EAGLE PHARMACEUTICALS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

EAGLE PHARMACEUTICALS, INC.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
The following information should be read in conjunction with our unaudited
consolidated financial statements and the notes thereto included in this
Quarterly Report on Form 10-Q, or the Quarterly Report, and the audited
financial information and the notes thereto included in our Annual Report on
Form 10-K, which was filed with the Securities and Exchange Commission, or the
SEC, on March 7, 2022, or our Annual Report. This discussion and analysis
contains forward-looking statements that involve significant risks and
uncertainties. Our actual results, performance or experience could differ
materially from what is indicated by any forward-looking statement due to
various important factors, risks and uncertainties, including, but not limited
to, those set forth under "Risk Factors" included elsewhere in this Quarterly
Report. Such factors may be amplified by the COVID-19 pandemic and its current
or its potential impact on our business and the global economy. Unless otherwise
indicated or required by context, references throughout to "Eagle," the
"Company," "we," "our," or "us" refer to financial information and transactions
of Eagle Pharmaceuticals, Inc.


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Overview

We are an integrated pharmaceutical company focused on finding ways to help
medicines do more for patients. Along with our collaborators, we have the
capabilities to take a molecule from preclinical research through regulatory
approval and into the marketplace, including development, manufacturing and
commercialization of our products and product candidates. Our business model
applies our scientific expertise, proprietary research-based insights and
marketplace proficiency to identify challenging-to-treat diseases of the central
nervous system or metabolic critical care therapeutic areas as well as in
oncology. By focusing on patients' unmet needs, we strive to provide healthcare
professionals with urgently needed treatment solutions that are designed to
improve patient care and outcomes and create near- and long-term value for our
stakeholders, including patients and healthcare providers and our employees,
marketing partners, collaborators and stockholders.

Our science-based business model has a proven track record with the U.S. Food
and Drug Administration ("FDA") approval and commercial launches of six
products: PEMFEXY® (pemetrexed for injection), vasopressin, an A-rated generic
alternative to Vasostrict®, Ryanodex® (dantrolene sodium) ("Ryanodex"),
bendamustine ready-to-dilute ("RTD") 500ml solution ("Belrapzo"), and rapidly
infused bendamustine RTD ("Bendeka") and RTD ("Treakisym"). We market our
products through marketing partners and/or our internal direct sales force. We
market PEMFEXY, vasopressin, Ryanodex and Belrapzo, and Teva Pharmaceutical
Industries Ltd. ("Teva") markets Bendeka through its subsidiary Cephalon, Inc.
SymBio Pharmaceuticals Limited ("SymBio"), markets Treakisym, a RTD product, in
Japan.

We acquired Acacia Pharma Group plc ("Acacia") as of June 9, 2022, which added
two U.S. Food and Drug Administration ("FDA") approved new chemical entities
with patent protection, BARHEMSYS® (amisulpride for injection) and BYFAVO®
(remimazolam for injection). The addition of these two products expands our
presence in the acute care space, and we believe that our hospital-based
salesforce will have success commercializing these assets. Refer to Note 14 for
further details.

With several pipeline projects underway and the potential for product launches
over the next several years, we believe we have many growth opportunities ahead.
We believe that each of our pipeline projects currently has the potential to
enter the market as a first-in-class, first-to-file, first-to-market or
best-in-class product. In particular, we are applying our expertise to conduct
novel research regarding the potential for Ryanodex to address conditions
including acute radiation syndrome, traumatic brain injury/concussion and
Alzheimer's disease as well as investigations of compounds such as EA-114 (our
fulvestrant product candidate) for patients with HR-positive advanced breast
cancer. Our clinical development program also includes a license agreement with
Combioxin, SA under which the Company was granted exclusive, worldwide
development and commercialization rights to CAL02, a novel first-in-class
anti-infective agent for Phase 2b/3 development for the treatment of severe
pneumonia in combination with traditional antibacterial drugs and a license
agreement with AOP Orphan Pharmaceuticals GmbH, a member of the AOP Health Group
("AOP Orphan"), for the commercial rights to its product, landiolol in the
United States. Landiolol is a leading hospital emergency use product, which is
currently approved in Europe for the treatment of non-compensatory sinus
tachycardia and tachycardic supraventricular arrhythmias.

