We have entered into certain license, collaboration and asset acquisition agreements with third parties. Generally, these agreements require us to share in the costs of developing, manufacturing, commercializing and/or selling product candidates and/or products with third parties, who in turn grant us marketing rights for such product candidates and/or products. Under these agreements we are generally required to: (i) make upfront payments and/or other payments upon successful completion of regulatory, sales and/or other milestones and/or (ii) pay royalties on sales and/or other costs arising from these agreements. We have also, from time to time, entered into agreements to directly acquire certain assets from third parties.

On October 19, 2020, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Beta Acquisition Corp., a Delaware corporation and wholly-owned indirect subsidiary of the Company (Merger Sub) and BioSpecifics. Pursuant to the Merger Agreement, and on the terms and subject to the conditions thereof, Merger Sub commenced a tender offer (the Offer) on November 2, 2020 to acquire all of BioSpecifics’ issued and outstanding shares of common stock (BioSpecifics Shares) at a purchase price of $88.50 per BioSpecifics Share, net to the holder thereof in cash, subject to reduction for any applicable withholding taxes and without interest.

Through the expiration of the Offer on December 1, 2020, approximately 6,159,975 BioSpecifics Shares were validly tendered and not validly withdrawn in accordance with the terms of the Offer. With all conditions to the Offer satisfied, on December 2, 2020, Merger Sub accepted for purchase all of the BioSpecifics Shares that were validly tendered and not validly withdrawn in accordance with the terms of the Offer.

Following consummation of the Offer, on December 2, 2020, Merger Sub merged with and into BioSpecifics (the Merger) in accordance with Section 251(h) of the Delaware General Corporation Law without a vote on the adoption of the Merger Agreement by BioSpecifics’ stockholders, with BioSpecifics continuing as the surviving corporation in the Merger and thereby becoming a wholly-owned, indirect subsidiary of the Company.

Prior to the Merger, BioSpecifics was a biopharmaceutical company involved in the development of injectable CCH that generated revenue primarily from a license agreement with us. We had a strategic relationship with BioSpecifics since 2004 pursuant to which BioSpecifics was, among other things, entitled to a royalty stream from us related to our collagenase-based therapies, including XIAFLEX®. Specifically, we were required to, among other things, pay BioSpecifics, on a country-by-country and product-by-product basis, a specified percentage, within a range of 5% to 15% of net sales, of certain specified products. This royalty applied to net sales by us and/or any of our sublicensees. In addition, we were required to pay BioSpecifics an amount equal to a specified mark-up on certain cost of goods related to supply of XIAFLEX® (which mark-up was capped at a specified percentage within the range of 5% to 15% of the cost of goods of XIAFLEX®). Our December 2020 acquisition of BioSpecifics eliminated this third-party relationship, which had the effect of reducing royalty payments recognized in Cost of revenues. The BioSpecifics acquisition also eliminated certain milestones and royalties we may otherwise have been required to pay for potential future indications of products or product candidates containing CCH, including those associated with our plantar fibromatosis development program.

The acquired set of BioSpecifics assets and activities did not meet the definition of a business based on our assessment that the acquired set of activities lacks substantive processes that significantly contribute to the conversion of inputs into outputs. As a result, we accounted for the transaction as an asset acquisition. The consideration transferred in the asset acquisition was measured at cost, including transaction costs, assets transferred by the Company and royalty obligations discharged by the seller. The following table represents the costs accumulated to acquire BioSpecifics (in thousands):

(2)In accordance with BioSpecifics’ stock plan and employment arrangements, certain unvested options and employee bonus compensation immediately vested and accelerated, with no future service requirement, upon change in control. We have accounted for the accelerated vestings as a component of consideration transferred.


	December 2, 2020
Cash and cash equivalents	$	21,073
Investments (1)	89,050
Intangible assets—developed technology	673,796
Intangible assets—in-process research and development	28,602
Other acquired assets	3,089
Deferred tax liability	(156,441)
Other assumed liabilities	(3,501)
Net identifiable assets acquired	$	655,668

The in-process research and development assets noted in the table above were expensed on the acquisition date and are included in Acquired in-process research and development in the Consolidated Statements of Operations. The Company concluded that the consideration allocable to developed technology acquired represented incremental costs associated with the Company’s existing XIAFLEX® and QWO® intangible assets (the Existing Intangible Assets). The Existing Intangible Assets were acquired by the Company as part of its acquisition of Auxilium Pharmaceuticals, Inc. (Auxilium), accounted for as a business combination at fair value during 2015. Auxilium had a pre-existing development and license agreement with BioSpecifics. The following table summarizes changes to the gross carrying amount, accumulated amortization and net book amount of the Existing Intangible Assets and the new intangible assets resulting from the BioSpecifics acquisition (in thousands):


	Gross Carrying Amount		Accumulated Amortization		Net Book Amount
Asset balances immediately prior to BioSpecifics acquisition	$	1,580,600	$	(725,123)	$	855,477
Additional costs incurred in connection with BioSpecifics acquisition	673,796		—		673,796
Asset balances immediately following BioSpecifics acquisition	$	2,254,396	$	(725,123)	$	1,529,273

