(55)	0
Provision for write-down of inventory	595	884
Changes in assets and liabilities
Accrued interest of available-for-sale securities	362	50
Accounts receivable, net	(2,272)	(259)
Inventory	(2,205)	(970)
Prepaid expenses and other assets	(5,056)	1,560
Operating lease right-of-use assets	1,437	1,008
Accounts payable	(4,979)	398
Current portion of long-term debt	(11,738)	(6,450)
Long-term portion of operating lease liabilities	(1,696)	(1,188)
Accrued liabilities and other liabilities	10,947	678
Net cash used in operating activities	(50,708)	(80,779)
Cash flows from investing activities
Purchases of property and equipment	0	(18)
Purchases of available-for-sale securities	(68,936)	(93,869)
Maturities of available-for-sale securities	106,810	182,750
Sales of available-for-sale securities	17,066	0
Net cash provided by investing activities	54,940	88,863
Cash flows from financing activities
Proceeds from public offerings, net of offering costs	1,041	0
Proceeds from Paycheck Protection Program Loan	2,650	0
Repayment of Paycheck Protection Program Loan	(2,650)	0
Proceeds from issuance of common stock upon exercise of stock options	176	310
Proceeds from employee stock purchase plan	437	775
Net cash provided by financing activities	1,654	1,085
Net increase in cash and cash equivalents	5,886	9,169
Cash and cash equivalents at beginning of period	65,774	56,605
Cash and cash equivalents at end of period	71,660	65,774
Supplemental disclosure
Cash paid for interest	11,738	6,450
Supplemental disclosure of noncash activities
Right-of-use assets obtained in exchange for operating lease liabilities	46	9,056
Stock-based compensation capitalized in inventory	$ 251	$ 208

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DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS

Adamas Pharmaceuticals, Inc. (the “Company”) is a commercial-stage pharmaceutical company focused on growing a portfolio of therapies to address a range of neurological diseases. In August 2017, the U.S. Food and Drug Administration (FDA) approved GOCOVRI® (amantadine) extended release capsules, the first and only FDA-approved medication indicated for the treatment of dyskinesia in patients with Parkinson’s disease receiving levodopa-based therapy, with or without concomitant dopaminergic medications. In February 2021, the FDA approved a second indication for GOCOVRI for use as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. On January 4, 2021, the Company acquired the global rights to OSMOLEX ER® (amantadine) extended release tablets from Osmotica Pharmaceuticals US LLC, a subsidiary of Osmotica Pharmaceuticals plc. In November 2012, the Company granted Forest Laboratories Holdings Limited “Forest”, an indirect wholly-owned subsidiary of Allergan plc (collectively “Allergan”) an exclusive license, with right to sublicense, certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. In connection with these rights, Allergan markets and sells NAMZARIC® (memantine hydrochloride extended release and donepezil hydrochloride) capsules for the treatment of moderate to severe dementia related to Alzheimer’s disease. In May 2020, the Company became entitled to receive royalties at rates in the low double digits to mid-teens from Allergan for sales of NAMZARIC in the United States.

The Company was incorporated in the State of Delaware on November 15, 2000, and operates as one segment. The Company’s headquarters and operations are located in Emeryville, California.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition and variable consideration, lease assets and liabilities, clinical trial accruals, fair value of assets and liabilities including short-term and long-term classification, embedded derivatives, income taxes, inventory, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Risks and Uncertainties

The outbreak of the novel Coronavirus (“COVID-19”), which is understood to have begun in December 2019, continues to grow both within the U.S. and globally. The World Health Organization has declared the outbreak of COVID-19 to be a pandemic, and the U.S. federal government has declared it a national emergency. The Company is subject to risks and uncertainties as a result of the outbreak of COVID-19. Despite disruptions to the Company’s business operations, the COVID-19 pandemic did not significantly impact GOCOVRI prescription refill rates for the year ended December 31, 2020, and thus far management has observed no disruptions to its inventory on hand or planned manufacturing schedule. However, new prescription rates have been impacted due to several factors, including: a fluid environment in which office practices are changing frequently including many healthcare providers have temporarily closed their offices or are restricting patient visits; patients are postponing visits to healthcare provider facilities; and the sales force has moved to a mix of virtual and live interactions with healthcare providers, adapting to the local environment. While management believes this initial decline and continued impact on new prescriptions to be temporary, the duration and severity is dependent on future developments, including new information that may emerge concerning the actions taken to contain or prevent further spread, all of which are highly uncertain and cannot be predicted with confidence.

As of the date of issuance of these consolidated financial statements, due to the numerous uncertainties surrounding the COVID-19 pandemic, the Company is unable to predict the extent to which the COVID-19 pandemic may materially adversely affect the Company’s future business, financial results, liquidity and cash flows.

Liquidity

During the last three fiscal years, the Company has funded its operations primarily through sales of GOCOVRI, through sales of its common stock, and to a lesser extent through royalties received on net sales of NAMZARIC. The Company made GOCOVRI available for physician and patient use in the fourth quarter of 2017, with a full commercial launch in January 2018. Prior to the generation of revenue from GOCOVRI, the Company had not generated any commercial revenue from the sale of its products. In January 2018, the Company completed a follow-on public offering of its common stock from which proceeds raised were approximately $134.3 million, net of underwriting discounts, commissions, and offering-related transaction costs. In November 2019, the Company entered into a sales agreement with Cowen and Company, LLC, pursuant to which it may, from time to time, issue and sell shares of common stock having an aggregate offering value of up to $50.0 million. As of December 31, 2020, the Company had issued 217,403 shares of common stock and raised net proceeds of $1.0 million under the sales agreement.

As of December 31, 2020, the Company had $83.4 million of cash, cash equivalents, and investments, which management believes will be sufficient to fund its projected operating requirements for at least 12 months from the issuance of these consolidated financial statements. However, it is possible that the Company will not achieve the progress it expects, because revenues from GOCOVRI may be less than anticipated, especially in light of the current COVID-19 pandemic.

Inventory

Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method. Inventory consists of raw materials, work-in-process, and GOCOVRI finished goods. Raw materials and work-in-process that may be utilized for both commercial and clinical programs are identical and, as a result, the inventory has an “alternative future use” as defined in authoritative guidance and are included in inventory. Amounts in inventory associated with clinical development programs are charged to research and development expense when the product enters the research and development process and can no longer be used for commercial purposes and, therefore, does not have “alternative future use”. Costs include active pharmaceutical ingredient (API), third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs. If the Company identifies excess, obsolete or unsalable product, the Company will write down its inventory to net realizable value in the period it is identified.

The Company begins capitalizing costs as inventory when the product candidate receives regulatory approval. Prior to regulatory approval, inventory costs related to product candidates are recorded as research and development expense. The Company received FDA approval for GOCOVRI on August 24, 2017, and began capitalizing inventory manufactured at the FDA approved location, after FDA approval.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities, when purchased, of less than three months.

Investments

The Company classifies its investments as “available-for-sale.” In general, these investments are free of trading restrictions. The Company carries these investments at fair value, based on quoted market prices or other readily available market information. Quoted market prices for U.S. government and corporate bonds include both principal and accrued interest components. Unrealized gains and losses are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in its consolidated balance sheets. Gains and losses are recognized when realized as gains or losses in interest and other income, net, in the consolidated statements of operations. When the Company determines that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. The Company considers all marketable debt securities with a maturity of less than one year to be short-term investments, with all others considered to be long-term investments.

All of the Company’s available-for-sale securities are subject to a periodic impairment review. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the investments’ fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, its intent to sell or hold the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost.

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Segments

In accordance with ASC 280-10-50, Segment Reporting, operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company operates in one reportable segment: the development and commercialization of therapeutics targeting chronic disorders of the central nervous system. All revenues for the years ended December 31, 2020 and 2019 were generated in the United States.

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, using the full retrospective transition method. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that the Company would have recognized is one year or less.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct.

Product sales

The Company’s product sales consist of U.S. sales of GOCOVRI. GOCOVRI was approved by the FDA on August 24, 2017, and the Company commenced shipments of GOCOVRI to a specialty pharmacy during October 2017. The Company sells its products principally to a specialty pharmacy and certain specialty distributors (each a “Customer” or collectively its “Customers”). These agreements with its Customers provide for transfer of title to the product at the time the product has been delivered to and accepted by the Customer. The Customer subsequently dispenses product directly to a patient. In addition, except for limited circumstances, the Customer has no right of product return to the Company.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer. The Company has determined that the delivery of its product to Customers constitutes a single performance obligation as there are no other promises to deliver goods or services. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. The Company has assessed the existence of a significant financing component in the agreements with its Customers. The trade payment terms with its Customers do not exceed one year and therefore the Company has elected to apply the practical expedient and no amount of consideration has been allocated as a financing component.

The Company considers the effects of items which can decrease the transaction price such as variable consideration and consideration payable to a Customer or payer. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. The amount of variable consideration may be constrained and is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Revenue from product sales is recorded after considering the impact of the following variable consideration amounts at the time of revenue recognition:

Distribution Fees: Distribution fees include fees paid to the Company’s Customers for data and prompt payment discounts. Distribution fees are recorded based on contractual terms.

Rebates: Rebates include discounts under the Medicaid Drug Rebate Program, TRICARE Retail Pharmacy Refunds Program (TRICARE), and Managed Care contracts. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or statutory requirements with benefit providers. Rebates are estimated based on statutory discount rates and expected utilization. The expected utilization of rebates is estimated based on data received from the specialty pharmacy and specialty distributor. The Company uses the expected-value method for estimating rebates and estimates are adjusted quarterly to reflect actual experience.

Chargebacks: Chargebacks are discounts that occur when Healthcare Providers purchase directly from a Customer. Healthcare Providers, which currently consist of Public Health Service institutions, non-profit clinics, government entities, group purchasing organizations, and health maintenance organizations, generally purchase the product at a discounted price. The Customer, in turn, charges back to the Company the difference between the price initially paid by the Customer and the discounted price paid by the Healthcare Providers to the Customer. The allowance for chargebacks is based on an estimate of sales through to Healthcare Providers from the Customer.

Product Returns: Consistent with industry practice, the Company offers limited product return rights and generally allows for the return of product that is damaged or defective, and within a few months prior to and up to a few months after the product expiration date. The Company does not allow product returns for product that has been dispensed to a patient. The Company considers several factors in the estimation of potential product returns, including expiration dates of the product shipped, the limited product return rights, third-party data in monitoring channel inventory levels, shelf life of the product, prescription trends, and other relevant factors. Product returns have been insignificant to date and are expected to be immaterial in the future.

Medicare Part D Coverage Gap: Medicare Part D coverage gap is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States, which mandates manufacturers to fund a portion of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Funding of the coverage gap is generally invoiced and paid in arrears. The Medicare Part D coverage gap is estimated using the expected-value method based on an amount expected to be incurred for the current quarter’s activity based on expected utilization, plus an accrual balance for known prior quarters and is adjusted quarterly based on actual experience. The expected utilization of the Medicare Part D coverage gap is estimated based on data received from the specialty pharmacy and historical utilization.

Co-payment Assistance: The Company provides co-payment assistance to patients who have commercial insurance and meet certain eligibility requirements. Co-payment assistance is estimated using the expected-value method based on historical program participation and estimates of program redemption using data provided by third-party administrators.

Each of the above items are variable consideration, are recorded at the time of revenue recognition, and require significant estimates, judgment and information obtained from external sources. The Company determined a significant reversal of revenue would not occur in a future period for the estimates of variable consideration detailed above and, therefore, the transaction price was not reduced during the periods presented. If management’s estimates differ from actual results, the Company will record adjustments that would affect product sales in the period of adjustment.

License agreement revenue

The Company generates revenue from collaboration and license agreements for the development and commercialization of products. Collaboration and license agreements may include non-refundable upfront license fees,

partial or complete reimbursement of research and development costs, contingent consideration milestone payments based on the achievement of defined objectives, and royalties on sales of commercialized products. Such agreements may contain various promises to customers which are generally capable of being distinct and accounted for as separate performance obligations. The Company’s duties and responsibilities under the collaboration and license agreements typically include the license or transfer of intellectual property rights, obligations to provide research and development services and related materials, and obligations to participate on certain development and/or commercialization committees with the partners. These promises may be regarded as separate performance obligations, or bundled as a single performance obligation, depending upon the nature of the arrangement.

For agreements with multiple performance obligations, the Company allocates estimated revenue to each performance obligation at contract inception based on the estimated relative standalone selling price (SSP) of each performance obligation in the arrangement. Revenue allocated to each performance obligation is then recognized when the entity satisfies the performance obligation by transferring control of the promised good or service to the customer.

Licenses for Intellectual Property (IP): If the Company determines that the license for IP is distinct from the other performance obligations identified in the arrangement, revenue from non-refundable, up-front fees allocated to the license is recognized when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, judgment is applied to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: For contracts with customers that contain payments that are contingent upon achievement of a substantive milestone, at the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative SSP basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

Reimbursement of Research and Development Costs: Amounts related to research and development funding and full-time equivalent employees assigned to the license agreement are recognized over time as the related services or activities are performed, in accordance with the contract terms.

Royalties: For arrangements that include sales-based royalties, and the licensed IP is deemed to be the predominant item to which the royalties relate, the Company recognizes the related royalty revenue at the later of (i) when the related sales occur, or (ii) the satisfaction or partial satisfaction of the performance obligation to which the royalty relates. Sales-based royalties are recorded based on estimated quarterly net sales of NAMZARIC. Differences between actual results and estimated amounts are adjusted in the period in which they become known, which typically follows the quarterly period in which the estimate is made. To date, actual royalties received have not differed materially from estimates. Receivables related to NAMZARIC royalties are recorded in prepaid expenses and other current assets on the consolidated balance sheets.

Cost of Product Sales

Cost of product sales consists primarily of direct and indirect costs related to the manufacturing of GOCOVRI products sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs. Cost of product sales may also include period costs related to certain inventory manufacturing services, inventory adjustment charges, as well as manufacturing variances. In connection with the FDA approval of GOCOVRI on August 24, 2017, the Company began capitalizing inventory manufactured at the FDA approved location starting in August

2017. Prior to receiving regulatory approval for GOCOVRI from the FDA, the Company expensed all costs incurred in the manufacture of GOCOVRI as research and development.

Concentration of Risk

Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and short and long-term investments. Cash, cash equivalents, and investments are deposited with financial institutions or invested in security issuers that management believes are credit worthy. Deposits may, at times, exceed the amount of insurance provided on such deposits. Risks associated with cash, cash equivalents, and investments are mitigated by the Company’s investment policy which defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of its investments to preserve principal and maintain liquidity.

Major Customers    

The Company has entered into distribution agreements with a specialty pharmacy and certain limited specialty distributors. For the years ended December 31, 2020 and 2019, the Company’s largest customer represented approximately 95% and 98% of the Company’s product revenue, respectively, and approximately 94% and 96% of the Company’s accounts receivable balance at December 31, 2020 and 2019, respectively.

Major Suppliers

The Company does not currently have any of its own manufacturing facilities, and therefore it depends on an outsourced manufacturing strategy for the production of GOCOVRI for commercial use and for the production of its product candidates for clinical trials. The Company has contracts in place with one third-party manufacturer that is approved for the commercial production of GOCOVRI and two third-party suppliers that are approved for GOCOVRI’s active pharmaceutical ingredient. Although there are potential sources of supply other than the Company’s existing manufacturers and suppliers, any new supplier would be required to qualify under applicable regulatory requirements.

Accounts Receivable, net

The Company’s accounts receivable balance consists of amounts due from sales of GOCOVRI. Receivables from sales of GOCOVRI are recorded net of allowances which generally include chargebacks, doubtful accounts, and discounts. The Company’s estimate of the allowance for doubtful accounts is based on an evaluation of the aging of its receivables. Accounts receivable balances are written off against the allowance when it is probable that the receivable will not be collected. Given the nature and historical collectability of the Company’s accounts receivable, the Company determined that an allowance for doubtful accounts was not required at December 31, 2020.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in operations in the period realized.