recent developments

Enalare Investment


On August 8, 2022, we and Enalare Therapeutics Inc. ("Enalare") entered into a
Securities Purchase Agreement, pursuant to which we have committed to provide
equity investments of up to $55 million in Enalare, subject to the completion of
certain development milestones (the "Purchase Agreement"). Concurrently with the
execution of the Purchase Agreement, we, Enalare and holders of all of the
outstanding capital stock, and any securities or options exercisable for capital
stock, of Enalare (the "Securityholders") entered into a Security Purchase
Option Agreement, pursuant to which we were granted an option (the "Purchase
Option") to acquire all of the remaining outstanding shares of Enalare other
than those that we already own, subject to the terms and conditions of the
agreement (the "Option Agreement"). The term of the Purchase Option (the "Option
Period") commenced on August 8, 2022 and will end upon the earlier of (x) 90
days following the FDA communication of proceed to clinical for a Phase 3
clinical study for a Product Candidate or (y) June 30, 2027. Enalare shall not
initiate Phase 3 pivotal studies prior to the end of the Option Period and we
shall have reasonable access to all relevant data and documents following the
Phase 3 Milestone (as defined in the Option Agreement).

ENA-001 is an investigational, portfolio of novel new chemical entities being
developed by Enalare as an agnostic respiratory stimulant for multiple patient
populations experiencing acute respiratory depression. The initial targeted
indications include post-operative respiratory depression; community drug
overdose; and Apnea of Prematurity, a common condition in preterm infants. FDA
granted Orphan Drug Designation to ENA-001 for the treatment of Apnea of
Prematurity ("AoP"). AoP is a development disorder attributed to immaturity of
the pulmonary system characterized by either cessation of breathing for more
than 20 seconds or cessation of breathing that lasts less than 20 seconds but is
accompanied by either bradycardia or hypoxemia.

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Third Amended and Restated Credit Agreement
On November 1, 2022, we entered into the Third Amended and Restated Credit
Agreement (the "Third Amended Credit Agreement"), with JPMorgan Chase Bank,
N.A., as administrative agent (the "Administrative Agent") and the lenders party
thereto, which replaced our existing credit agreement, dated as of November 8,
2019 (the "Prior Credit Agreement"). The terms and amounts borrowed under the
Third Amended Credit Agreement includes a drawn term loan of $50 million and a
$100 million revolving credit facility of which $15.0 million was drawn on
November 1, 2022. In addition, approximately $35.4 million of the proceeds of
the credit facility were used to refinance all amounts outstanding under the
Prior Credit Agreement, and we currently intend to use the remaining proceeds to
repay certain indebtedness of our wholly-owned subsidiary, Acacia Pharma Group
Limited, and for other corporate purposes. The new maturity date of the schedule
of principal payments for each of the revolving credit facility and the term
loan facility is October 31, 2025, unless required to mature earlier or extended
pursuant to the terms of the Third Amended Credit Agreement.

Acacia acquisition


On June 9, 2022, we completed the acquisition of Acacia Pharma Group plc
("Acacia"), formerly a public company organized under the laws of England and
Wales. The acquisition added two FDA approved currently marketed, acute care,
hospital products, both of which are new chemical entities with strong patent
protection:

•BARHEMSYS (amisulpride injection), the first and only FDA-approved antiemetic for the salvage treatment of postoperative nausea and vomiting, and


•BYFAVO (remimazolam for injection), indicated for the induction and maintenance
of procedural sedation in adults undergoing procedures lasting 30 minutes or
less.


Landiolol
On June 1, 2022, we announced that AOP Orphan, with whom we entered into a
licensing agreement in August 2021, submitted an NDA to the FDA for landiolol, a
short-acting, intravenous ("IV"), cardio-selective beta-1 adrenergic blocker.
The submission seeks approval for landiolol for the short-term reduction of
ventricular rate in patients with supraventricular tachycardia ("SVT"),
including atrial fibrillation and atrial flutter. The FDA's decision with
respect to approval is expected in mid-2023. Patient enrollment for a study of
pediatric patients with supraventricular tachycardia is underway in Europe.

