ACQUISITIONS

12 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Spectrum Pharmaceuticals

On the Effective Date, the Company completed the Spectrum Merger pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of April 24, 2023, through a merger of a wholly-owned subsidiary of the Company with and into Spectrum, with Spectrum surviving the merger as a wholly-owned subsidiary of the Company. The Company accounted for the Spectrum Merger using the acquisition method of accounting under ASC 805 and is considered the accounting acquirer.

Pursuant to the Merger Agreement, each issued and outstanding share of Spectrum common stock as of the Effective Date was converted into the right to receive (i) 0.1783 shares of the Company’s common stock and (ii) one CVR representing a contractual right to receive future conditional payments worth up to an aggregate maximum amount of $0.20, to be settled in cash, additional shares of Assertio common stock or a combination of cash and additional shares of Assertio common stock at the Company’s sole discretion, upon the achievement of certain sales milestones related to Spectrum’s product ROLVEDON. Subject to adjustments, each CVR represents the right to receive up to $0.10 payable upon ROLVEDON net sales (less certain deductions) achieving $175 million during the calendar year ending December 31, 2024, and up to $0.10 payable upon ROLVEDON net sales (less certain deductions) achieving $225 million during the calendar year ending December 31, 2025. In addition, upon consummation of the Spectrum Merger, Spectrum’s outstanding employee stock awards and other warrants that were outstanding immediately as of the Effective Date automatically vested (if unvested) and/or cancelled, as applicable, which generally resulted in the issuance of shares of the Company’s common stock and/or CVRs to the holders of such stock awards or other warrants, in each case as dictated by the terms of the Merger Agreement. These shares and CVRs issued are considered part of the consideration transferred, and no compensation expense was recognized because the settlement was a condition of the Merger Agreement and other existing individual agreements, no future performance is required by the holders, and the fair value of the shares and CVRs is equivalent to the fair value of the existing employee stock awards and other warrants.

The following table reflects the components of the consideration transferred in the Spectrum Merger (in thousands, except exchange ratio and per share data):







Assertio shares issued	38,013
Assertio closing price per share as of the Effective Date	$	5.69
Fair value of Assertio shares issued	$	216,294
Repayment of Spectrum's long-term debt(1)	32,647
CVRs (2)	3,932
Total fair value of consideration transferred	$	252,873

(1)Represents settlement of Spectrum’s existing long-term debt in connection with the close of the transaction. The Company concluded it did not assume the debt, therefore the amount paid to settle the debt has been accounted for and disclosed as part of the consideration transferred.

(2)Represents the fair value of 223,397 CVRs at $0.0176 per CVR issued to holders of Spectrum common stock, employee stock awards and warrants as of the Effective Date.

The CVRs represent a contingent consideration obligation measured at fair value and classified as liabilities on the Company’s Consolidated Balance Sheets. The fair value of the CVR contingent consideration is determined using a Monte Carlo simulation model under the income approach and is based on Level 3 inputs. Refer to Note 20, Fair Value, for additional information. Fair value is based on the probability of achievement of 2024 and 2025 annual ROLVEDON net sales milestones. Significant assumptions include the discount rate and the probability assigned to the achievement of the net sales milestones. Achievement of both the 2024 and 2025 annual ROLVEDON net sales milestones would obligate the Company to transfer a maximum of approximately $44.7 million of additional consideration. No additional consideration would be paid by the Company if neither the 2024 nor 2025 annual ROLVEDON net sales milestones are achieved.

The following table reflects the estimated preliminary fair values of the assets acquired and liabilities assumed at the Effective Date (in thousands) and is subject to final fair value determination. The fair values were based on management’s estimates and assumptions; however, the amounts shown are preliminary in nature and are subject to adjustment, including income tax related amounts, as additional information is obtained about facts and circumstances that existed as of the Effective Date. The final determination of the fair values of accrued liabilities and income tax assets and liabilities will be completed as soon as practicable, and within the measurement period of up to one year from the Effective date as permitted under GAAP. Any adjustments to provisional amounts that are identified during the measurement period will be recorded in the reporting period in which the adjustment is determined.