Estimated useful lives by major asset category are as follows:

	Useful Lives
Computer equipment and software	3 years
Equipment	5 years
Furniture and fixtures	10 years

Leases

The Company determines if an arrangement is, or contains, a lease at inception. An arrangement is, or contains, a lease if it conveys the right to control the use of identified property, plant or equipment (i.e., an identified asset) for a

period of time in exchange for consideration. The Company’s arrangements determined to be or contain a lease include explicitly or implicitly identified assets where the Company has the right to substantially all of the economic benefits of the assets and has the ability to direct how and for what purpose the assets are used during the lease term. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on its consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term and any amounts probable of being owed under a residual value guarantee (if applicable). In determining the incremental borrowing rate used to calculate the present value of lease payments, the Company uses the interest rate specified in the lease. If the rate is not readily determinable, which is generally the case for the Company, the Company uses its incremental borrowing rate based on the information available at the commencement date. The operating lease ROU assets also include any lease payments made (including any prepaid rents and initial direct costs) and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise any such options. Lease expense for lease payments is recognized on a straight-line basis over the expected lease term. The Company has lease agreements with lease components and non-lease components. For its facility and office equipment lease, the Company accounts for the lease and non-lease components separately. For its vehicle leases, the Company elected the practical expedient to not separate lease components, such as base rent payments, and non-lease components, such as interest, and also applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities, given the volume of individual leases involved in the overall arrangement.

Accounting for Long-Lived Assets

The Company reviews its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by the comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. There have been no such impairments of long-lived assets as of December 31, 2020.

Clinical Trial Accruals

The Company’s clinical trial accruals are based on estimates of patient enrollment and related activities at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations (“CROs”) that conduct and manage clinical trials on the Company’s behalf. The Company estimates clinical trial expenses based on the estimated services performed pursuant to these contracts, as provided by the CRO. These estimates are reviewed for reasonableness by the Company’s internal clinical personnel. The Company monitors patient enrollment levels and related activities using available information; however, if the Company underestimates activity levels associated with various studies at a given point in time, the Company could be required to record significant additional R&D expenses in future periods when the actual activity level becomes known. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Research and Development

Research and development (“R&D”) expenses include salaries and related compensation, contractor and consultant fees, external clinical trial expenses performed by CROs, licensing fees, acquired intellectual property with no alternative future use, and facility and administrative expense allocations. In addition, the Company funds R&D at research institutions under agreements that are generally cancelable at its option. Research costs typically consist of applied research and preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of pre-approval inventory purchases, product formulation, chemical analysis, and the transfer and scale-up of manufacturing at facilities operated by the Company’s contract manufacturers. Clinical development costs include the costs of Phase 1, Phase 2, and Phase 3 clinical trials. These costs are a significant component of the Company’s research and development expenses.

Long-Term Debt

Long-term debt consists of the Company’s royalty-backed loan agreement (“Royalty-Backed Loan”) with HealthCare Royalty Partners (“HCR”). The Company accounted for the loan agreement as a debt financing arrangement. Interest expense is accrued using the effective interest rate method over the estimated period the debt will be repaid. Debt issuance costs have been recorded as a debt discount in the Company’s consolidated balance sheets and are being amortized and recorded as interest expense throughout the life of the loan using the effective interest rate method. The Company must make certain assumptions and estimates, including future royalties and net product sales, in determining the expected repayment term, amortization period of the debt discount, accretion of interest expense, as well as the classification between current and long-term portions. The Company periodically assesses these assumptions and estimates, and adjusts the liabilities accordingly. Under the terms of the loan, HCR has recourse to Adamas Pharma, LLC, not the Company. See Note 10 - Long-Term Debt, for further details of the Company’s long-term debt.

Embedded Derivatives Related to Debt Instruments

Embedded derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the debt instrument. Under the Company’s loan agreement with HCR, upon the occurrence of a default or a change in control, the Company may be required to make mandatory prepayments of the borrowings. The prepayment premium is considered an embedded derivative, as the holder of the loans may exercise the option to require prepayment by the Company. Further, in the event of a regulatory change that results in a material adverse effect on HCR’s rate of return, the Company shall pay directly to HCR an amount that compensates HCR for such reduction. The embedded derivative is presented as a component of other non-current liabilities. The Company will remeasure the embedded derivatives each reporting period and report changes in the estimated fair value as gains or losses in interest and other income, net, in the consolidated statements of operations and in operating activities in the consolidated statements of cash flows.

Fair Value of Financial Instruments

The carrying value of the Company’s cash and cash equivalents, short-term investments, accounts receivable, long-term investments and other current assets, other assets, accounts payable, accrued liabilities approximate fair value due to the short-term nature or determinable value of these items. See also Note 3 - Fair Value Measurements for further details of the Company’s fair value instruments.

Income Taxes

The Company accounts for income taxes under the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows the provisions of ASC 740, Income Taxes, under which it assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Basic and Diluted Net Loss Per Share

Basic net loss per share is based upon the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalents outstanding during the period. Common stock equivalents are equity awards granted under the Company’s stock awards plans and are calculated under the treasury stock method. Common equivalent shares from unexercised stock options and unvested restricted stock units are excluded from the computation when there is a loss as

their effect is anti-dilutive, or if the exercise price of such options is greater than the average market price of the stock for the period.

Stock-Based Compensation

The Company accounts for stock-based compensation of stock options and employee stock purchase plan shares by estimating the fair value of stock-based awards using the Black-Scholes option-pricing model. The Company accounts for stock-based compensation of restricted stock units granted to employees based on the closing price of the Company’s common stock on the date of grant. The fair value of stock-based awards, net of estimated forfeitures, is recognized and amortized over the applicable vesting period.

Contingencies

In the normal course of business, the Company is involved from time to time in various legal proceedings and other matters which are complex in nature and have outcomes that are difficult to predict. The company records accruals for loss contingencies when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company considers all relevant factors when making assessments regarding these contingencies. Litigation expenses are expensed as incurred.

Recent Accounting Pronouncements

Accounting Pronouncements Adopted in 2020

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements. Disclosures are updated in Note 3 “Fair Value Measurements”.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments; in November 2018 the FASB issued a subsequent amendment ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses; in April 2019 the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; in May 2019 the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief; and in November 2019 the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The new guidance changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates, which defers the effective date of ASU 2016-13 for all entities except SEC reporting companies that are not smaller reporting companies. As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the timing and effect the new guidance will have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, which is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company does not expect the new guidance to have a material impact on its consolidated financial statements.

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FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, Fair Value Measurements and Disclosures, the Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

•Level 1 inputs, which include quoted prices in active markets for identical assets or liabilities;

•Level 2 inputs, which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. For available-for-sale securities, the Company reviews trading activity and pricing as of the measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and

•Level 3 inputs, which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques, as well as significant management judgment or estimation.

The following table represents the fair value hierarchy for the Company’s financial assets and liabilities which require fair value measurement on a recurring basis (in thousands):

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Money market	$	48,152	$	48,152	$	—	$	—
Corporate debt	6,706		—		6,706		—
U.S. Treasury securities	4,999		—		4,999		—
Total assets measured at fair value	$	59,857	$	48,152	$	11,705	$	—
Liabilities:
Embedded derivative liability	$	2,378	$	—	$	—	$	2,378
Total liabilities measured at fair value	$	2,378	$	—	$	—	$	2,378

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
Money market	$	27,720	$	27,720	$	—	$	—
Corporate debt	22,576		—		22,576		—
U.S. Treasury securities	37,811		—		37,811		—
Commercial paper	10,928		—		10,928		—
Total assets measured at fair value	$	99,035	$	27,720	$	71,315	$	—
Liabilities:
Embedded derivative liability	$	2,157	$	—	$	—	$	2,157
Total liabilities measured at fair value	$	2,157	$	—	$	—	$	2,157

Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

Corporate debt, U.S. Treasury securities, and commercial paper are measured at fair value using Level 2 inputs. The Company reviews trading activity and pricing for these investments as of each measurement date. When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy. In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. The Company classified an embedded derivative related to its Royalty-Backed Loan with HCR as a Level 3 liability.

The fair value of the embedded derivative as a result of a change in control was calculated using a probability-weighted discounted cash flow model. The model used in valuing this embedded derivative requires the use of significant estimates and assumptions including but not limited to: 1) expected cash flows the Company expects to receive on U.S. net sales of GOCOVRI and on royalties from Allergan on U.S. net sales of NAMZARIC; 2) the Company’s risk adjusted discount rates; and 3) the probability of a change in control occurring during the term of the note based on the percentage of similar companies that were acquired over the previous five year period. Changes in the estimated fair value of the bifurcated embedded derivative are reported as gains or losses in interest and other income, net, in the consolidated statements of operations. In the periods presented, the Company evaluated the embedded derivative value as a result of an event of default and the value as a result of increased costs due to a regulatory change and considered both to have no material value based on current assessment of probability, but could become material in future periods if a specified event of default or regulatory change became more probable than is currently estimated. See Note 10 “Long-Term Debt” for further description.

At December 31, 2020, the embedded derivative related to the Royalty-Backed Loan was the only recurring fair value measurement with Level 3 unobservable inputs. A risk-adjusted discount rate of 16.7% and a probability of a change in control of 3.0% were applied to calculate the value of the embedded derivative. Significant increases (or decreases) in the discount rate, and significant increases (or decreases) in the probability of a change in control would result in a significantly higher (or lower) fair value measurement.

The following table sets forth changes in Level 3 liabilities measured at fair value on a recurring basis for the years ended December 31, 2020 and 2019 (in thousands):

Balance as of December 31, 2018	$	1,352
Change in fair value included in interest and other income, net	805
Balance as of December 31, 2019	2,157
Change in fair value included in interest and other income, net	221
Balance as of December 31, 2020	$	2,378

There were no transfers into or out of Level 3 during the years ended December 31, 2020 and 2019.

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INVESTMENTS

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

INVESTMENTS

The Company’s investments consist of corporate debt, U.S. Treasury securities, and commercial paper classified as available-for-sale securities.

The Company limits the amount of investment exposure as to institution, maturity, and investment type. To mitigate credit risk, the Company invests in investment grade corporate debt, U.S. Treasury securities, and commercial paper. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and shown separately as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Realized gains and losses are reclassified from other comprehensive income (loss) to other income on the consolidated statements of operations when incurred. The Company may pay a premium or receive a discount upon the purchase of available-for-sale securities. Interest earned and gains realized on available-for-sale securities and amortization of discounts received and accretion of premiums paid on the purchase of available-for-sale securities are included in investment income.

The following table is a summary of amortized cost, unrealized gain and loss, and the fair value of available-for-sale securities as of December 31, 2020, and 2019 (in thousands):

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments:
Corporate debt	$	6,706	$	—	$	—	$	6,706
U.S. Treasury securities	4,999		—		—		4,999
Total	$	11,705	$	—	$	—	$	11,705
Reported as:
Short-term investments	$	11,705	$	—	$	—	$	11,705
Total	$	11,705	$	—	$	—	$	11,705

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments:
Corporate debt	$	22,582	$	3	$	(9)	$	22,576
U.S. Treasury securities	37,789		22		—		37,811
Commercial paper	6,446		—		—		6,446
Total	$	66,817	$	25	$	(9)	$	66,833
Reported as:
Short-term investments	$	66,817	$	25	$	(9)	$	66,833
Total	$	66,817	$	25	$	(9)	$	66,833

Short-term investments include accrued interest of $0.1 million and $0.4 million as of December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, there were gross realized gains on investments of $55,000 and no gross realized losses. There were no gross realized gains or losses on investments for the year ended December 31, 2019. Realized gains are reflected in interest and other income, net, in the consolidated statements of operations, using the specific-identification method. Investments are classified as short-term or long-term depending on the underlying investment’s maturity date. The Company had no investments with a maturity date greater than 12 months as of December 31, 2020 and 2019. All investments with unrealized losses at December 31, 2020, have been in a loss position for less than twelve months or the loss is not material and were temporary in nature. The Company does not intend to sell the investments that are in an unrealized loss position before recovery of their amortized cost basis.

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BALANCE SHEET COMPONENTS

12 Months Ended

Dec. 31, 2020

Balance Sheet Related Disclosures [Abstract]

BALANCE SHEET COMPONENTS

BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets (in thousands)
	December 31,
	2020		2019
Insurance litigation recovery	$	7,500	$	—
Prepaid expenses	3,126		2,624
Royalty receivables	1,252		—
Prepaid clinical trial	928		2,710
Income tax receivable	—		1,259
Other current assets	229		83
Prepaid expenses and other current assets	$	13,035	$	6,676

Property and equipment, net (in thousands)
	December 31,
	2020		2019
Computer equipment and software	$	3,297	$	3,297
Equipment	384		384
Furniture and fixtures	336		336
Leasehold improvements	1,891		1,891
	5,908		5,908
Less: Accumulated depreciation and amortization	(4,310)		(3,459)
Property and equipment, net	$	1,598	$	2,449

Depreciation expense was $0.9 million and $1.2 million for the years ended December 31, 2020 and 2019, respectively.

Accrued liabilities (in thousands)
	December 31,
	2020		2019
Litigation settlement liability (see Note 9)	$	7,500	$	—
Accrued employee related costs	9,403		7,682
Patent litigation settlement liability (see Note 9)	5,000		—
Clinical trial accruals	616		1,680
Accrued consulting and other professional fees	2,657		4,867
Accrued sales deductions	1,571		1,822
Other	417		66
Accrued liabilities	$	27,164	$	16,117

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INVENTORY

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

INVENTORY

INVENTORY

If the Company identifies excess, obsolete, or unsalable product, the Company will write down its inventory to net realizable value in the period it is identified. During the years ended December 31, 2020 and 2019, the Company recorded a provision for the write-down of inventory to cost of sales of $0.6 million and $0.9 million, respectively. Inventory consists of the following (in thousands):

	December 31,
	2020		2019
Raw materials	$	795	$	1,057
Work-in-process	4,403		1,925
Finished goods	2,096		2,285
Total inventory	$	7,294	$	5,267

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LICENSE AGREEMENTS

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LICENSE AGREEMENTS

LICENSE AGREEMENTS

In November 2012, the Company granted Forest Laboratories Holdings Limited “Forest”, an indirect, wholly-owned subsidiary of Allergan plc (collectively “Allergan”) an exclusive license, with right to sublicense, certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. In connection with these rights, Allergan markets and sells NAMZARIC and NAMENDA XR for the treatment of moderate to severe dementia related to Alzheimer’s disease.

Pursuant to the agreement, Allergan made an upfront payment of $65.0 million. The Company earned and received additional cash payments totaling $95.0 million upon achievement by Allergan of certain development and

regulatory milestones. Under the agreement, external costs incurred related to the prosecution and litigation of intellectual property rights are reimbursable. Reimbursable external costs are recorded as a reduction to selling, general and administrative, net. For the twelve months ended December 31, 2020 and 2019, there were no reimbursable external costs for prosecution or litigation of intellectual property rights were not material.

In addition, the Company may earn tiered royalty payments based on net sales of NAMZARIC and NAMENDA XR. Beginning in May 2020, the Company became entitled to receive royalties at rates in the low double digits to mid-teens from Allergan for sales of NAMZARIC in the United States. The Company recognized $3.3 million in NAMZARIC royalty revenue for the twelve months ended December 31, 2020, and recognized no royalty revenue for the twelve months ended December 31, 2019. Allergan’s obligation to pay royalties with respect to fixed-dose memantine-donepezil products, including NAMZARIC, continues until the later of (i) 15 years after the commercial launch of the first fixed-dose memantine-donepezil product by Allergan in the United States or (ii) the expiration of the Orange Book listed patents for which Allergan obtained rights from the Company covering such product, but is eliminated in any quarter where there is significant competition from generics. Based on Allergan’s and the Company’s current settlement agreements with the NAMZARIC ANDA filers to date, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer’s generic version of NAMZARIC is January 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest license date have the option to launch an authorized generic version of NAMZARIC beginning on January 1, 2026 instead of launching their own generic version of NAMZARIC on January 1, 2025. For further discussion of NAMZARIC ANDA filers, see Litigation and Other Legal Proceedings in “Note 9 - Commitments and Contingencies.” Beginning in June 2018, the Company was entitled to receive royalties at rates in the low to mid-single digits for sales of NAMENDA XR in the United States. The Company does not expect to receive royalties on net sales of NAMENDA XR, due to the entry of generic versions of NAMENDA XR. Royalties under the license agreement will be recognized when the related sales occur, in accordance with the sales-based royalty exception.