PEMFEXY

On February 1, 2022, we announced the commercial availability of our novel
product PEMFEXY® (pemetrexed for injection). A branded alternative to ALIMTA®,
Eagle's PEMFEXY is a ready-to-use liquid with a unique J-code approved to treat
nonsquamous non-small cell lung cancer and mesothelioma.

In February 2020, Eagle received final approval from the FDA of its New Drug
Application ("NDA") for PEMFEXY, following the settlement agreement of patent
litigation with Eli Lilly and Company (NYSE: LLY) in December 2019. The
agreement provided for a release of all claims by the parties and allows for an
initial entry of PEMFEXY into the market (equivalent to approximately a
three-week supply of current ALIMTA utilization) on February 1, 2022 and a
subsequent uncapped entry on April 1, 2022.

vasopressin

In January 18, 2022We announced the commercial availability of our newly approved product, Vasopressin, an A-rated generic alternative to Vasostrict®.


On December 15, 2021, the FDA approved Eagle's abbreviated new drug application
("ANDA") for vasopressin, a product that is indicated for use to increase blood
pressure in adults with vasodilatory shock (e.g., post-cardiotomy or sepsis) who
remain hypotensive despite fluids and catecholamines.

TREAKISYM


Eagle's bendamustine franchise continues to grow, including the launch of the
TREAKISYM ready-todilute ("RTD") formulation in Japan in the first quarter of
2021. Together with a potential approval of the rapid infusion ("RI") (50ml)
liquid formulation.

Fulvestrant

Based on discussions with the FDA, we reformulated and began pilot human studies of our product candidate fulvestrant for the treatment of HR+/HER- advanced breast cancer.

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CAL02


We submitted an IND to the FDA for CAL02, a novel first-in-class broad-spectrum
anti-virulence agent for the treatment of severe community-acquired bacterial
pneumonia ("SCABP"). The IND filing includes a protocol for a global Phase 2
study to evaluate the efficacy and safety of CAL02 when added to standard of
care therapy in patients with SCABP.

We expect to start a Phase 2b/3 clinical trial for CAL02 patients later in 2022,
during pneumonia season. In August 2021, we entered into a license agreement
with Combioxin SA under which we were granted exclusive, worldwide development
and commercialization rights to CAL02, a novel approach to the treatment of
severe bacterial pneumonia.

Bendeka settlement


On April 19, 2022, we entered into a definitive settlement agreement, or the
Settlement Agreement, with Hospira, Inc., or Hospira, relating to our product
BENDEKA® (rapidly infused bendamustine hydrochloride). This settlement resolves
patent litigation brought by us and our marketing partners Teva Pharmaceuticals
International, GmbH and Cephalon, Inc. relating to the alleged infringement of
Orange Book listed United States Patent Nos. 11,103,483 and 9,572,887, or the
Asserted Patents, with respect to Hospira's 505(b)(2) NDA, No. 211530. Pursuant
to the terms of the Settlement Agreement, we will grant Hospira a license to
market Hospira's product made under NDA No. 211530 in the United States
beginning on January 17, 2028 (subject to FDA approval), or earlier under
certain circumstances. Additionally, in accordance with the Agreement, the
parties will terminate all ongoing litigation among us, Teva Pharmaceuticals
International, GmbH and Cephalon, Inc. and Hospira regarding the Asserted
Patents pending in the United States District Court for the District of
Delaware. The Agreement is confidential and subject to review by the U.S.
Federal Trade Commission and the U.S. Department of Justice.