Prior to the BioSpecifics acquisition, the Company had been amortizing the Existing Intangible Assets over their respective useful lives, which were the periods over which the assets were expected to contribute directly or indirectly to the future cash flows of the Company. The BioSpecifics acquisition significantly impacted the timing and amount of estimated future cash flows from sales of XIAFLEX® and QWO® and, therefore, the Company considered the acquisition to be a triggering event to remeasure the expected useful lives of the XIAFLEX® and QWO® intangible assets. Immediately following the BioSpecifics acquisition, the Company determined that the weighted average useful life for the XIAFLEX® and QWO® intangible assets was approximately 13.6 years from the closing date of the BioSpecifics acquisition and, accordingly, the Company began to amortize the corresponding intangible assets prospectively on a straight-line basis over their then-anticipated useful lives, which approximated the periods of economic benefits expected to be realized from future cash flows from sales of XIAFLEX® and QWO®. The Company’s accounting for these intangible assets has since been affected by certain subsequent developments, including the Company’s plans announced in December 2022 that it would be ceasing the production and sale of QWO® in light of market concerns about the extent and variability of bruising following initial treatment as well as the potential for prolonged skin discoloration. Refer to Note 5. Restructuring for additional information.

In May 2022, we announced that our EVL subsidiary had entered into an agreement to acquire six development-stage RTU injectable product candidates from Nevakar Injectables, Inc., a subsidiary of Nevakar, Inc., for an upfront cash payment of $35.0 million (the 2022 Nevakar Agreement). The acquisition closed during the second quarter of 2022. The acquired set of assets and activities did not meet the definition of a business. As a result, we accounted for the transaction as an asset acquisition. Upon closing, the upfront payment was recorded as Acquired in-process research and development in the Consolidated Statements of Operations.

The product candidates, which relate to our Sterile Injectables segment, are in various stages of development. The first commercial launch is expected in 2025; however, there can be no assurance this will occur within this timeframe or at all. With this acquisition, the Company will control all remaining development, regulatory, manufacturing and commercialization activities for the acquired product candidates.

In August 2022, within the ongoing bankruptcy proceedings, EVL filed an adversary proceeding (the Nevakar Litigation) against Nevakar, Inc. and Nevakar Injectables Inc. (collectively, Nevakar) to enforce: (i) a 2018 development, license and commercialization agreement (the 2018 Nevakar Agreement) and (ii) the 2022 Nevakar Agreement. In September 2022, Nevakar filed counterclaims against EVL. In December 2022, EVL and Nevakar reached a settlement with respect to the Nevakar Litigation (the Nevakar Settlement) subject to Bankruptcy Court approval. The Nevakar Settlement provided for the amendment of the 2018 Nevakar Agreement to revoke EVL’s license of two products covered by the 2018 Nevakar Agreement, modify EVL’s license to the remaining three products covered by the 2018 Nevakar Agreement to reduce the royalty owed to Nevakar, terminate any obligations of EVL to make payments to Nevakar upon achievement of contingent milestones and eliminate Nevakar’s ability to terminate the remaining licenses for EVL’s breach or material breach. The Nevakar Settlement also provided that EVL and Nevakar would agree to a mutual release of certain claims under both the 2018 Nevakar Agreement and the 2022 Nevakar Agreement. The Nevakar Settlement was approved by the Bankruptcy Court in January 2023. The Nevakar Settlement had no effect on our Consolidated Financial Statements in 2022; we are currently evaluating how the Nevakar Settlement will be accounted for in 2023.

Under the terms of the TLC Agreement, TLC is primarily responsible for the development of the product and we are primarily responsible for obtaining regulatory approval and for commercialization of the product in the U.S. Upon receipt of regulatory approval, if obtained, we will have exclusive rights to manufacture, market, sell and distribute the product in the U.S.

During the second quarter of 2022, we made an upfront payment of $30.0 million to TLC and recorded a corresponding charge to Acquired in-process research and development in the Consolidated Statements of Operations. TLC is also eligible to receive: (i) payments of up to an additional $110.0 million based on the achievement of certain development, regulatory and manufacturing milestones related to the initial indication for the treatment of osteoarthritis knee pain; (ii) payments of up to an additional $30.0 million based on the achievement of certain development and regulatory milestones related to certain potential future indications; (iii) payments of up to an additional $500.0 million based on the achievement of certain commercial milestones; and (iv) tiered royalties based on net sales of TLC599 in the U.S. Unless terminated earlier or extended, the term of the TLC Agreement generally extends until the 20-year anniversary of the first commercial sale of TLC599.

Pursuant to the terms of the TLC Agreement, we have deposited approximately $85.0 million of cash into a bank account which may be used to fund certain future obligations under the TLC Agreement or returned to us upon satisfaction of certain conditions. As further described in Note 7. Fair Value Measurements, this amount is considered restricted cash as of December 31, 2022 and is included in our Consolidated Balance Sheets at December 31, 2022 as Other assets.