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LEASES

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

LEASES

LEASES

Lease Commitments

The Company performed an evaluation of its contracts in accordance with Topic 842 and determined that, except for its facility, vehicle, and office equipment leases, described below, none of its other contracts contain a lease. The Company evaluated all its leases and determined they were operating leases.

In January 2018, the Company amended its Emeryville, California, office facility lease agreement to extend the term to April 30, 2025, and relocate and expand its office space to 37,626 rentable square feet within the same building. The lease contains an option to extend the term for one additional five-year period. The extension option has not been considered in the determination of the right-of-use asset or the lease liability as the Company did not consider it reasonably certain that it would exercise such option. The lease provides for a tenant improvement allowance of approximately $1.1 million, which the Company fully utilized during the third quarter of 2018.

In 2018, the Company entered into a three-year lease for office equipment that commenced in June 2018 and will be required to make cash payments totaling $0.2 million during the term of the lease.

In March 2019, the Company entered into a three-year vehicle lease agreement, pursuant to which it currently leases 67 vehicles. Delivery of the vehicles commenced during the second quarter of 2019. The term for each leased vehicle commences upon the delivery of the vehicle and is for a period of 12 months, with renewal terms at the Company’s discretion that can extend the lease term up to 50 months.

As of December 31, 2020, the Company did not have additional operating leases that have not yet commenced.

Supplemental balance sheet information related to operating leases were as follows (in thousands):

	December 31,
	2020		2019
Assets
Operating lease right-of-use assets	$	6,657	$	8,048
Total right-of-use assets	$	6,657	$	8,048
Liabilities
Current portion included in other current liabilities	$	1,855	$	1,669
Long-term portion of operating lease liabilities	6,453		8,272
Total operating lease liabilities	$	8,308	$	9,941

The Company’s total lease cost was approximately $2.8 million and $2.4 million for the years ended December 31, 2020 and 2019, respectively. The components of lease costs, which were included in selling, general and administrative, net in its consolidated statements of operations, were as follows (in thousands):

	Years Ended December 31,
	2020		2019
Operating lease cost	$	2,373	$	2,037
Variable lease cost	464		320
Total lease cost	$	2,837	$	2,357

As of December 31, 2020, the maturities of operating lease liabilities were as follows (in thousands):

	Operating leases
2021	$	2,622
2022	2,446
2023	2,191
2024	2,247
2025	764
Thereafter	—
Total lease payments	10,270
Less: Imputed interest	(1,962)
Operating lease liabilities	$	8,308

As of December 31, 2020, the weighted average remaining lease term is 4.1 years and the weighted average operating discount rate used to determine the operating lease liability was 10.5%.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Purchase Commitments

The Company has entered into agreements for the supply of active pharmaceutical ingredients with Moehs Ibérica, S.L. and AMSA S.p.A., and the manufacture of commercial supply of GOCOVRI with Catalent Pharma Solutions, LLC. Under the terms of the agreements, the Company will supply the vendors with non-cancelable firm commitment purchase orders. The Company has also entered into other agreements with certain vendors for the provision of services, including services related to data access and packaging, under which the Company is contractually obligated to make certain payments to the vendors.

The Company enters into contracts in the normal course of business that include, among others, arrangements with CROs for clinical trials, vendors for preclinical research, and vendors for manufacturing. These contracts generally provide for termination upon notice, and therefore the Company believes that its obligations under these agreements are not material.

As of December 31, 2020, the Company had non-cancelable purchase commitments of $2.4 million due within one year.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown, because it involves claims that may be made against the Company in the future, but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Indemnification

In accordance with the Company’s amended and restated certificate of incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving in such capacity. The Company has a directors and officers liability insurance policy that may enable it to recover a portion of any amounts paid for claims. In addition, in the normal course of business, the Company enters into contracts and agreements that may contain a variety of representations and warranties and provide for general indemnifications.

Litigation and Other Legal Proceedings

In November 2012, the Company granted Forest an exclusive license to certain of the Company’s intellectual property rights relating to human therapeutics containing memantine in the United States. Under the terms of that license agreement, Forest has the right to enforce such intellectual property rights which are related to its right to market and sell NAMZARIC and NAMENDA XR for the treatment of moderate to severe dementia related to Alzheimer’s disease. The Company has a right to participate in, but not control, such enforcement actions by Forest.

In 2018 and as of the issuance date of these consolidated financial statements, multiple generic companies have launched generic versions of NAMENDA XR.

As of the issuance date of these consolidated financial statements, a number of companies have submitted ANDAs including one or more certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(iv) to the FDA requesting approval to manufacture and market generic versions of NAMZARIC, on which the Company is entitled to receive royalties from Forest beginning in May 2020.

As of the issuance date of these consolidated financial statements, the Company and Forest have settled with all such NAMZARIC ANDA filers, including all first filers on all the available dosage forms of NAMZARIC. Subject to those agreements, the earliest date on which any of these agreements grant a license to market a NAMZARIC ANDA filer’s generic version of NAMZARIC is January 1, 2025 (or earlier in certain circumstances). Alternatively, the NAMZARIC ANDA filers with the earliest date have the option to launch an authorized generic version of NAMZARIC beginning on January 1, 2026 instead of launching their own generic version of NAMZARIC on January 1, 2025. The Company and Forest intend to continue to enforce the patents associated with NAMZARIC.

On February 16, 2018, Osmotica Pharmaceutical US LLC and Vertical Pharmaceuticals LLC (“Osmotica”) filed an action against the Company in U.S. District Court for the state of Delaware, requesting a declaratory judgment that Osmotica’s newly-approved product OSMOLEX ER® (amantadine) extended release tablets do not infringe certain of the Company’s patents. On September 20, 2018, the Company filed its first amended answer including infringement counterclaims against Osmotica asserting Osmotica has infringed nine Company patents under 35 U.S.C. §§ 271(a), (b), and/or (c) and 35 U.S.C. § 271(e)(2)(A) and seeking various forms of relief, including damages, treble damages, injunctive relief, and an order pursuant to 35 U.S.C. § 271(e)(4)(A) that the effective date of any approval of Osmotica’s NDA for OSMOLEX ER be a date that is not earlier than the latest expiration date of the Company patents involved in the lawsuit. On December 1, 2020, the Company entered into a purchase agreement (the “Asset Purchase Agreement”) with Osmotica pursuant to which: both parties gave each other mutual releases and agreed to dismiss their respective claims relating to the patent litigation; the Company will acquire the global rights to OSMOLEX ER and existing inventory for $7.5 million and the assumption of certain liabilities; and Osmotica will not engage in the U.S. in the

development, manufacture, or sale of any product that is a generic version of any dosage strength of OSMOLEX ER for a period of

five years from the closing of the Asset Purchase Agreement. The Company also entered into a supply agreement pursuant to which Osmotica will be the sole manufacturer of OSMOLEX ER. The Asset Purchase Agreement subsequently closed on January 4, 2021. Management determined, in accordance with ASC 450, that as of December 31, 2020, a probable loss had occurred as a result of the litigation settlement. As a result, the Company recorded a patent litigation settlement liability of $5.0 million, based on management’s best estimate, which is included in other current liabilities on the consolidated balance sheets and reported as selling, general and administrative, net, in the consolidated statements of operations for the twelve months ended December 31, 2020.

On July 1, 2020, the Company received a letter dated June 29, 2020, notifying the Company that Zydus Worldwide DMCC (“Zydus Worldwide”) submitted to the FDA an ANDA for Amantadine Extended-Release Capsules, 68.5 mg and 137 mg that contains certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to the Company’s U.S. Patent Nos. 8,389,578; 8,741,343; 8,796,337; 8,889,740; 8,895,614; 8,895,615; 8,895,616; 8,895,617; 8,895,618; 9,867,791; 9,867,792; 9,867,793; 9,877,933; and 10,154,971, that these patents are invalid or will not be infringed by the manufacture, use or sale of Zydus Worldwide’s Amantadine Extended-Release Capsules, 68.5 mg and 137 mg. On August 13, 2020, the Company filed a lawsuit against Zydus Worldwide and Zydus Pharmaceuticals (USA), Inc. (collectively “Zydus”) alleging infringement of those patents and U.S. Patent No. 10,646,456 by Zydus in the United States District Court for the District of New Jersey. U.S. Patent No. 10,646,456 was not listed in the Orange Book at the time Zydus Worldwide filed its ANDA, but on or about September 3, 2020, the Company received a letter dated September 2, 2020, notifying the Company that Zydus Worldwide submitted a certifications pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) with respect to the Company’s U.S. Patent No. 10,646,456 with respect to its ANDA for Amantadine Extended-Release Capsules, 68.5 mg and 137 mg. On January 30, 2021, Adamas Pharma, LLC entered into a definitive agreement (the “Settlement Agreement”) with Zydus pursuant to which the parties agreed to end the lawsuit and dismiss it without prejudice, and the Court dismissed the lawsuit on February 3, 2021. Pursuant to the Settlement Agreement, Adamas Pharma, LLC grants Zydus a license to make, use, sell, offer to sell and import a generic version of GOCOVRI (amantadine) extended release capsules (including for any new indications approved under the GOCOVRI NDA), effective as of March 4, 2030, or earlier in certain circumstances typical for such agreements. The Settlement Agreement contains provisions that may accelerate the license date, including if unit sales of GOCOVRI for the 12-month period ending July 31, 2025 or any subsequent 12-month period decline by a specified percentage below GOCOVRI unit sales for the year ended December 31, 2019. The Company and Adamas Pharma LLC intend to continue to enforce the patents associated with GOCOVRI.

On April 1, 2019, the Company was served with a complaint filed in the United States District Court for the Northern District of California (Case No. 3:18-cv-03018-JCS) against the Company and several Allergan entities alleging violations of Federal and state false claims acts (“FCA”) in connection with the commercialization of NAMENDA XR and NAMZARIC by Allergan. The lawsuit is a qui tam complaint brought by a named individual, Zachary Silbersher, asserting rights of the Federal government and various state governments. The lawsuit was originally filed in May 2018 under seal, and the Company became aware of the lawsuit when it was served. The complaint alleges that patents held by Allergan and the Company covering NAMENDA XR and NAMZARIC were procured through fraud on the United States Patent and Trademark Office and that these patents were asserted against potential generic manufacturers of NAMENDA XR and NAMZARIC to prevent the generic manufacturers from entering the market, thereby wrongfully excluding generic competition resulting in an artificially high price being charged to government payors. The Company’s patents in question were licensed exclusively to Forest. The complaint includes a claim for damages of “potentially more than $2.5 billion dollars,” treble damages “under the federal FCA and most of the State FCAs,” and “statutory penalties that can be assessed for each false claim.” This action is ongoing. The federal and state governments have declined to intervene in this action. To the Company’s knowledge, the individual plaintiff is pursuing the lawsuit in his individual capacity. This case is currently stayed pending the Company and Allergan’s Petition for Permission to Appeal Under 28 U.S.C. § 1292(b) in the United States Court of Appeals for the Ninth Circuit (Case No. 21-80005), which was filed on February 8, 2021, and seeks permission for an interlocutory appeal of the District Court’s December 11, 2020 order denying the Company’s and Allergan’s motion to dismiss the complaint. The Company believes it has strong factual and legal defenses and intends to defend itself vigorously.

On May 13, 2019, a putative class action lawsuit alleging violations of the federal securities laws was filed by Plymouth County Contributory Retirement System against the Company and certain of the Company’s current and former directors and officers in California Superior Court for the County of Alameda (Case No. RG19018715). The lawsuit alleges violations of the Securities Act of 1933 by the Company and certain of the Company’s current and former directors and officers for allegedly making false statements and omissions in the registration statement and prospectus filed by the Company in connection with its January 24, 2018, secondary public offering of common stock. On October 29, 2020, Adamas signed a Memorandum of Understanding to settle this lawsuit for a payment of $7.5 million to eligible settlement class members in resolution of claims asserted against the Company, its officers, directors, and the other defendants. The settlement will be paid by the Company’s Director & Officer liability insurance. As a result of signing the Memorandum of Understanding and the potential liability becoming probable and estimable, the Company has recorded a litigation settlement liability of $7.5 million, which is included in accrued liabilities on the consolidated balance sheets. Additionally, the Company has recorded an insurance litigation recovery of $7.5 million within prepaid expenses and other current assets on the consolidated balance sheets, which represents the estimated insurance proceeds agreed with the Company’s insurance carrier in excess of the Company’s retention. The Company and the other defendants continue to deny each of the plaintiff’s claims and all liability. The Company has agreed to the settlement to resolve the disputes, avoid the costs and risks of further litigation, and avoid further distractions to management. This settlement remains subject to final documentation and approval by the court. A final non-appealable closure of this court action is expected in mid-2021.

On December 10, 2019, another putative class action lawsuit alleging violations of the federal securities laws was filed by Ali Zaidi against the Company and certain of the Company’s current and former directors and officers in federal court in the Northern District of California (Case No. 4:19-cv-08051). This lawsuit alleges violations of the Securities Exchange Act of 1934 by the Company and certain of the Company’s current and former officers. On March 16, 2020, a shareholder derivative lawsuit was filed by Patrick Van Camp in federal court in the Northern District of California (Case No. 4:20-cv-01815) naming the Company and certain of the Company’s current and former directors and officers as defendants. This lawsuit alleges breaches of fiduciary duty and violations of the Securities Exchange Act of 1934 by certain of the Company’s current and former directors and officers. The Company is named as a nominal defendant only. On April 6, 2020, another, virtually identical, shareholder derivative lawsuit was filed by James Druzbik in federal court in the Northern District of California (Case No. 4:20-cv-02320) naming the Company and certain of the Company’s current and former directors and officers as defendants. This lawsuit contains the same allegations, claims, and defendants as the first derivative action. The Company is named as a nominal defendant only. Other similar cases may be filed in the future. In all of these actions, Plaintiffs seek unspecified monetary damages and other relief. These actions are ongoing. The Company believes it has strong factual and legal defenses to all actions and intends to defend itself vigorously.

From time to time, the Company may be party to legal proceedings, investigations, and claims in the ordinary course of its business. Other than the matters described above, the Company is not currently party to any material legal proceedings.

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LONG-TERM DEBT

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

Royalty-Backed Loan Agreement

In May 2017, the Company, through a new wholly-owned subsidiary, Adamas Pharma, LLC, entered into a Royalty-Backed Loan with HCR, whereby the Company initially borrowed $35 million, followed by an additional $65 million received in the fourth quarter 2017 upon FDA’s recognition in the Orange Book of seven-year orphan drug exclusivity, which GOCOVRI earned upon approval on August 24, 2017. Principal and interest will be payable quarterly from the proceeds of a 12.5% royalty on U.S. net sales of GOCOVRI and up to $15 million of the Company’s annual royalties from Allergan on U.S. net sales of NAMZARIC starting in May 2020, pursuant to the Company’s license agreement with Allergan. The royalty rate on net sales of GOCOVRI will drop to 6.25% after the principal amount of the loan has been repaid in full, until the Company has made total payments of 200% of the funded amounts. The Company may elect to voluntarily prepay the loan at any time, or may be required to prepay subject to specified prepayment trigger events as described below, in which case the amount due will be 200% of the funded amounts, less total payments made to date. Royalty rates are subject to increase to 17.5% and 22.5% if total principal and interest payments have not reached minimum specified levels at measurement dates on December 2021 and December 2022, respectively. Under the

terms of the loan, HCR has recourse to Adamas Pharma, LLC, not the Company. The loan agreement matures in December 2026 but as the repayment of the loan amount is contingent upon the sales volumes of GOCOVRI and royalties from Allergan, the repayment term may be shortened depending on the actual sales of GOCOVRI and actual royalties received from Allergan.