COVID-19 Business Update


In response to the ongoing COVID-19 pandemic, we have taken and continue to take
active measures designed to address and mitigate the impact of the COVID-19
pandemic on its business, such as remote working policies, facilitating
management's daily communication to address employee and business concerns and
providing frequent updates to the Board. While we have experienced variable
financial and operational impacts to date, the ongoing COVID-19 pandemic,
including the global economic slowdown, government measures taken in response
thereto, the overall disruption of global healthcare systems and other risks and
uncertainties associated with the pandemic, could materially adversely affect
our business, financial condition, results of operations and growth prospects.
We continue to closely monitor the COVID-19 pandemic as we evaluate and evolve
our business plans and response strategy. The impact of the COVID-19 pandemic on
our business and financial condition is more fully described below in Trends and
Uncertainties.

In addition, we continue to monitor the impacts of other global and worsening macroeconomic conditions, such as global geopolitical tension, rising inflation and interest rates, exchange rate fluctuations, supply chain disruptions, and increases in prices of basic products, energy and fuel.

Update of other businesses


In addition, the U.S. government and other nations have imposed significant
restrictions on most companies' ability to do business in Russia as a result of
the ongoing military conflict between Russia and Ukraine. It is not possible to
predict the broader or longer-term consequences of this conflict, which could
include further sanctions, embargoes, regional instability, geopolitical shifts
and adverse effects on macroeconomic conditions, security conditions, currency
exchange rates and financial markets. Such geopolitical instability and
uncertainty could have a negative impact on our ability to further expand our
business and to otherwise generate revenues and develop our product candidates.
In addition, a significant escalation or expansion of economic disruption or the
conflict's current scope could have a material adverse effect on our business,
financial condition, results of operations and growth prospects.

Summary of financial operations

Income

Our income consists of product sales, royalty and license income, and other income.

Sale of products. Through September 30, 2022, we have recognized revenue from sales of products including Pemfexy, Vasopressin, Ryanodex, Belrapzo, Bendeka, Treakisym, BARHEMSYS and BYFAVO. Sales of Bendeka and Treakisym were made to our business partners, Teva and SymBio, respectively. Sales to our business partners are generally made at little or no profit for resale. Pemfexy, vasopressin, Ryanodex Belrapzo, BARHEMSYS, and BYFAVO were sold directly to wholesalers, hospitals, and surgery centers through a third-party logistics partner.

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We typically enter into agreements with group purchasing organizations acting on
behalf of their hospital members, in connection with the hospitals' purchases of
our direct commercial products. Based on these agreements, most of our hospital
customers have contracted prices for products and volume-based rebates on
product purchases. These amounts are estimated and recorded at the time of sale.
In the case of discounted pricing, we typically provide a chargeback,
representing the difference between the price invoiced to the wholesaler and the
customer contract price.

Royalty Revenue. We recognize revenue from royalties based on a percentage of
Teva's net sales of Bendeka and Symbio's net sales of Treakisym, net of
discounts, returns and allowances incurred by our commercial partners. Royalty
revenue is recognized as earned in accordance with contract terms when it can be
reasonably estimated and collectability is reasonably assured.

License and Other Revenue. Our revenues may either be in the form of the
recognition of deferred revenues upon milestone achievement for which cash has
already been received or recognition of revenue upon milestone achievement for
which the payment for which is reasonably assured to be received in the future.

The main factors that determine our income derived from Bendeka are:

•the level of orders shipped by our business partner, Teva;

•the rate at which Teva can convert the current market to Bendeka;

•the level of institutional demand for Bendeka;

•unit sales prices charged by Teva, net of any sales reserves; Y

•the level of orders sent to Teva by wholesalers, hospitals and surgical centers.

The main factors that determine our income derived from Treakisym are:

•the level of orders shipped by our business partner, SymBio;

•the level of institutional demand for Treakisym; Y

• unit sales prices charged by SymBio, net of any sales reserves.

The main factors that may determine our revenue from Pemfexy, Vasopressin, Ryanodex, Belrapzo, BARHEMSYS, BYFAVO and our future products are:

•the effectiveness of our sales force;

•the level of orders submitted by wholesalers, hospitals and surgical centers;

•the level of institutional demand for our products; Y

• unit sales prices, net of any sales reserves.