	Initial Preliminary Purchase Price Allocation to Fair Value		Adjustments to Purchase Price Allocation to Fair Value (2)		Adjusted Preliminary Purchase Price Allocation to Fair Value
Assets:
Cash and cash equivalents	$	34,600	$	—	$	34,600
Marketable securities	2,194		—		2,194
Accounts receivable	50,975		—		50,975
Inventories	22,244		61		22,305
Prepaid and other current assets	1,287		698		1,985
Property and equipment	100		—		100
Intangible assets	234,000		(13,500)		220,500
Other long-term assets	1,396		—		1,396
Total	$	346,796	$	(12,741)	$	334,055

Liabilities:
Accounts payable	$	10,108	$	—	$	10,108
Accrued rebates, returns and discounts	21,025		—		21,025
Accrued liabilities	36,509		(2,343)		34,166
Other current liabilities	784		—		784
Deferred taxes	34,250		(30,254)		3,996
Other long-term liabilities	11,103		—		11,103
Total	$	113,779	$	(32,597)	$	81,182

Total Spectrum net assets acquired (1)	$	233,017	$	19,856	$	252,873
Goodwill	$	19,856	$	(19,856)	$	—

(1)Application of the acquisition method required the Company to adjust Spectrum assets and liabilities as of the Effective Date, including certain liabilities for variable consideration associated with ROLVEDON, to reflect conformity of Spectrum’s accounting policies to those of Assertio. Liabilities assumed include certain bonuses owed to former Spectrum executives under the terms of existing employment agreements triggered by the consummation of the Spectrum Merger.

(2)Adjustments made to the preliminary purchase price allocation to fair value primarily reflect completion of studies and other analysis necessary to determine the income tax effects of the net identifiable assets acquired and further refinement of the assumptions used in the valuation supporting the ROLVEDON product rights. These adjustments did not materially impact the Consolidated Statement of Comprehensive (Loss) Income in any period.

The income approach was primarily used to value the acquired intangible assets, representing rights to Spectrum’s product ROLVEDON. Significant assumptions include the amount and timing of projected future cash flows; the discount rate selected to measure the inherent risk of future cash flows; and the assessment of the product’s life cycle and the competitive trends impacting the product. The ROLVEDON product rights will be amortized on a straight-line basis over its estimated useful life of 10 years.

Acquisition costs related to the Spectrum Merger were approximately $8.9 million for the year ended December 31, 2023. These costs are included within Selling, general and administrative expenses in the Consolidated Statement of Comprehensive (Loss) Income.

The following unaudited pro forma information represents the Company’s results of operations as if the Spectrum Merger had been completed as of January 1, 2022 (in thousands) and includes nonrecurring adjustments for additional costs of sales from the fair value step-up of inventories and transaction costs. The disclosure of pro forma net sales and net (loss) income does not purport to indicate the results that would actually have been obtained had the Spectrum Merger been completed on the assumed date for the periods presented, or which may be realized in the future. The unaudited pro forma information does not reflect any operating efficiencies or cost savings that may be realized from the integration of the acquisition.


	Year ended December 31,
	2023		2022
Net sales	$	192,513	$	167,638
Net (loss) income	$	(380,272)	$	15,286

Sympazan License Acquisition

On October 27, 2022, the Company, through its wholly-owned subsidiary, Otter Pharmaceuticals, LLC, completed a transaction to acquire an exclusive license for Sympazan® (clobazam) oral film and product inventory from Aquestive Therapeutics, Inc. (“Aquestive”). The terms of the definitive agreement included an upfront payment of $9.0 million and a $6.0 million milestone payment contingent upon allowance of an existing patent application which, at the date of the transaction, Aquestive was prosecuting. The patent allowance was granted in the fourth quarter of 2022; accordingly, the Company has paid in full the $6.0 million milestone payment. The Company is required to pay Aquestive cash royalties on a quarterly basis equal to 10% of the gross margin (defined within the definitive agreement) from sales of Sympazan. The Company also entered into a long-term supply agreement with Aquestive for Sympazan, the terms of which the Company has concluded are at market.

The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of Sympazan (in thousands):


Cash paid to Aquestive at closing	$	9,000
Milestone payment	6,000
Transaction costs	850
Total purchase price of assets acquired	$	15,850

The Sympazan license transaction was accounted for as an asset acquisition in accordance with ASC 805-50, as substantially all the fair value of the assets acquired was concentrated in a single identifiable asset, the Sympazan product rights. The Sympazan product rights acquired consist of the license for the Sympazan intellectual property, regulatory documentation, domain names, certain at-market contracts, and customers lists, and are considered a single asset as they are inextricably linked. The Company concluded that the contingent milestone payment and contingent royalty payments were not required to be accounted for as derivatives pursuant to scope exceptions in ASC 815 and therefore included the contingent milestone payment within, and excluded the contingent royalty payments from, the cost of the asset acquisition. The relative fair values of identifiable assets from the acquisition of Sympazan are based on estimates of fair value using assumptions that the Company believes are reasonable.

The following table summarizes the fair value of assets acquired in the acquisition of Sympazan (in thousands):


Inventories	$	1,300
Intangible assets (Sympazan product rights)	14,550
Total assets acquired	$	15,850

The Company determined that the acquired Sympazan product rights would be amortized over a 12-year period.