The loans bear interest at an annual rate of 11% on the outstanding principal amount and includes an interest-only period until the interest payment date following the ninth full calendar quarter after the $65 million additional loan received in the fourth quarter 2017. To the extent that royalties were insufficient to pay interest in full during the first nine quarters of the loan, any unpaid portion of the quarterly interest payment was added to the principal amount of the loans. This payment-in-kind period ended in the first quarter of 2020.

In connection with the Royalty-Backed Loan, in 2017 the Company paid HCR a lender expense amount of $0.4 million and incurred additional debt issuance costs totaling $0.8 million. The lender expense and additional debt issuance costs have been recorded as a debt discount and are being amortized and recorded as interest expense over the estimated term of the loan using the effective interest method. The Company recorded interest expense, including amortization of the debt discount, related to the Royalty-Backed Loan, of $14.0 million and $15.0 million for the twelve months ended December 31, 2020 and 2019, respectively. Interest expense over the life of the Royalty-Backed Loan includes an annual interest rate of 11% on the outstanding principal, a royalty rate of 6.25% on net sales of GOCOVRI after the principal amount is paid, and amortization of the debt discount. The effective interest rate as of December 31, 2020 on the amounts borrowed under the Royalty-Backed Loan, including the amortization of the debt discount, was 12.8%.

The assumptions used in determining the expected repayment term of the loan and amortization period of the debt discount require that the Company make estimates that could impact the short and long-term classification of these costs, as well as the period over which these costs will be amortized and the effective interest rate.

The Company may be required to make mandatory prepayments of the borrowings under the Royalty-Backed Loan upon the occurrence of specified prepayment trigger events, including: (1) the occurrence of any event of default or (2) the occurrence of a change in control. Upon the prepayment of all or any of the outstanding principal balance, the Company shall pay, in addition to such prepayment, a prepayment premium. As HCR, as the holder of the loans, may exercise the option to require prepayment by the Company, the prepayment premium is considered to be an embedded derivative which is required to be bifurcated from its host contract and accounted for as a separate financial instrument. The valuation of the embedded derivative is described further in Note 3 - Fair Value Measurements.

Payment obligations under the Royalty-Backed Loan are as follows (in thousands):

	December 31,
	2020		2019
Total repayment obligation	$	200,000	$	200,000
Less: Interest to be accreted in future periods	(49,230)		(63,217)
Less: Payments made	(20,806)		(9,068)
Carrying value of loans payable	$	129,964	$	127,715
Less: Current portion of long-term debt	(3,657)		(2,041)
Non-current portion of long-term debt	$	126,307	$	125,674

The estimated fair value of the long-term debt, as measured using Level 3 inputs, approximates $109.4 million as of December 31, 2020. The estimated fair value was calculated in the same methodology as the valuation of the embedded derivative as described further in Note 3 - Fair Value Measurements.

There are no contractual minimum principal payments due until the loan matures in December 2026 as the repayment of the loan amount is contingent upon the sales volumes of GOCOVRI and royalties from Allergan on U.S. net sales of NAMZARIC.

On December 1, 2020, Adamas Pharma, LLC entered into an agreement with HCR to amend certain key terms of the Royalty-Backed Loan to be effective upon the closing of the Company’s Asset Purchase Agreement with Osmotica. The Asset Purchase Agreement subsequently closed on January 4, 2021, and is described further in Note 9 -

Commitments and Contingencies. For further discussion of the key terms amended under the Royalty-Backed Loan, see Note 17 - Subsequent Events.

Paycheck Protection Program

On April 15, 2020, the Company received proceeds from a loan in the amount of $2.7 million (the “PPP Loan”) from JPMorgan Chase Bank, N.A. (the “Lender”), pursuant to the Small Business Association (“SBA”) Paycheck Protection Program (or “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). At the time the Company applied for the PPP loan, the Company believed it qualified to receive the funds pursuant to the then published qualification requirements. On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new guidance regarding qualification requirements for public companies. Based on the Company’s assessment of the new guidance, on April 29, 2020, the Company repaid the principal and interest on the PPP loan.

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CONVERTIBLE PREFERRED STOCK	12 Months Ended
	Dec. 31, 2020
Temporary Equity Disclosure [Abstract]
CONVERTIBLE PREFERRED STOCK	CONVERTIBLE PREFERRED STOCKThe Company’s amended and restated certificate of incorporation filed on April 15, 2014, authorizes 5,000,000 shares of preferred stock, of which there were no shares outstanding as of December 31, 2020 and 2019.

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STOCKHOLDERS’ EQUITY

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

STOCKHOLDERS’ EQUITY

STOCKHOLDERS’ EQUITY

Common Stock

The amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of common stock. Common stockholders are entitled to dividends as and when declared by the board of directors, subject to the rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date. Each share of common stock is entitled to one vote.

Sales Agreement

In November 2019, the Company entered into a sales agreement (“Sales Agreement”) with Cowen and Company, LLC (“Cowen”), as sales agent, pursuant to which the Company may, from time to time, issue and sell at its option, shares of the Company’s common stock for an aggregate offering price of up to $50.0 million under an at-the-market offering (“ATM Offering”). Sales of the common stock, if any, will be made pursuant to a shelf registration statement that was declared effective by the Securities and Exchange Commission (“SEC”) on December 2, 2019. Cowen is acting as sole sales agent for any sales made under the Sales Agreement and the Company will pay Cowen a commission of up to 3% of the gross proceeds. The Company’s common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices may vary. The Company is not obligated to make any sales of shares of common stock under the Sales Agreement. Unless otherwise terminated earlier, the Sales Agreement continues until all shares available under the Sales Agreement have been sold. No shares were sold under the Sales Agreement during the fiscal year ended December 31, 2019. During the fiscal year ended December 31, 2020, 217,403 shares were sold at an average price of $4.94, for net proceeds of $1.0 million.

Shares Reserved for Future Issuance

Shares of the Company’s common stock reserved for future issuance are as follows:

	December 31,
	2020	2019
Common stock awards issued and outstanding	7,172,029	6,874,633
Authorized for future issuance under 2014 Equity Incentive Plan	3,518,414	2,376,613
Authorized for future issuance under 2016 Inducement Plan	469,419	236,269
Employee stock purchase plan	1,018,060	926,943
Total	12,177,922	10,414,458

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STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock Compensation Plans

In October 2002, the Company established its 2002 Employee, Director, and Consultant Stock Plan and in December 2007, the Company established its 2007 Stock Plan. No further grants were then made under the 2002 Plan.

In February 2014, the Company’s board of directors adopted, and in March 2014 the Company’s stockholders approved, the 2014 Equity Incentive Plan (the “2014 Plan”), which became effective on the completion of the IPO. No further grants were then made under the 2007 Plan. Under the 2014 Plan, 1,993,394 shares of the Company’s common stock were made available for issuance which included all shares that, as of the effective time, were reserved for issuance pursuant to the 2007 Plan, and is subject to further increase for shares that were subject to outstanding options under the 2007 Plan and the 2002 Plan as of the effective time that thereafter expire, terminate, or otherwise are forfeited or reacquired. The number of shares of the Company’s common stock reserved for issuance pursuant to the 2014 Plan will automatically increase on the first day of each fiscal year for a period of up to ten years, commencing on the first day of the fiscal year following 2014, in an amount equal to 4% of the total number of shares of the Company’s capital stock outstanding on the last day of the preceding fiscal year, or a lesser number of shares as determined by the Company’s board of directors. On January 1, 2020, the common stock available for issuance under the 2014 Plan increased by 1,118,591 shares. As of December 31, 2020, the number of shares available for issuance under the 2014 Plan was 3,518,414.

Options granted under the 2014 Stock Plan may have terms of up to ten years. All options issued to date have had a ten year life. The exercise price of an ISO shall not be less than 100% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. The exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, respectively, as determined by the board of directors. The exercise price of a NSO shall not be less than the par value per share of common stock. Options and restricted stock units granted generally vest over four years. Certain grants have other vesting periods approved by the Company’s Board of Directors or an authorized committee.

In March 2016, the Company’s board of directors approved the 2016 Inducement Plan (the “Inducement Plan”) under which 450,000 shares of the Company’s common stock were made available for issuance. An amendment to the Inducement Plan was approved to increase the number of shares available for issuance by an additional 450,000 shares in each of January 2017, November 2017, March 2019, and February 2020, and an additional 600,000 shares in October 2020, for a total of 2,400,000 shares, resulting in a total of 2,850,000 shares of common stock issuable under the Inducement Plan. As of December 31, 2020, the number of shares available for issuance under the Inducement Plan was 469,419. Options granted under the Inducement Plan may have terms of up to ten years. All options issued to date have had a ten year life. Consistent with the 2014 Plan, options and restricted stock units granted generally vest over four years. The Inducement Plan was adopted by the board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

Stock Option Activity

Stock option activity under all of the Company’s stock compensation plans is summarized as follows:

	Outstanding Options			Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
	Number of Shares	Weighted Average Exercise Price
Stock Options
Balances, December 31, 2019	5,516,684	$	12.06
Options granted	1,562,148	3.71
Options exercised	(237,425)	0.74
Options forfeited	(558,612)	12.48
Options expired	(693,580)	17.98
Balances, December 31, 2020	5,589,215	$	9.43	5.56	$	2,806
Vested and expected to vest, December 31, 2020	5,369,025	$	9.57	5.43	$	2,700
Exercisable, December 31, 2020	3,387,312	$	11.69	3.53	$	1,740

The aggregate intrinsic value of options outstanding, vested and expected to vest, and exercisable were calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of December 31, 2020 of $4.33. The intrinsic value of options exercised, calculated as the difference between the exercise price and the fair value of the Company’s common stock on the date of exercise, was approximately $0.9 million and $0.9 million for the years ended December 31, 2020 and 2019, respectively.

During the years ended December 31, 2020 and 2019, the Company granted stock options to employees to purchase 1,562,148 and 1,721,508 shares of common stock, respectively, with a weighted-average grant date fair value of $2.19 and $4.01, respectively. As of December 31, 2020, there was total unrecognized compensation cost related to unvested options of approximately $6.6 million. This cost is expected to be recognized over a weighted average remaining vesting period of 2.7 years. The total fair value of employee stock options vested for the years ended December 31, 2020 and 2019 was $4.6 million and $9.6 million, respectively.

Restricted Stock Unit Activity

Restricted stock unit activity under all of the Company’s stock compensation plans is summarized as follows:

	Outstanding Units
		Weighted-Average Grant Date Fair Value
Restricted Stock Units	Number of Shares
Unvested, December 31, 2019	1,357,949	$	7.79
Granted	928,998	3.29
Vested	(258,819)	9.46
Forfeited	(445,314)	7.50
Unvested, December 31, 2020	1,582,814	$	4.95

The aggregate intrinsic value of RSUs outstanding on December 31, 2020 was $6.9 million based on the fair value of the Company’s common stock on that date. The aggregate intrinsic value of RSUs vested for the years ended December 31, 2020 and 2019 was $0.9 million and $1.0 million, respectively. As of December 31, 2020, there was total unrecognized compensation cost related to unvested RSUs of approximately $4.7 million. This cost is expected to be recognized over a weighted average remaining vesting period of 2.2 years.

Employee Stock Purchase Plan

In February 2014, the Company’s board of directors adopted and, in March 2014, the Company’s stockholders approved, the 2014 Employee Stock Purchase Plan (the “ESPP”), which became effective on the completion of the Company’s IPO. The ESPP authorized the issuance of 262,762 shares. Under the ESPP, employees, subject to certain restrictions, may purchase shares of common stock at 85% of the fair market value at either the beginning of the offering

period or the date of purchase, whichever is less. Purchases are limited to the lesser of 15% of each employee’s eligible annual compensation or $25,000. Through the end of 2020, the Company has issued a total of 612,357 shares under the ESPP. The number of shares available for future issuance under the plan were 1,018,060 at December 31, 2020. Beginning January 1, 2015 and continuing through and including January 1, 2024, the amount of common stock reserved for issuance under the ESPP will increase annually on that date by the lesser of (i) one percent (1%) of the total number of shares of common stock outstanding on such December 31, (ii) 520,000 shares of common stock, or (iii) a number of shares as determined by the board of directors prior to the beginning of each year, which shall be the lesser of (i) or (ii) above. On January 1, 2020, the common stock available for issuance under the ESPP increased by 279,648 shares.

Stock-Based Compensation Expense

The following table reflects stock-based compensation expense recognized for the years ended December 31, 2020 and 2019 (in thousands):

	Years Ended December 31,
	2020		2019
Research and development	$	385	$	1,732
Selling, general and administrative	6,046		11,120
Total stock-based compensation expense	$	6,431	$	12,852

Stock-based compensation of $0.3 million and $0.2 million was capitalized into inventory for the twelve months ended December 31, 2020 and 2019. Stock-based compensation capitalized into inventory is recognized as cost of sales when the related product is sold.

The Company’s method of valuation for share-based awards is based on the Black-Scholes model. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. A description of the assumptions follows:

•The expected stock price volatility assumption was determined by examining the historical volatilities of a group of industry peers, as well as taking into consideration the Company’s own historical volatility since its IPO in 2014. Beginning in 2021, the Company will calculate expected volatility based solely on the historical volatility of its own common stock as it will have a sufficient amount of historical information.

•The risk-free interest rate is based on the U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

•The expected term of the options granted represents the average period the stock options are expected to remain outstanding. The Company has elected to use the “simplified method” for estimating the expected term, which is calculated as the mid-point between the vesting period and the contractual term of the options.

•The expected dividend yield assumption was based on the fact that the Company has never paid cash dividends and currently has no intention to pay cash dividends.

Stock-based compensation expense in the consolidated statements of operations is based on awards ultimately expected to vest and is reduced for estimated forfeitures, based on historical experience.

The Company estimated the fair value of employee stock options and ESPP shares on the date of grant using the Black-Scholes model with the following weighted-average assumptions:

	Years Ended December 31,
	2020	2019
Stock Options
Expected price volatility	65% - 66%	65% - 69%
Risk-free interest rate	0.37% - 1.75%	1.52% - 2.58%
Expected term (in years)	5.50 - 6.25	5.50 - 6.25
Dividend yield	—	—
Employee Stock Purchase Plan
Expected price volatility	67% - 80%	53% - 56%
Risk-free interest rate	0.10% - 0.18%	1.60% - 2.35%
Expected term (in years)	0.50	0.50
Dividend yield	—	—

Stock-based compensation expense related to employee stock options for the years ended December 31, 2020 and 2019 was $3.2 million and $9.4 million, respectively. Stock-based compensation expense related to the ESPP plan for the years ended December 31, 2020 and 2019 was $0.2 million and $0.4 million, respectively. Stock-based compensation expense related to restricted stock units was $2.9 million and $3.1 million for the years ended December 31, 2020 and 2019, respectively.

Included in stock-based compensation expense for the year ended 2019 was expense of approximately $2.2 million recognized as a result of the modification of certain stock options and restricted stock units associated with the termination of employment in September 2019 of the Company’s Chief Executive Officer and notification of retirement in August 2019 of the Company’s Chief Financial Officer.

Non-Employee Stock-Based Compensation

During both the years ended 2020 and 2019, the Company granted no options to purchase common stock and no restricted stock units to consultants and recorded no stock compensation expense.