Cost of Revenue


Cost of revenue consists of the costs associated with producing our products for
our commercial partners. In particular, our cost of revenue includes production
costs of our products paid to a contract manufacturing organization coupled with
shipping and customs charges, cost of royalty and the amortization of intangible
assets. Cost of revenue may also include the effects of product recalls, if
applicable.


Research and Development

Costs for research and development are charged to expenses as incurred and
include: employee-related expenses including salaries, benefits, travel and
stock-based compensation expense for research and development personnel;
expenses incurred under agreements with contract research organizations,
contract manufacturing organizations and service providers that assist in
conducting clinical and preclinical studies; costs associated with preclinical
activities and development activities; costs associated with regulatory
operations; and depreciation expense for assets used in research and development
activities.

Costs for certain development activities, such as clinical studies, are
recognized based on an evaluation of the progress to completion of specific
tasks using data such as patient enrollment, clinical site activations, or
information provided to the Company by its vendors on their actual costs
incurred. Payments for these activities are based on the terms of the individual
arrangements, which may differ from the patterns of costs incurred, and are
reflected in the condensed consolidated financial statements as prepaid expenses
or accrued expenses as deemed appropriate. Recoveries of previously recognized
research and development expenses from third parties are recorded as a reduction
to research and development expense in the period it becomes realizable.


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General and administrative salesman


Selling, general and administrative costs consist of employee-related costs
including salaries, benefits and other related costs, stock-based compensation
for executive, finance, sales and operations personnel. Selling, general and
administrative expenses also include facility and related costs, professional
fees for legal, consulting, tax and accounting services, insurance, selling,
marketing, market research, advisory board and key opinion leaders, depreciation
and general corporate expenses.


Income taxes


We account for income taxes using the liability method in accordance with
Financial Accounting Standards Board Accounting Standards Codification Topic 740
- Income Taxes, or ASC 740.  Deferred tax assets and liabilities are determined
based on temporary differences between financial reporting and tax bases of
assets and liabilities and are measured by applying enacted rates and laws to
taxable years in which differences are expected to be recovered or settled.
Further, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income (loss) in the period that the rate changes.  A
valuation allowance is required when it is "more likely than not" that all or a
portion of deferred tax assets will not be realized. ASC 740 also prescribes a
comprehensive model for how a company should recognize, measure, present and
disclose in its financial statements uncertain tax positions that it has taken
or expects to take on a tax return, including a decision whether to file or not
file a return in a particular jurisdiction.  We recognize any interest and
penalties accrued related to unrecognized tax benefits as income tax expense.

The provision for income taxes was based on the applicable federal and state tax
rates for those periods. The effective tax rate for the three months ended
September 30, 2022 reflects certain non-deductible executive compensation,
partially offset by credits for research and development activity. The effective
tax rate for the three months ended September 30, 2021 reflects the impact of a
valuation allowance established and adjusted for the fair value adjustments on
our investment in Syros Pharmaceuticals, Inc. ("Syros"), following the merger of
Tyme Technologies, Inc. ("Tyme") and Syros on September 16, 2022, certain
non-deductible executive compensation and changes in state filing positions,
partially offset by credits for research and development activity.

Results of Operations

Comparison of three months ended September 30, 2022 and 2021

Revenues

                                  Three Months Ended
                                    September 30,
                                  2022           2021        Increase / (Decrease)
                                                  (in thousands)
Product sales, net            $   38,086      $ 12,124      $               25,962
Royalty revenue                   24,007        27,729                      (3,722)
License and other revenue          3,808             -                       3,808
Total revenue                 $   65,901      $ 39,853      $               26,048



Our product sales increased $26 million during the three months ended September
30, 2022 as compared to the three months ended September 30, 2021. The increase
was primarily attributable to product sales of $13.8 million for vasopressin and
product sales of Pemfexy of $1.7 million, each of which launched in the first
quarter of 2022. We also had higher product sales for Ryanodex, Bendeka, and
Belrapzo of $3.1 million, $3.0 million and $3.6 million, respectively, primarily
driven by volume increases. Product sales for the three months ended September
30, 2022 also included our recently acquired Barhemsys and Byfavo products,
which totaled $0.8 million.