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INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Loss before benefit for income tax is summarized as follows (in thousands):

	Years Ended December 31,
	2020		2019
United States	$	(57,378)	$	(105,186)
International	(25)		—
Total	$	(57,403)	$	(105,186)

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21% to pretax loss from operations as a result of the following:

	December 31,
	2020		2019
Statutory federal income tax rate	$	(12,054)	$	(22,079)
State income taxes, net of federal tax benefits	(4,390)		(8,473)
Tax credits	(435)		(1,398)
Stock compensation	2,646		2,648
Nondeductible compensation	164		278
Other	426		198
Change in valuation allowance	13,643		28,826
Income tax provision	$	—	$	—

Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2020		2019
Deferred tax assets
Net operating loss carryforwards	$	105,264	$	99,449
Research and development tax credits	20,609		20,174
Accruals and reserves	9,780		7,004
Stock compensation	8,017		9,291
Depreciation and amortization	1,062		1,108
Lease liabilities	2,380		2,889
Other	6,014		—
Gross deferred tax assets	153,126		139,915
Less: Valuation allowance	(151,219)		(137,576)
Net deferred tax assets	1,907		2,339
Deferred tax liabilities
Right of use assets	(1,907)		(2,339)
Net deferred tax liabilities	(1,907)		(2,339)
Net deferred taxes	$	—	$	—

The deferred income tax assets have been fully offset by a valuation allowance, as realization is dependent on future earnings, if any, the timing and amount of which are uncertain. The net change in the valuation allowance was $13.6 million and $28.8 million for the years ended December 31, 2020 and 2019, respectively.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realization of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood, and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. The Tax Act repealed corporate alternative minimum tax (“AMT”) for tax years beginning after December 31, 2017, and provided that any existing AMT credit carryovers were refundable beginning in 2018 through 2022. The Company has received the refund in full relating to its AMT credit carryover as of December 31, 2020. The Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying balance sheets.

As of December 31, 2020, the Company had federal net operating loss carryforwards of approximately $375.1 million available to reduce future taxable income and state net operating loss carryforwards of approximately $345.2 million. The federal net operating loss carryforward begins expiring in 2024, and state net operating loss carryforward begins expiring in 2028.

The Company has federal research and development tax credit carryforwards of approximately $6.9 million. If not utilized, the carryforwards will begin expiring in 2023. The Company has state research and development credit carryforwards of approximately $4.6 million which do not expire. The Company also has orphan drug credit carryforwards of $14.4 million which begin to expire in 2035.

Under federal and similar state tax statutes, changes in the Company’s ownership may limit its ability to use its available net operating loss and tax credit carryforwards. The annual limitation, as a result of a change of control, may result in the expiration of net operating losses and credits before utilization.

The Company’s ability to use its remaining net operating loss and tax credit carryforwards may be further limited if the Company experiences a Section 382 ownership change in connection with future changes in its stock ownership. The Company has completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards through April 2018 and found that there is no forfeiture of the Company’s attributes.

Uncertain Tax Positions

The total amounts of unrecognized tax benefits for the years ended December 31, 2020 and 2019 were $5.2 million and $5.1 million, respectively. If recognized, none of the unrecognized tax benefits would affect the effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	December 31,
	2020		2019
Balance at the beginning of the year	$	5,065	$	4,697
Additions based on current period tax positions	119		368
Balance at the end of the year	$	5,184	$	5,065

The Company’s policy is to account for interest and penalties as income tax expense. The Company accrued no interest related to unrecognized tax benefits during the years ended December 31, 2020 and 2019.

The Company files income tax returns in the U.S. federal jurisdiction, Pennsylvania, California, other state jurisdictions, and India. The Company is subject to U.S. federal income tax examination for the calendar years ending 2003 through 2020 due to net operating losses that have been carried forward for tax purposes. Additionally, the Company is subject to state income tax examinations for the 2003 through 2020 calendar years due to net operating losses that are being carried forward for tax purposes. The Company is subject to audit by the Indian tax authorities from 2014 onward. The Company is not currently under audit in any major tax jurisdiction.

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NET LOSS PER SHARE

12 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

NET LOSS PER SHARE

NET LOSS PER SHARE

For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. The following table presents the calculation of the basic and diluted net loss per share (in thousands, except per share data):

	Years Ended December 31,
	2020		2019
Net loss attributable to common stockholders, basic and diluted	$	(57,403)	$	(105,186)
Weighted average common shares used in calculating net loss per common share, basic and diluted	28,305		27,677
Net loss per share attributable to common stockholders, basic and diluted	$	(2.03)	$	(3.80)

The following total outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented, because including them would have been anti-dilutive (in thousands):

	December 31,
	2020	2019
Options to purchase common stock	5,589	5,517
Restricted stock units	1,583	1,358
Total	7,172	6,875

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On January 4, 2021, the Company closed its Asset Purchase Agreement with Osmotica for the acquisition of OSMOLEX ER, as described further in Note 9 - Commitments and Contingencies. At closing, the Company paid $7.3 million, including a $7.5 million base purchase price less $0.2 million for the assumption of certain liabilities.

On January 4, 2021, upon the closing of the Asset Purchase Agreement with Osmotica, the Company’s December 1, 2020 agreement to amend certain key terms of its Royalty-Backed Loan with HCR also became effective. Pursuant to the amendment, upon its effectiveness of January 4, 2021, the Royalty-Backed Loan was amended, inter alia, to: (i) provide for repayment from a royalty on OSMOLEX ER on the same terms as, and in addition to, the royalty for GOCOVRI; (ii) eliminate the potential royalty rate step-up to 17.5%; (iii) revise the prepayment provisions after a change of control provision to provide that the full obligation to HCR is fully satisfied by making a prepayment sufficient to bring the cumulative payments to HCR to $175 million, if such prepayment is made on or prior to December 31, 2022, or $195 million if made thereafter; (iv) extend the maturity date to March 31, 2027; and (v) add a covenant requiring the Company to maintain minimum cash, cash equivalents and marketable securities of at least $25 million.

Subsequent to December 31, 2020, and through February 16, 2021, the Company issued an aggregate of 1,335,896 shares of common stock under its 2019 Sales Agreement, at an average price of $5.57, for net proceeds of approximately $7.2 million.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Use of Estimates

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition and variable consideration, lease assets and liabilities, clinical trial accruals, fair value of assets and liabilities including short-term and long-term classification, embedded derivatives, income taxes, inventory, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results may differ from those estimates.

Risks and Uncertainties

Risks and Uncertainties

The outbreak of the novel Coronavirus (“COVID-19”), which is understood to have begun in December 2019, continues to grow both within the U.S. and globally. The World Health Organization has declared the outbreak of COVID-19 to be a pandemic, and the U.S. federal government has declared it a national emergency. The Company is subject to risks and uncertainties as a result of the outbreak of COVID-19. Despite disruptions to the Company’s business operations, the COVID-19 pandemic did not significantly impact GOCOVRI prescription refill rates for the year ended December 31, 2020, and thus far management has observed no disruptions to its inventory on hand or planned manufacturing schedule. However, new prescription rates have been impacted due to several factors, including: a fluid environment in which office practices are changing frequently including many healthcare providers have temporarily closed their offices or are restricting patient visits; patients are postponing visits to healthcare provider facilities; and the sales force has moved to a mix of virtual and live interactions with healthcare providers, adapting to the local environment. While management believes this initial decline and continued impact on new prescriptions to be temporary, the duration and severity is dependent on future developments, including new information that may emerge concerning the actions taken to contain or prevent further spread, all of which are highly uncertain and cannot be predicted with confidence.

As of the date of issuance of these consolidated financial statements, due to the numerous uncertainties surrounding the COVID-19 pandemic, the Company is unable to predict the extent to which the COVID-19 pandemic may materially adversely affect the Company’s future business, financial results, liquidity and cash flows.

Liquidity

Liquidity

During the last three fiscal years, the Company has funded its operations primarily through sales of GOCOVRI, through sales of its common stock, and to a lesser extent through royalties received on net sales of NAMZARIC. The Company made GOCOVRI available for physician and patient use in the fourth quarter of 2017, with a full commercial launch in January 2018. Prior to the generation of revenue from GOCOVRI, the Company had not generated any commercial revenue from the sale of its products. In January 2018, the Company completed a follow-on public offering of its common stock from which proceeds raised were approximately $134.3 million, net of underwriting discounts, commissions, and offering-related transaction costs. In November 2019, the Company entered into a sales agreement with Cowen and Company, LLC, pursuant to which it may, from time to time, issue and sell shares of common stock having an aggregate offering value of up to $50.0 million. As of December 31, 2020, the Company had issued 217,403 shares of common stock and raised net proceeds of $1.0 million under the sales agreement.

As of December 31, 2020, the Company had $83.4 million of cash, cash equivalents, and investments, which management believes will be sufficient to fund its projected operating requirements for at least 12 months from the issuance of these consolidated financial statements. However, it is possible that the Company will not achieve the progress it expects, because revenues from GOCOVRI may be less than anticipated, especially in light of the current COVID-19 pandemic.

Inventory

Inventory

Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method. Inventory consists of raw materials, work-in-process, and GOCOVRI finished goods. Raw materials and work-in-process that may be utilized for both commercial and clinical programs are identical and, as a result, the inventory has an “alternative future use” as defined in authoritative guidance and are included in inventory. Amounts in inventory associated with clinical development programs are charged to research and development expense when the product enters the research and development process and can no longer be used for commercial purposes and, therefore, does not have “alternative future use”. Costs include active pharmaceutical ingredient (API), third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs. If the Company identifies excess, obsolete or unsalable product, the Company will write down its inventory to net realizable value in the period it is identified.

The Company begins capitalizing costs as inventory when the product candidate receives regulatory approval. Prior to regulatory approval, inventory costs related to product candidates are recorded as research and development expense. The Company received FDA approval for GOCOVRI on August 24, 2017, and began capitalizing inventory manufactured at the FDA approved location, after FDA approval.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities, when purchased, of less than three months.

Investments

Investments

The Company classifies its investments as “available-for-sale.” In general, these investments are free of trading restrictions. The Company carries these investments at fair value, based on quoted market prices or other readily available market information. Quoted market prices for U.S. government and corporate bonds include both principal and accrued interest components. Unrealized gains and losses are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in its consolidated balance sheets. Gains and losses are recognized when realized as gains or losses in interest and other income, net, in the consolidated statements of operations. When the Company determines that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. The Company considers all marketable debt securities with a maturity of less than one year to be short-term investments, with all others considered to be long-term investments.

All of the Company’s available-for-sale securities are subject to a periodic impairment review. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. Factors considered in determining whether a loss is temporary include the length of time and extent to which the investments’ fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, extent of the loss related to credit of the issuer, the expected cash flows from the security, its intent to sell or hold the security, and whether or not the Company will be required to sell the security before the recovery of its amortized cost.

Consolidation

Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Segments

SegmentsIn accordance with ASC 280-10-50, Segment Reporting, operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company operates in one reportable segment: the development and commercialization of therapeutics targeting chronic disorders of the central nervous system.

Revenue Recognition and Cost of Product Sales

Revenue Recognition

Effective January 1, 2018, the Company adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, using the full retrospective transition method. The Company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that the Company would have recognized is one year or less.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct.

Product sales

The Company’s product sales consist of U.S. sales of GOCOVRI. GOCOVRI was approved by the FDA on August 24, 2017, and the Company commenced shipments of GOCOVRI to a specialty pharmacy during October 2017. The Company sells its products principally to a specialty pharmacy and certain specialty distributors (each a “Customer” or collectively its “Customers”). These agreements with its Customers provide for transfer of title to the product at the time the product has been delivered to and accepted by the Customer. The Customer subsequently dispenses product directly to a patient. In addition, except for limited circumstances, the Customer has no right of product return to the Company.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer. The Company has determined that the delivery of its product to Customers constitutes a single performance obligation as there are no other promises to deliver goods or services. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. The Company has assessed the existence of a significant financing component in the agreements with its Customers. The trade payment terms with its Customers do not exceed one year and therefore the Company has elected to apply the practical expedient and no amount of consideration has been allocated as a financing component.

The Company considers the effects of items which can decrease the transaction price such as variable consideration and consideration payable to a Customer or payer. Amounts related to such items are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. The amount of variable consideration may be constrained and is included in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Revenue from product sales is recorded after considering the impact of the following variable consideration amounts at the time of revenue recognition:

Distribution Fees: Distribution fees include fees paid to the Company’s Customers for data and prompt payment discounts. Distribution fees are recorded based on contractual terms.

Rebates: Rebates include discounts under the Medicaid Drug Rebate Program, TRICARE Retail Pharmacy Refunds Program (TRICARE), and Managed Care contracts. Rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or statutory requirements with benefit providers. Rebates are estimated based on statutory discount rates and expected utilization. The expected utilization of rebates is estimated based on data received from the specialty pharmacy and specialty distributor. The Company uses the expected-value method for estimating rebates and estimates are adjusted quarterly to reflect actual experience.

Chargebacks: Chargebacks are discounts that occur when Healthcare Providers purchase directly from a Customer. Healthcare Providers, which currently consist of Public Health Service institutions, non-profit clinics, government entities, group purchasing organizations, and health maintenance organizations, generally purchase the product at a discounted price. The Customer, in turn, charges back to the Company the difference between the price initially paid by the Customer and the discounted price paid by the Healthcare Providers to the Customer. The allowance for chargebacks is based on an estimate of sales through to Healthcare Providers from the Customer.

Product Returns: Consistent with industry practice, the Company offers limited product return rights and generally allows for the return of product that is damaged or defective, and within a few months prior to and up to a few months after the product expiration date. The Company does not allow product returns for product that has been dispensed to a patient. The Company considers several factors in the estimation of potential product returns, including expiration dates of the product shipped, the limited product return rights, third-party data in monitoring channel inventory levels, shelf life of the product, prescription trends, and other relevant factors. Product returns have been insignificant to date and are expected to be immaterial in the future.

Medicare Part D Coverage Gap: Medicare Part D coverage gap is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States, which mandates manufacturers to fund a portion of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. Funding of the coverage gap is generally invoiced and paid in arrears. The Medicare Part D coverage gap is estimated using the expected-value method based on an amount expected to be incurred for the current quarter’s activity based on expected utilization, plus an accrual balance for known prior quarters and is adjusted quarterly based on actual experience. The expected utilization of the Medicare Part D coverage gap is estimated based on data received from the specialty pharmacy and historical utilization.

Co-payment Assistance: The Company provides co-payment assistance to patients who have commercial insurance and meet certain eligibility requirements. Co-payment assistance is estimated using the expected-value method based on historical program participation and estimates of program redemption using data provided by third-party administrators.

Each of the above items are variable consideration, are recorded at the time of revenue recognition, and require significant estimates, judgment and information obtained from external sources. The Company determined a significant reversal of revenue would not occur in a future period for the estimates of variable consideration detailed above and, therefore, the transaction price was not reduced during the periods presented. If management’s estimates differ from actual results, the Company will record adjustments that would affect product sales in the period of adjustment.

License agreement revenue

The Company generates revenue from collaboration and license agreements for the development and commercialization of products. Collaboration and license agreements may include non-refundable upfront license fees,

partial or complete reimbursement of research and development costs, contingent consideration milestone payments based on the achievement of defined objectives, and royalties on sales of commercialized products. Such agreements may contain various promises to customers which are generally capable of being distinct and accounted for as separate performance obligations. The Company’s duties and responsibilities under the collaboration and license agreements typically include the license or transfer of intellectual property rights, obligations to provide research and development services and related materials, and obligations to participate on certain development and/or commercialization committees with the partners. These promises may be regarded as separate performance obligations, or bundled as a single performance obligation, depending upon the nature of the arrangement.

For agreements with multiple performance obligations, the Company allocates estimated revenue to each performance obligation at contract inception based on the estimated relative standalone selling price (SSP) of each performance obligation in the arrangement. Revenue allocated to each performance obligation is then recognized when the entity satisfies the performance obligation by transferring control of the promised good or service to the customer.

Licenses for Intellectual Property (IP): If the Company determines that the license for IP is distinct from the other performance obligations identified in the arrangement, revenue from non-refundable, up-front fees allocated to the license is recognized when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, judgment is applied to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: For contracts with customers that contain payments that are contingent upon achievement of a substantive milestone, at the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative SSP basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment.

Reimbursement of Research and Development Costs: Amounts related to research and development funding and full-time equivalent employees assigned to the license agreement are recognized over time as the related services or activities are performed, in accordance with the contract terms.

Royalties: For arrangements that include sales-based royalties, and the licensed IP is deemed to be the predominant item to which the royalties relate, the Company recognizes the related royalty revenue at the later of (i) when the related sales occur, or (ii) the satisfaction or partial satisfaction of the performance obligation to which the royalty relates. Sales-based royalties are recorded based on estimated quarterly net sales of NAMZARIC. Differences between actual results and estimated amounts are adjusted in the period in which they become known, which typically follows the quarterly period in which the estimate is made. To date, actual royalties received have not differed materially from estimates. Receivables related to NAMZARIC royalties are recorded in prepaid expenses and other current assets on the consolidated balance sheets.

Cost of Product Sales

Cost of product sales consists primarily of direct and indirect costs related to the manufacturing of GOCOVRI products sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs. Cost of product sales may also include period costs related to certain inventory manufacturing services, inventory adjustment charges, as well as manufacturing variances. In connection with the FDA approval of GOCOVRI on August 24, 2017, the Company began capitalizing inventory manufactured at the FDA approved location starting in August

2017. Prior to receiving regulatory approval for GOCOVRI from the FDA, the Company expensed all costs incurred in the manufacture of GOCOVRI as research and development.

Concentration of Risk

Concentration of Risk

Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents and short and long-term investments. Cash, cash equivalents, and investments are deposited with financial institutions or invested in security issuers that management believes are credit worthy. Deposits may, at times, exceed the amount of insurance provided on such deposits. Risks associated with cash, cash equivalents, and investments are mitigated by the Company’s investment policy which defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of its investments to preserve principal and maintain liquidity.

Major Customers    

The Company has entered into distribution agreements with a specialty pharmacy and certain limited specialty distributors. For the years ended December 31, 2020 and 2019, the Company’s largest customer represented approximately 95% and 98% of the Company’s product revenue, respectively, and approximately 94% and 96% of the Company’s accounts receivable balance at December 31, 2020 and 2019, respectively.

Major Suppliers

The Company does not currently have any of its own manufacturing facilities, and therefore it depends on an outsourced manufacturing strategy for the production of GOCOVRI for commercial use and for the production of its product candidates for clinical trials. The Company has contracts in place with one third-party manufacturer that is approved for the commercial production of GOCOVRI and two third-party suppliers that are approved for GOCOVRI’s active pharmaceutical ingredient. Although there are potential sources of supply other than the Company’s existing manufacturers and suppliers, any new supplier would be required to qualify under applicable regulatory requirements.

Accounts Receivable, net

Accounts Receivable, netThe Company’s accounts receivable balance consists of amounts due from sales of GOCOVRI. Receivables from sales of GOCOVRI are recorded net of allowances which generally include chargebacks, doubtful accounts, and discounts. The Company’s estimate of the allowance for doubtful accounts is based on an evaluation of the aging of its receivables. Accounts receivable balances are written off against the allowance when it is probable that the receivable will not be collected.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in operations in the period realized.

Estimated useful lives by major asset category are as follows:

	Useful Lives
Computer equipment and software	3 years
Equipment	5 years
Furniture and fixtures	10 years

Leases

Leases

The Company determines if an arrangement is, or contains, a lease at inception. An arrangement is, or contains, a lease if it conveys the right to control the use of identified property, plant or equipment (i.e., an identified asset) for a

period of time in exchange for consideration. The Company’s arrangements determined to be or contain a lease include explicitly or implicitly identified assets where the Company has the right to substantially all of the economic benefits of the assets and has the ability to direct how and for what purpose the assets are used during the lease term. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on its consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term and any amounts probable of being owed under a residual value guarantee (if applicable). In determining the incremental borrowing rate used to calculate the present value of lease payments, the Company uses the interest rate specified in the lease. If the rate is not readily determinable, which is generally the case for the Company, the Company uses its incremental borrowing rate based on the information available at the commencement date. The operating lease ROU assets also include any lease payments made (including any prepaid rents and initial direct costs) and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise any such options. Lease expense for lease payments is recognized on a straight-line basis over the expected lease term. The Company has lease agreements with lease components and non-lease components. For its facility and office equipment lease, the Company accounts for the lease and non-lease components separately. For its vehicle leases, the Company elected the practical expedient to not separate lease components, such as base rent payments, and non-lease components, such as interest, and also applies a portfolio approach to effectively account for the operating lease ROU assets and liabilities, given the volume of individual leases involved in the overall arrangement.

Accounting for Long-Lived Assets

Accounting for Long-Lived AssetsThe Company reviews its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by the comparison of the carrying amount to the future net cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset.

Clinical Trial Accruals

Clinical Trial Accruals

The Company’s clinical trial accruals are based on estimates of patient enrollment and related activities at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations (“CROs”) that conduct and manage clinical trials on the Company’s behalf. The Company estimates clinical trial expenses based on the estimated services performed pursuant to these contracts, as provided by the CRO. These estimates are reviewed for reasonableness by the Company’s internal clinical personnel. The Company monitors patient enrollment levels and related activities using available information; however, if the Company underestimates activity levels associated with various studies at a given point in time, the Company could be required to record significant additional R&D expenses in future periods when the actual activity level becomes known. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Research and Development

Research and Development

Research and development (“R&D”) expenses include salaries and related compensation, contractor and consultant fees, external clinical trial expenses performed by CROs, licensing fees, acquired intellectual property with no alternative future use, and facility and administrative expense allocations. In addition, the Company funds R&D at research institutions under agreements that are generally cancelable at its option. Research costs typically consist of applied research and preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of pre-approval inventory purchases, product formulation, chemical analysis, and the transfer and scale-up of manufacturing at facilities operated by the Company’s contract manufacturers. Clinical development costs include the costs of Phase 1, Phase 2, and Phase 3 clinical trials. These costs are a significant component of the Company’s research and development expenses.

Long-Term Debt

Long-Term DebtLong-term debt consists of the Company’s royalty-backed loan agreement (“Royalty-Backed Loan”) with HealthCare Royalty Partners (“HCR”). The Company accounted for the loan agreement as a debt financing arrangement. Interest expense is accrued using the effective interest rate method over the estimated period the debt will be repaid. Debt issuance costs have been recorded as a debt discount in the Company’s consolidated balance sheets and are being amortized and recorded as interest expense throughout the life of the loan using the effective interest rate method. The Company must make certain assumptions and estimates, including future royalties and net product sales, in determining the expected repayment term, amortization period of the debt discount, accretion of interest expense, as well as the classification between current and long-term portions. The Company periodically assesses these assumptions and estimates, and adjusts the liabilities accordingly.

Embedded Derivatives Related to Debt Instruments

Embedded Derivatives Related to Debt Instruments

Embedded derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the debt instrument. Under the Company’s loan agreement with HCR, upon the occurrence of a default or a change in control, the Company may be required to make mandatory prepayments of the borrowings. The prepayment premium is considered an embedded derivative, as the holder of the loans may exercise the option to require prepayment by the Company. Further, in the event of a regulatory change that results in a material adverse effect on HCR’s rate of return, the Company shall pay directly to HCR an amount that compensates HCR for such reduction. The embedded derivative is presented as a component of other non-current liabilities. The Company will remeasure the embedded derivatives each reporting period and report changes in the estimated fair value as gains or losses in interest and other income, net, in the consolidated statements of operations and in operating activities in the consolidated statements of cash flows.

Fair Value of Financial Instruments

Fair Value of Financial InstrumentsThe carrying value of the Company’s cash and cash equivalents, short-term investments, accounts receivable, long-term investments and other current assets, other assets, accounts payable, accrued liabilities approximate fair value due to the short-term nature or determinable value of these items.

Income Taxes

Income Taxes

The Company accounts for income taxes under the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows the provisions of ASC 740, Income Taxes, under which it assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Basic and Diluted Net Loss Per Share

Basic and Diluted Net Loss Per Share

Basic net loss per share is based upon the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalents outstanding during the period. Common stock equivalents are equity awards granted under the Company’s stock awards plans and are calculated under the treasury stock method. Common equivalent shares from unexercised stock options and unvested restricted stock units are excluded from the computation when there is a loss as

their effect is anti-dilutive, or if the exercise price of such options is greater than the average market price of the stock for the period.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for stock-based compensation of stock options and employee stock purchase plan shares by estimating the fair value of stock-based awards using the Black-Scholes option-pricing model. The Company accounts for stock-based compensation of restricted stock units granted to employees based on the closing price of the Company’s common stock on the date of grant. The fair value of stock-based awards, net of estimated forfeitures, is recognized and amortized over the applicable vesting period.

Contingencies

Contingencies

In the normal course of business, the Company is involved from time to time in various legal proceedings and other matters which are complex in nature and have outcomes that are difficult to predict. The company records accruals for loss contingencies when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company considers all relevant factors when making assessments regarding these contingencies. Litigation expenses are expensed as incurred.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Accounting Pronouncements Adopted in 2020

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements. Disclosures are updated in Note 3 “Fair Value Measurements”.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which amends ASC 808 to clarify ASC 606 should apply in entirety to certain transactions between collaborative arrangement participants. The Company adopted the new guidance effective January 1, 2020, and determined the adoption did not have a material impact on its consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments; in November 2018 the FASB issued a subsequent amendment ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses; in April 2019 the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; in May 2019 the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief; and in November 2019 the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The new guidance changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates, which defers the effective date of ASU 2016-13 for all entities except SEC reporting companies that are not smaller reporting companies. As a smaller reporting company, this guidance is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the timing and effect the new guidance will have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, which is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company does not expect the new guidance to have a material impact on its consolidated financial statements.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Summary of estimated useful lives by major asset category

Estimated useful lives by major asset category are as follows:

	Useful Lives
Computer equipment and software	3 years
Equipment	5 years
Furniture and fixtures	10 years

Property and equipment, net (in thousands)
	December 31,
	2020		2019
Computer equipment and software	$	3,297	$	3,297
Equipment	384		384
Furniture and fixtures	336		336
Leasehold improvements	1,891		1,891
	5,908		5,908
Less: Accumulated depreciation and amortization	(4,310)		(3,459)
Property and equipment, net	$	1,598	$	2,449

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FAIR VALUE MEASUREMENTS (Tables)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of fair value hierarchy for the Company’s financial assets and liabilities which require fair value measurement on a recurring basis

The following table represents the fair value hierarchy for the Company’s financial assets and liabilities which require fair value measurement on a recurring basis (in thousands):

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Assets:
Money market	$	48,152	$	48,152	$	—	$	—
Corporate debt	6,706		—		6,706		—
U.S. Treasury securities	4,999		—		4,999		—
Total assets measured at fair value	$	59,857	$	48,152	$	11,705	$	—
Liabilities:
Embedded derivative liability	$	2,378	$	—	$	—	$	2,378
Total liabilities measured at fair value	$	2,378	$	—	$	—	$	2,378

	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets:
Money market	$	27,720	$	27,720	$	—	$	—
Corporate debt	22,576		—		22,576		—
U.S. Treasury securities	37,811		—		37,811		—
Commercial paper	10,928		—		10,928		—
Total assets measured at fair value	$	99,035	$	27,720	$	71,315	$	—
Liabilities:
Embedded derivative liability	$	2,157	$	—	$	—	$	2,157
Total liabilities measured at fair value	$	2,157	$	—	$	—	$	2,157

Schedule of the changes in the estimated fair value of the Company's embedded derivative

The following table sets forth changes in Level 3 liabilities measured at fair value on a recurring basis for the years ended December 31, 2020 and 2019 (in thousands):

Balance as of December 31, 2018	$	1,352
Change in fair value included in interest and other income, net	805
Balance as of December 31, 2019	2,157
Change in fair value included in interest and other income, net	221
Balance as of December 31, 2020	$	2,378

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INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Summary of amortized cost, unrealized gain and loss and the fair value of available-for-sale securities

The following table is a summary of amortized cost, unrealized gain and loss, and the fair value of available-for-sale securities as of December 31, 2020, and 2019 (in thousands):

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments:
Corporate debt	$	6,706	$	—	$	—	$	6,706
U.S. Treasury securities	4,999		—		—		4,999
Total	$	11,705	$	—	$	—	$	11,705
Reported as:
Short-term investments	$	11,705	$	—	$	—	$	11,705
Total	$	11,705	$	—	$	—	$	11,705

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments:
Corporate debt	$	22,582	$	3	$	(9)	$	22,576
U.S. Treasury securities	37,789		22		—		37,811
Commercial paper	6,446		—		—		6,446
Total	$	66,817	$	25	$	(9)	$	66,833
Reported as:
Short-term investments	$	66,817	$	25	$	(9)	$	66,833
Total	$	66,817	$	25	$	(9)	$	66,833

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BALANCE SHEET COMPONENTS (Tables)

12 Months Ended

Dec. 31, 2020

Balance Sheet Related Disclosures [Abstract]

Schedule of prepaid expenses and other current assets

Prepaid expenses and other current assets (in thousands)
	December 31,
	2020		2019
Insurance litigation recovery	$	7,500	$	—
Prepaid expenses	3,126		2,624
Royalty receivables	1,252		—
Prepaid clinical trial	928		2,710
Income tax receivable	—		1,259
Other current assets	229		83
Prepaid expenses and other current assets	$	13,035	$	6,676

Schedule of property and equipment, net

Estimated useful lives by major asset category are as follows:

	Useful Lives
Computer equipment and software	3 years
Equipment	5 years
Furniture and fixtures	10 years

Property and equipment, net (in thousands)
	December 31,
	2020		2019
Computer equipment and software	$	3,297	$	3,297
Equipment	384		384
Furniture and fixtures	336		336
Leasehold improvements	1,891		1,891
	5,908		5,908
Less: Accumulated depreciation and amortization	(4,310)		(3,459)
Property and equipment, net	$	1,598	$	2,449

Schedule of accrued liabilities

Accrued liabilities (in thousands)
	December 31,
	2020		2019
Litigation settlement liability (see Note 9)	$	7,500	$	—
Accrued employee related costs	9,403		7,682
Patent litigation settlement liability (see Note 9)	5,000		—
Clinical trial accruals	616		1,680
Accrued consulting and other professional fees	2,657		4,867
Accrued sales deductions	1,571		1,822
Other	417		66
Accrued liabilities	$	27,164	$	16,117

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INVENTORY (Tables)

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Schedule of inventory

Inventory consists of the following (in thousands):

	December 31,
	2020		2019
Raw materials	$	795	$	1,057
Work-in-process	4,403		1,925
Finished goods	2,096		2,285
Total inventory	$	7,294	$	5,267

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LEASES (Tables)

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Schedule of balance sheet classification of operating lease liabilities

Supplemental balance sheet information related to operating leases were as follows (in thousands):

	December 31,
	2020		2019
Assets
Operating lease right-of-use assets	$	6,657	$	8,048
Total right-of-use assets	$	6,657	$	8,048
Liabilities
Current portion included in other current liabilities	$	1,855	$	1,669
Long-term portion of operating lease liabilities	6,453		8,272
Total operating lease liabilities	$	8,308	$	9,941

Schedule of components of lease cost

The components of lease costs, which were included in selling, general and administrative, net in its consolidated statements of operations, were as follows (in thousands):

	Years Ended December 31,
	2020		2019
Operating lease cost	$	2,373	$	2,037
Variable lease cost	464		320
Total lease cost	$	2,837	$	2,357

Schedule of the maturities of operating lease liabilities

As of December 31, 2020, the maturities of operating lease liabilities were as follows (in thousands):

	Operating leases
2021	$	2,622
2022	2,446
2023	2,191
2024	2,247
2025	764
Thereafter	—
Total lease payments	10,270
Less: Imputed interest	(1,962)
Operating lease liabilities	$	8,308

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LONG-TERM DEBT (Tables)