Our royalty revenue decreased $3.7 million during the three months ended
September 30, 2022 as compared to the three months ended September 30, 2021,
primarily as a result of a decrease in royalty revenue from our share of Teva's
Bendeka sales.

During the three months ended September 30, 2022, we earned a sales milestone of
$3.8 million from Symbio related to a contractual milestone for aggregate net
sales of Treakisym.

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Cost of revenue

                              Three Months Ended
                                September 30,
                              2022           2021        Increase
                                       (in thousands)
Cost of product sales     $    20,869      $ 5,486      $ 15,383
Cost of royalty revenue         2,782        2,773             9
Total cost of revenue     $    23,651      $ 8,259      $ 15,392



Our cost of product sales increased by $15.4 million during the three months
ended September 30, 2022 as compared to the three months ended September 30,
2021. This was primarily attributable to the cost of product sales of
vasopressin of $7.1 million, which launched in 2022. There were also increases
of $2.7 million in Bendeka and $1.2 million in Belrapzo cost of product sales
resulting from higher unit sales. We also recorded $2.9 million of amortization
expenses related to intangible assets acquired with Acacia in June 2022.

Our cost of royalty revenue was almost unchanged during the three months ended
September 30, 2022 as compared to the three months ended September 30, 2021 and
included royalties we paid on our bendamustine franchise products. This was
primarily attributable to costs related to the royalty revenue for Treakisym.

Research and development The following table details the Company’s research and development expenses by significant project for the periods presented.


                                                          Three Months Ended September 30,             Increase /
                                                             2022                    2021              (Decrease)
                                                                             (in thousands)
Fulvestrant                                           $          1,676          $       729          $       947
Vasopressin                                                         13                2,086               (2,073)
Ryanodex related projects                                           80                    -                   80
CAL02                                                            3,351               10,000               (6,649)
Landiolol                                                          214                5,000               (4,786)
Pemfexy                                                              -                1,386               (1,386)
All other projects                                                 690                  602                   88
Salary and other personnel related costs                         3,302                3,486                 (184)
Research and development                              $          9,326      

$23,289 $(13,963)




Our research and development expenses decreased $14.0 million during the three
months ended September 30, 2022 as compared to the three months ended September
30, 2021. The decrease was primarily due to lower spend of $6.6 million on CAL02
and $4.8 million on landiolol due to the upfront license fees paid in Q3 2021
and non-recurrence of development costs of $2.1 million on vasopressin and $1.4
million on PEMFEXY. This was partially offset by an increase in spend on
fulvestrant of $0.9 million compared to the three months ended September 30,
2021.
Selling, general and administrative

                                           Three Months Ended
                                             September 30,
                                           2022           2021        Increase
                                                    (in thousands)

General and administrative salesman $23,462 $18,482 $4,980




Our selling, general and administrative expenses increased $5.0 million during
the three months ended September 30, 2022 as compared to the three months ended
September 30, 2021. This increase was primarily related to $1.1 million of
external sales and marketing and $1.2 million of headcount costs for BARHEMSYS
and BYFAVO re-launches, $1.1 million of financial and
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other professional fees, $0.6 million compensation related to the integration of Acacia, $0.5 million external court costs, and $0.2 million of PEMFEXY’s sales and marketing costs, partially offset by lower general and administrative personnel costs.

Other expense, net

                                Three Months Ended
                                  September 30,
                                2022           2021        Increase
                                         (in thousands)
Interest income             $     (444)     $    197      $    (641)
Interest expense                (1,147)         (396)          (751)

Other expense                  (11,534)       (2,284)        (9,250)
Total other expense, net    $  (13,125)     $ (2,483)     $ (10,642)



Our interest income decreased by $0.6 million for the three months ended
September 30, 2022 as compared to the three months ended September 30, 2021.
This increase was primarily due to write-off $0.5 million of interest receivable
associated with the convertible promissory note which was written-off during the
third quarter 2022.