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Schedule of long-term debt and unamortized debt discount balances

Payment obligations under the Royalty-Backed Loan are as follows (in thousands):

	December 31,
	2020		2019
Total repayment obligation	$	200,000	$	200,000
Less: Interest to be accreted in future periods	(49,230)		(63,217)
Less: Payments made	(20,806)		(9,068)
Carrying value of loans payable	$	129,964	$	127,715
Less: Current portion of long-term debt	(3,657)		(2,041)
Non-current portion of long-term debt	$	126,307	$	125,674

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STOCKHOLDERS’ EQUITY (Tables)

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Schedule of shares of Company's common stock reserved for future issuance

Shares of the Company’s common stock reserved for future issuance are as follows:

	December 31,
	2020	2019
Common stock awards issued and outstanding	7,172,029	6,874,633
Authorized for future issuance under 2014 Equity Incentive Plan	3,518,414	2,376,613
Authorized for future issuance under 2016 Inducement Plan	469,419	236,269
Employee stock purchase plan	1,018,060	926,943
Total	12,177,922	10,414,458

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STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Schedule of activity under the company's stock option plans

Stock option activity under all of the Company’s stock compensation plans is summarized as follows:

	Outstanding Options			Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
	Number of Shares	Weighted Average Exercise Price
Stock Options
Balances, December 31, 2019	5,516,684	$	12.06
Options granted	1,562,148	3.71
Options exercised	(237,425)	0.74
Options forfeited	(558,612)	12.48
Options expired	(693,580)	17.98
Balances, December 31, 2020	5,589,215	$	9.43	5.56	$	2,806
Vested and expected to vest, December 31, 2020	5,369,025	$	9.57	5.43	$	2,700
Exercisable, December 31, 2020	3,387,312	$	11.69	3.53	$	1,740

Schedule of restricted stock unit and related activity

Restricted stock unit activity under all of the Company’s stock compensation plans is summarized as follows:

	Outstanding Units
		Weighted-Average Grant Date Fair Value
Restricted Stock Units	Number of Shares
Unvested, December 31, 2019	1,357,949	$	7.79
Granted	928,998	3.29
Vested	(258,819)	9.46
Forfeited	(445,314)	7.50
Unvested, December 31, 2020	1,582,814	$	4.95

Schedule of allocation of total stock-based compensation expense

The following table reflects stock-based compensation expense recognized for the years ended December 31, 2020 and 2019 (in thousands):

	Years Ended December 31,
	2020		2019
Research and development	$	385	$	1,732
Selling, general and administrative	6,046		11,120
Total stock-based compensation expense	$	6,431	$	12,852

Schedule of assumptions used to estimate fair value of stock options

The Company estimated the fair value of employee stock options and ESPP shares on the date of grant using the Black-Scholes model with the following weighted-average assumptions:

	Years Ended December 31,
	2020	2019
Stock Options
Expected price volatility	65% - 66%	65% - 69%
Risk-free interest rate	0.37% - 1.75%	1.52% - 2.58%
Expected term (in years)	5.50 - 6.25	5.50 - 6.25
Dividend yield	—	—
Employee Stock Purchase Plan
Expected price volatility	67% - 80%	53% - 56%
Risk-free interest rate	0.10% - 0.18%	1.60% - 2.35%
Expected term (in years)	0.50	0.50
Dividend yield	—	—

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Summary of loss before benefit for income tax

Loss before benefit for income tax is summarized as follows (in thousands):

	Years Ended December 31,
	2020		2019
United States	$	(57,378)	$	(105,186)
International	(25)		—
Total	$	(57,403)	$	(105,186)

Schedule showing the difference of benefit for income taxes from the amount computed by applying the federal income tax rate of 35% to pretax loss from operations

The provision for income taxes differs from the amount computed by applying the federal income tax rate of 21% to pretax loss from operations as a result of the following:

	December 31,
	2020		2019
Statutory federal income tax rate	$	(12,054)	$	(22,079)
State income taxes, net of federal tax benefits	(4,390)		(8,473)
Tax credits	(435)		(1,398)
Stock compensation	2,646		2,648
Nondeductible compensation	164		278
Other	426		198
Change in valuation allowance	13,643		28,826
Income tax provision	$	—	$	—

Schedule of deferred tax assets and liabilities

Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2020		2019
Deferred tax assets
Net operating loss carryforwards	$	105,264	$	99,449
Research and development tax credits	20,609		20,174
Accruals and reserves	9,780		7,004
Stock compensation	8,017		9,291
Depreciation and amortization	1,062		1,108
Lease liabilities	2,380		2,889
Other	6,014		—
Gross deferred tax assets	153,126		139,915
Less: Valuation allowance	(151,219)		(137,576)
Net deferred tax assets	1,907		2,339
Deferred tax liabilities
Right of use assets	(1,907)		(2,339)
Net deferred tax liabilities	(1,907)		(2,339)
Net deferred taxes	$	—	$	—

Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	December 31,
	2020		2019
Balance at the beginning of the year	$	5,065	$	4,697
Additions based on current period tax positions	119		368
Balance at the end of the year	$	5,184	$	5,065

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NET LOSS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Schedule of reconciliation of numerator and denominator used in calculation of basic and diluted net loss per share

The following table presents the calculation of the basic and diluted net loss per share (in thousands, except per share data):

	Years Ended December 31,
	2020		2019
Net loss attributable to common stockholders, basic and diluted	$	(57,403)	$	(105,186)
Weighted average common shares used in calculating net loss per common share, basic and diluted	28,305		27,677
Net loss per share attributable to common stockholders, basic and diluted	$	(2.03)	$	(3.80)

Schedule of outstanding shares of potentially dilutive securities excluded from the computation of diluted net loss per share of common stock, because including them would have been anti-dilutive

The following total outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented, because including them would have been anti-dilutive (in thousands):

	December 31,
	2020	2019
Options to purchase common stock	5,589	5,517
Restricted stock units	1,583	1,358
Total	7,172	6,875

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DESCRIPTION OF BUSINESS (Details)	12 Months Ended
	Dec. 31, 2020 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating segments	1

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Liquidity (Details) - USD ($)	1 Months Ended	12 Months Ended
	Jan. 31, 2018	Dec. 31, 2020	Dec. 31, 2019	Nov. 30, 2019
Debt Instrument [Line Items]
Proceeds from public offerings, net of offering costs	$ 134,300,000	$ 1,041,000	$ 0
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs		1,041,000
Cash, cash equivalents and investments		$ 83,400,000
Cowen and Company, LLC
Debt Instrument [Line Items]
At-the-market offering, aggregate offering price (up to)				$ 50,000,000.0
Common stock shares sold (in shares)		217,403	0
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs		$ 1,000,000.0

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segments (Details)	12 Months Ended
	Dec. 31, 2020 segment
Accounting Policies [Abstract]
Number of reportable segments	1

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Risk (Details) - Customer One - Customer Concentration Risk	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenue from Contract with Customer
Concentration Risk [Line Items]
Concentration risk	95.00%	98.00%
Accounts Receivable
Concentration Risk [Line Items]
Concentration risk	94.00%	96.00%

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2020
Computer equipment and software
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	3 years
Equipment
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	5 years
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Estimated useful lives of the assets	10 years

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FAIR VALUE MEASUREMENTS - Financial Assets and Liabilities Which Require Fair Value Measurement (Details) - Recurring basis - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Assets:
Total assets measured at fair value	$ 59,857	$ 99,035
Liabilities:
Total liabilities measured at fair value	2,378	2,157
Level 1
Assets:
Total assets measured at fair value	48,152	27,720
Liabilities:
Total liabilities measured at fair value	0	0
Level 2
Assets:
Total assets measured at fair value	11,705	71,315
Liabilities:
Total liabilities measured at fair value	0	0
Level 3
Assets:
Total assets measured at fair value	0	0
Liabilities:
Total liabilities measured at fair value	2,378	2,157
Embedded derivative liability
Liabilities:
Total liabilities measured at fair value	2,378	2,157
Embedded derivative liability | Level 1
Liabilities:
Total liabilities measured at fair value	0	0
Embedded derivative liability | Level 2
Liabilities:
Total liabilities measured at fair value	0	0
Embedded derivative liability | Level 3
Liabilities:
Total liabilities measured at fair value	2,378	2,157
Money market
Assets:
Total assets measured at fair value	48,152	27,720
Money market | Level 1
Assets:
Total assets measured at fair value	48,152	27,720
Money market | Level 2
Assets:
Total assets measured at fair value	0	0
Money market | Level 3
Assets:
Total assets measured at fair value	0	0
Corporate debt
Assets:
Total assets measured at fair value	6,706	22,576
Corporate debt | Level 1
Assets:
Total assets measured at fair value	0	0
Corporate debt | Level 2
Assets:
Total assets measured at fair value	6,706	22,576
Corporate debt | Level 3
Assets:
Total assets measured at fair value	0	0
U.S. Treasury securities
Assets:
Total assets measured at fair value	4,999	37,811
U.S. Treasury securities | Level 1
Assets:
Total assets measured at fair value	0	0
U.S. Treasury securities | Level 2
Assets:
Total assets measured at fair value	4,999	37,811
U.S. Treasury securities | Level 3
Assets:
Total assets measured at fair value	$ 0	0
Commercial paper
Assets:
Total assets measured at fair value		10,928
Commercial paper | Level 1
Assets:
Total assets measured at fair value		0
Commercial paper | Level 2
Assets:
Total assets measured at fair value		10,928
Commercial paper | Level 3
Assets:
Total assets measured at fair value		$ 0

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FAIR VALUE MEASUREMENTS - Narrative (Details) - Level 3 - Embedded derivative liability	Dec. 31, 2020
Measurement Input, Discount Rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	0.167
Measurement Input, Change In Control Probability
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Measurement input	0.030

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FAIR VALUE MEASUREMENTS - Changes in Estimated Fair Value of Embedded Derivative (Details) - Level 3 - Long-term debt with embedded derivative - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Roll forward of the financial instruments classified within Level 3 of the fair value hierarchy
Beginning balance	$ 2,157	$ 1,352
Change in fair value included in interest and other income, net	221	805
Ending balance	$ 2,378	$ 2,157

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INVESTMENTS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 11,705,000	$ 66,817,000
Gross Unrealized Gains	0	25,000
Gross Unrealized Losses	0	(9,000)
Fair Value	11,705,000	66,833,000
Debt securities, available-for-sale, realized gain	55,000	0
Debt securities, available-for-sale, realized loss	0	0
Short-term investments
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	11,705,000	66,817,000
Gross Unrealized Gains	0	25,000
Gross Unrealized Losses	0	(9,000)
Fair Value	11,705,000	66,833,000
Accrued interest	$ 100,000	$ 400,000
Long-term investments | Minimum
Debt Securities, Available-for-sale [Line Items]
Maturity date of long term investment	12 months	12 months
Corporate debt
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 6,706,000	$ 22,582,000
Gross Unrealized Gains	0	3,000
Gross Unrealized Losses	0	(9,000)
Fair Value	6,706,000	22,576,000
U.S. Treasury securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	4,999,000	37,789,000
Gross Unrealized Gains	0	22,000
Gross Unrealized Losses	0	0
Fair Value	$ 4,999,000	37,811,000
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Amortized Cost		6,446,000
Gross Unrealized Gains		0
Gross Unrealized Losses		0
Fair Value		$ 6,446,000

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BALANCE SHEET COMPONENTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Prepaid expenses and other current assets
Insurance litigation recovery	$ 7,500	$ 0
Prepaid expenses	3,126	2,624
Royalty receivables	1,252	0
Prepaid clinical trial	928	2,710
Income tax receivable	0	1,259
Other current assets	229	83
Prepaid expenses and other current assets	13,035	6,676
Property and equipment, net
Property and equipment, gross	5,908	5,908
Less: Accumulated depreciation and amortization	(4,310)	(3,459)
Property and equipment, net	1,598	2,449
Depreciation expense	851	1,214
Accrued liabilities
Litigation settlement liability (see Note 9)	7,500	0
Accrued employee related costs	9,403	7,682
Patent litigation settlement liability (see Note 9)	5,000	0
Clinical trial accruals	616	1,680
Accrued consulting and other professional fees	2,657	4,867
Accrued sales deductions	1,571	1,822
Other	417	66
Accrued liabilities	27,164	16,117
Computer equipment and software
Property and equipment, net
Property and equipment, gross	3,297	3,297
Equipment
Property and equipment, net
Property and equipment, gross	384	384
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	336	336
Leasehold improvements
Property and equipment, net
Property and equipment, gross	$ 1,891	$ 1,891

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INVENTORY (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Provision for write-down of inventory	$ 595	$ 884
Raw materials	795	1,057
Work-in-process	4,403	1,925
Finished goods	2,096	2,285
Total inventory	$ 7,294	$ 5,267

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LICENSE AGREEMENTS (Details) - USD ($)		12 Months Ended
	Nov. 30, 2012	Dec. 31, 2020	Dec. 31, 2019
Collaboration and License Agreements
Revenues		$ 74,461,000	$ 54,637,000
Royalty revenue
Collaboration and License Agreements
Revenues		$ 3,295,000	0
Period describing the commercial launch of dose		15 years
License agreement
Collaboration and License Agreements
Upfront payment received	$ 65,000,000.0
Maximum total additional cash payments receivable upon achievement of certain development and regulatory milestones	$ 95,000,000.0
Prosecution and litigation cost		$ 0	$ 0

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LEASES - Narrative (Details) $ in Thousands	1 Months Ended			3 Months Ended	12 Months Ended
	Mar. 31, 2019 vehicle	Jun. 30, 2018 USD ($)	Jan. 31, 2018 USD ($) ft² extension	Dec. 31, 2020 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2019
Lessee, Lease, Description [Line Items]
Operating lease, cash payments to be required					$ 1,696	$ 1,188
Lease, cost				$ 2,837	$ 2,800	$ 2,357
Weighted average remaining lease term				4 years 1 month 6 days	4 years 1 month 6 days
Weighted average discount rate				10.50%	10.50%
Office equipment
Lessee, Lease, Description [Line Items]
Operating lease, term							3 years
Operating lease, cash payments to be required		$ 200
Vehicles
Lessee, Lease, Description [Line Items]
Operating lease, term	3 years
Operating lease, number of vehicles | vehicle	67
Operating lease, term of contract per vehicle	12 months
Operating lease, renewal term	50 months
Emeryville, CA | Office facility
Lessee, Lease, Description [Line Items]
Lessee, operating lease, rentable square feet (in sqft) | ft²			37,626
Operating lease, number of options to extend | extension			1
Operating lease, option to extend, term			5 years
Operating lease, tenet improvement allowance			$ 1,100

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LEASES - Balance Sheet Classification of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Operating lease right-of-use assets	$ 6,657	$ 8,048
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesCurrent	us-gaap:OtherLiabilitiesCurrent
Current portion included in other current liabilities	$ 1,855	$ 1,669
Long-term portion of operating lease liabilities	6,453	8,272
Total operating lease liabilities	$ 8,308	$ 9,941

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LEASES - Components of Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Operating lease cost	$ 2,373		$ 2,037
Variable lease cost	464		320
Total lease cost	$ 2,837	$ 2,800	$ 2,357

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LEASES - Maturities of Operating Lease Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2021	$ 2,622
2022	2,446
2023	2,191
2024	2,247
2025	764
Thereafter	0
Total lease payments	10,270
Less: Imputed interest	(1,962)
Operating lease liabilities	$ 8,308	$ 9,941

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COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Dec. 01, 2020 USD ($)	Oct. 29, 2020 USD ($)	Sep. 20, 2018 patent	Dec. 31, 2020 USD ($) claim	Dec. 31, 2019 USD ($)
Loss Contingencies [Line Items]
Non-cancelable purchase commitments due within one year				$ 2,400
Consideration transferred	$ 7,500
Asset purchase agreement, noncompete agreement, period	5 years
Patent litigation settlement				5,000	$ 0
Litigation settlement liability				7,500	0
Insurance litigation recovery				$ 7,500	$ 0
Number of legal claims | claim				0
Positive Outcome of Litigation
Loss Contingencies [Line Items]
Counterclaim, Company patents allegedly infringed, number | patent			9
Qui Tam Complaint | Pending Litigation | Unfavorable Regulatory Action
Loss Contingencies [Line Items]
Claim for damages (potentially more than)				$ 2,500,000
Putative Class Action Lawsuit | Pending Litigation
Loss Contingencies [Line Items]
Litigation settlement, amount awarded to other party		$ 7,500
Litigation settlement liability				7,500
Insurance litigation recovery				$ 7,500

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LONG-TERM DEBT - Narrative (Details) - USD ($)			1 Months Ended	3 Months Ended	12 Months Ended
	Apr. 29, 2020	Apr. 15, 2020	May 31, 2017	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Proceeds from PPP loan		$ 2,700,000			$ 2,650,000	$ 0
Repayments of PPP loan	$ 2,700,000				2,650,000	0
HCRP | Royalty-backed loan agreement
Debt Instrument [Line Items]
Proceeds from issuance of debt			$ 35,000,000	$ 65,000,000
Percentage revenue interest of future net sales			12.50%
Quarterly royalty payment (up to)			$ 15,000,000
Royalty percentage of future net sales			6.25%
Royalty trail cap, percentage of face amount			200.00%
Voluntary prepay election, amount due, percentage of funded amount			200.00%
Interest rate, stated percentage			11.00%
Contingent consideration, asset			$ 65,000,000
Unpaid interest payment added to principal amount, term			2 years 3 months
Lender expense			$ 400,000
Payment of debt issuance costs			$ 800,000
Interest expense					$ 14,000,000.0	$ 15,000,000.0
Effective interest rate					12.80%
HCRP | Royalty-backed loan agreement | Level 3
Debt Instrument [Line Items]
Long-term debt, fair value					$ 109,400,000
HCRP | Royalty-backed loan agreement | December 2021
Debt Instrument [Line Items]
Royalty percentage of future net sales if principal and interest payments below minimum specified levels (up to)			17.50%
HCRP | Royalty-backed loan agreement | Subsequent to December 31, 2022
Debt Instrument [Line Items]
Royalty percentage of future net sales if principal and interest payments below minimum specified levels (up to)			22.50%

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LONG-TERM DEBT - Long-Term Debt and Unamortized Debt Discount Balances (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Less: Current portion of long-term debt	$ (3,657)	$ (2,041)
Non-current portion of long-term debt	126,307	125,674
HCRP | Royalty-backed loan agreement
Debt Instrument [Line Items]
Total repayment obligation	200,000	200,000
Less: Interest to be accreted in future periods	(49,230)	(63,217)
Less: Payments made	(20,806)	(9,068)
Carrying value of loans payable	129,964	127,715
Less: Current portion of long-term debt	(3,657)	(2,041)
Non-current portion of long-term debt	$ 126,307	$ 125,674

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CONVERTIBLE PREFERRED STOCK (Details) - shares	Dec. 31, 2020	Dec. 31, 2019	Apr. 15, 2014
Temporary Equity Disclosure [Abstract]
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000	5,000,000
Preferred stock, shares outstanding (in shares)	0	0

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STOCKHOLDERS’ EQUITY (Details)	12 Months Ended
	Dec. 31, 2020 USD ($) vote $ / shares shares	Dec. 31, 2019 shares	Nov. 30, 2019 USD ($)	Mar. 31, 2016 shares
Shareholders' Equity
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Dividends declared | $	$ 0
Number of votes per share | vote	1
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs | $	$ 1,041,000
Reserved for future issuance (in shares)	12,177,922	10,414,458
2016 Inducement Plan
Shareholders' Equity
Reserved for future issuance (in shares)	469,419			450,000
Employee Stock Purchase Plan
Shareholders' Equity
Reserved for future issuance (in shares)	1,018,060	926,943
Cowen and Company, LLC
Shareholders' Equity
At-the-market offering, aggregate offering price (up to) | $			$ 50,000,000.0
At-the-market offering, commission as a percentage of gross proceeds (up to)			3.00%
Common stock shares sold (in shares)	217,403	0
Sale of stock, price per share (in dollars per share) | $ / shares	$ 4.94
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs | $	$ 1,000,000.0
Stock options
Shareholders' Equity
Reserved for future issuance (in shares)	7,172,029	6,874,633
Stock options | 2014 Equity Incentive Plan
Shareholders' Equity
Authorized for future issuance (in shares)	3,518,414	2,376,613
Stock options | 2016 Inducement Plan
Shareholders' Equity
Authorized for future issuance (in shares)	469,419	236,269

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STOCK-BASED COMPENSATION - Stock Compensation Plans (Details) - shares		1 Months Ended							46 Months Ended	56 Months Ended
	Jan. 01, 2020	Oct. 31, 2020	Feb. 29, 2020	Mar. 31, 2019	Nov. 30, 2017	Jan. 31, 2017	Mar. 31, 2016	Mar. 31, 2014	Oct. 31, 2020	Oct. 31, 2020	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance under the plan (in shares)											12,177,922	10,414,458
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance under the plan (in shares)											7,172,029	6,874,633
2002 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock available for future grant or issuance (in shares)											0
2007 Stock Plan | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock available for future grant or issuance (in shares)											0
2014 Equity Incentive Plan | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of common stock available for future grant or issuance (in shares)								1,993,394			3,518,414
Increase in common stock reserved for issuance as a percentage of total number of shares of the Company's capital stock outstanding on the last day of the preceding fiscal year								4.00%
Increase in common stock available for issuance (in shares)	1,118,591
Threshold ownership percentage of shareholder for determining exercise price of awards granted								10.00%
Vesting period								4 years
2014 Equity Incentive Plan | Stock options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of awards								10 years
2014 Equity Incentive Plan | Stock options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price as a percentage of estimated fair value of the shares on the date of grant								100.00%
Exercise price as a percentage of estimated grant date fair value of shares for a 10% shareholder								110.00%
2016 Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance under the plan (in shares)							450,000				469,419
Number of additional shares available for future issuance under the plan (in shares)		600,000	450,000	450,000	450,000	450,000			2,400,000	2,850,000
2016 Inducement Plan | Employee Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of awards							10 years
Vesting period							4 years
2016 Inducement Plan | Employee Stock Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of awards							10 years

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STOCK-BASED COMPENSATION - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Aggregate Intrinsic Value (thousands)
Fair value of common stock (in dollars per share)	$ 4.33
Stock options
Number of Shares
Balances, beginning of the period (in shares)	5,516,684
Options granted (in shares)	1,562,148
Options exercised (in shares)	(237,425)
Options forfeited (in shares)	(558,612)
Options expired (in shares)	(693,580)
Balances, end of the period (in shares)	5,589,215	5,516,684
Vested and expected to vest, end of the period (in shares)	5,369,025
Exercisable, end of the period (in shares)	3,387,312
Weighted Average Exercise Price
Balances, beginning of the period (in dollars per share)	$ 12.06
Options granted (in dollars per share)	3.71
Options exercised (in dollars per share)	0.74
Options forfeited (in dollars per share)	12.48
Options expired (in dollars per share)	17.98
Balances, end of the period (in dollars per share)	9.43	$ 12.06
Vested and expected to vest, end of the period (in dollars per share)	9.57
Exercisable, end of the period (in dollars per share)	$ 11.69
Weighted Average Remaining Contractual Term (years)
Balances, end of the period	5 years 6 months 21 days
Vested and expected to vest, end of the period	5 years 5 months 4 days
Exercisable, end of the period	3 years 6 months 10 days
Aggregate Intrinsic Value (thousands)
Balances, end of the period	$ 2,806
Vested and expected to vest, end of the period	2,700
Exercisable, end of the period	1,740
Aggregate intrinsic value of exercises	$ 900	$ 900
Employee Stock Options
Number of Shares
Options granted (in shares)	1,562,148	1,721,508
Aggregate Intrinsic Value (thousands)
Weighted-average grant date fair value (in dollars per share)	$ 2.19	$ 4.01
Compensation not yet recognized	$ 6,600
Period for recognition of unrecognized compensation cost	2 years 8 months 12 days
Total fair value of awards vested	$ 4,600	$ 9,600

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STOCK-BASED COMPENSATION - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Number of Shares
Unvested, beginning of the period (in shares)	1,357,949
Granted (in shares)	928,998
Vested (in shares)	(258,819)
Forfeited (in shares)	(445,314)
Unvested, end of the period (in shares)	1,582,814	1,357,949
Weighted-Average Grant Date Fair Value
Unvested, beginning of the period (in dollars per share)	$ 7.79
Granted (in dollars per share)	3.29
Vested (in dollars per share)	9.46
Forfeited (in dollars per share)	7.50
Unvested, end of the period (in dollars per share)	$ 4.95	$ 7.79
Aggregate intrinsic value, outstanding	$ 6.9
Aggregate intrinsic value, vested	0.9	$ 1.0
Unrecognized compensation cost	$ 4.7
Period for recognition of unrecognized compensation cost	2 years 2 months 12 days

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STOCK-BASED COMPENSATION - Employee Stock Purchase Plan (Details) - USD ($)		1 Months Ended	70 Months Ended
	Jan. 01, 2020	Mar. 31, 2014	Dec. 31, 2019	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for future issuance under the plan (in shares)			10,414,458	12,177,922
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Authorized for future issuance (in shares)		262,762
Exercise price as a percentage of estimated fair value of the shares on the date of grant		85.00%
Value of shares that an employee is permitted to purchase		$ 25,000
Stock issued under employee stock purchase plan (in shares)			612,357
Number of shares available for future issuance under the plan (in shares)				1,018,060
Increase in common stock available for issuance (in shares)	279,648
Employee Stock Purchase Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of annual compensation of the employee to be deducted for purchase of shares		15.00%
Increase in common stock reserved for issuance as a percentage of total number of shares of the Company's capital stock outstanding on the last day of the preceding fiscal year		1.00%
Threshold number of shares to determine increase in common stock reserved for future issuance (in shares)		520,000

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STOCK-BASED COMPENSATION - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 6,431	$ 12,852
Stock-based compensation capitalized in inventory	251	208
Employee Stock Options
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	3,200	9,400
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	200	400
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	2,900	3,100
Employee Stock Options and Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Plan modification, incremental compensation cost		2,200
Research and development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	385	1,732
Selling, general and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 6,046	$ 11,120

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STOCK-BASED COMPENSATION - Weighted Average Assumptions (Details)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Employee Stock Options
Assumptions to estimate the fair value of stock options
Expected price volatility, minimum	65.00%	65.00%
Expected price volatility, maximum	66.00%	69.00%
Risk-free interest rate, minimum	0.37%	1.52%
Risk-free interest rate, maximum	1.75%	2.58%
Dividend yield	0.00%	0.00%
Employee Stock Options | Minimum
Assumptions to estimate the fair value of stock options
Expected term	5 years 6 months	5 years 6 months
Employee Stock Options | Maximum
Assumptions to estimate the fair value of stock options
Expected term	6 years 3 months	6 years 3 months
Employee Stock Purchase Plan
Assumptions to estimate the fair value of stock options
Expected price volatility, minimum	67.00%	53.00%
Expected price volatility, maximum	80.00%	56.00%
Risk-free interest rate, minimum	0.10%	1.60%
Risk-free interest rate, maximum	0.18%	2.35%
Expected term	6 months	6 months
Dividend yield	0.00%	0.00%

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STOCK-BASED COMPENSATION - Non-Employee Stock-Based Compensation (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 6,431,000	$ 12,852,000
Non-employee Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	0	0
Stock-based compensation expense	$ 0	$ 0
Non-employee Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	0	0

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INCOME TAXES - Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income (loss) before provision for income tax
United States	$ (57,378)	$ (105,186)
International	(25)	0
Loss before income taxes	(57,403)	(105,186)
Difference of provision for income taxes from the amount computed by applying the federal income tax rate of 35% to pretax income from operations
Statutory federal income tax rate	(12,054)	(22,079)
State income taxes, net of federal tax benefits	(4,390)	(8,473)
Tax credits	(435)	(1,398)
Stock compensation	2,646	2,648
Nondeductible compensation	164	278
Other	426	198
Change in valuation allowance	13,643	28,826
Income tax provision	0	0
Significant components of the Company's deferred tax assets
Net operating loss carryforwards	105,264	99,449
Research and development tax credits	20,609	20,174
Accruals and reserves	9,780	7,004
Stock compensation	8,017	9,291
Depreciation and amortization	1,062	1,108
Lease liabilities	2,380	2,889
Other	6,014	0
Gross deferred tax assets	153,126	139,915
Less: Valuation allowance	(151,219)	(137,576)
Net deferred tax assets	1,907	2,339
Significant components of deferred tax liabilities
Right of use assets	(1,907)	(2,339)
Net deferred tax liabilities	(1,907)	(2,339)
Net deferred taxes	$ 0	$ 0

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INCOME TAXES - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Operating loss carryforwards
Federal income tax rate	21.00%
Increase in net valuation allowance	$ 13.6	$ 28.8
Research and development tax credit carryforward
Operating loss carryforwards
Tax credit carryforwards	14.4
Federal
Operating loss carryforwards
Net operating loss carryforwards	375.1
Federal | Research and development tax credit carryforward
Operating loss carryforwards
Tax credit carryforwards	6.9
State
Operating loss carryforwards
Net operating loss carryforwards	345.2
State | Research and development tax credit carryforward
Operating loss carryforwards
Tax credit carryforwards	$ 4.6

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INCOME TAXES - Uncertain Tax Positions (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Unrecognized tax benefits that would impact effective tax rate	$ 0
Reconciliation of the beginning and ending amount of unrecognized tax benefits
Balance at the beginning of the year	5,065,000	$ 4,697,000
Additions based on current period tax positions	119,000	368,000
Balance at the end of the year	5,184,000	5,065,000
Interest related to unrecognized tax benefits	$ 0	$ 0

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NET LOSS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Earnings Per Share [Abstract]
Net loss attributable to common stockholders, basic and diluted	$ (57,403)	$ (105,186)
Weighted average common shares used in calculating net loss per share, basic and diluted (in shares)	28,305	27,677
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share)	$ (2.03)	$ (3.80)
Anti-dilutive securities
Anti-dilutive securities (in shares)	7,172	6,875
Options to purchase common stock
Anti-dilutive securities
Anti-dilutive securities (in shares)	5,589	5,517
Restricted stock units
Anti-dilutive securities
Anti-dilutive securities (in shares)	1,583	1,358

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SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands			2 Months Ended	12 Months Ended
	Jan. 04, 2021	Dec. 01, 2020	Feb. 16, 2021	Dec. 31, 2020
Subsequent Event [Line Items]
Consideration transferred		$ 7,500
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs				$ 1,041
Subsequent Event
Subsequent Event [Line Items]
Common stock shares sold (in shares)			1,335,896
Sale of stock, price per share (in dollars per share)			$ 5.57
Issuance of common stock in conjunction with equity offering, net of commissions and issuance costs			$ 7,200
Subsequent Event | Osmolex ER Asset Acquisition
Subsequent Event [Line Items]
Payments for business acquisition	$ 7,300
Consideration transferred	7,500
Assumption of certain liabilities	$ 200
Subsequent Event | HCRP | Royalty-backed loan agreement
Subsequent Event [Line Items]
Royalty percentage of future net sales if principal and interest payments below minimum specified levels (up to), eliminated	17.50%
Covenant, minimum cash, cash equivalents, and marketable securities	$ 25,000
Subsequent Event | HCRP | Royalty-backed loan agreement | Prior to December 31, 2022
Subsequent Event [Line Items]
Covenant, prepayment provisions, change in control, required cumulative payments	175,000
Subsequent Event | HCRP | Royalty-backed loan agreement | Subsequent to December 31, 2022
Subsequent Event [Line Items]
Covenant, prepayment provisions, change in control, required cumulative payments	$ 195,000