Our interest expense increased by $0.8 million for the three months ended
September 30, 2022 as compared to the three months ended September 30, 2021.
This increase was due to our higher level of outstanding debt during the three
months ended September 30, 2022.

Our other expense was a net expense of $11.5 million for the three months ended
September 30, 2022 as compared to a net expense of $2.3 million for the three
months ended September 30, 2021. The change was primarily due to a $6.4 million
loss related to foreign exchange losses and forward contracts settled during the
period, and a $4.2 million loss related to fair value adjustments related to a
promissory note write off, partially offset by small gain related to fair value
adjustments on our investment in Syros during the three months ended September
30, 2022.

Income tax provision

                                               Three Months Ended September 30,
                                               2022                              2021
                                                        (in thousands)
(Provision) benefit for income taxes   $         (3,468)                      $ 7,038
Effective tax rate                                  (95)  %                        56  %



Our effective tax rate for the three months ended September 30, 2022, reflects
an interim tax provision resulting from the impact of certain non-deductible
executive compensation and the impact of certain non-deductible costs from the
acquisition of Acacia. The effective tax rate for the three months ended
September 30, 2021 reflects the impact of a valuation allowance established and
certain non-deductible executive compensation, partially offset by credits for
research and development activity.

Comparison of Nine Months Ended September 30, 2022 and 2021
Revenues
                                                  Nine Months Ended September 30,             Increase /
                                                     2022                   2021              (Decrease)
                                                                     (in thousands)
Product sales, net                            $        177,375          $   48,865          $    128,510
Royalty revenue                                         74,728              80,361                (5,633)
License and other revenue                                3,808                   -                 3,808
Total revenue                                 $        255,911          $  129,226          $    126,685



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Our product sales increased $128.5 million in the nine months ended September
30, 2022 as compared to the nine months ended September 30, 2021. The increase
was primarily attributable to product sales of Pemfexy and vasopressin, which
each launched in the first quarter of 2022, which combined for $114.9 million of
product sales, net. We also had higher product sales of Bendeka of $4.5 million,
Belrapzo of $4.2 million, each due to unit volume, and Ryanodex of $3.6 million
due to volume and price increases.

Our royalty revenue decreased $5.6 million in the nine months ended September
30, 2022 as compared to the nine months ended September 30, 2021, primarily as a
result of lower royalties on Teva's sales of Bendeka of $9.3 million, which were
partially offset by royalties on Symbio's sales of Treakisym of $3.7 million.

During the nine months that ended September 30, 2022we achieved a sales milestone of
$3.8 million of Symbio related to sales of Treakisym.

Cost of revenue

                                                             Nine Months Ended September 30,             Increase /
                                                                2022                   2021              (Decrease)
                                                                                (in thousands)
Cost of product sales                                    $         67,216          $   21,835          $     45,381
Cost of royalty revenue                                             7,854               8,036                  (182)
Total cost of revenue                                    $         75,070          $   29,871          $     45,199



Our cost of product sales increased $45.4 million in the nine months ended
September 30, 2022 as compared to the nine months ended September 30, 2021. This
was primarily attributable to the product launches of Pemfexy and vasopressin in
2022, which combined for cost of sales of $34.4 million in the nine months ended
September 30, 2022, as well as increases of $4.4 million for Bendeka and $1.8
million for Belrapzo, each related to higher unit sales. We also recorded $3.6
million of amortization expenses related to intangible assets acquired with
Acacia in June 2022.

Our cost of royalty income decreased $0.2 million in the nine months ended
September 30, 2022 compared to the nine months ended September 30, 2021, primarily as a result of a decrease in royalty income on sales of Bendeka by Teva. Partially offset by higher royalty cost associated with Treakisym.


Research and development

                                                     Nine Months Ended September 30,          Increase /
                                                         2022                2021             (Decrease)
                                                                        (in thousands)
Fulvestrant                                          $    8,594          $   5,207          $     3,387
Vasopressin                                                (591)             7,297               (7,888)
Ryanodex related projects                                   512              3,625               (3,113)
CAL02                                                     6,737             10,000               (3,263)
Landiolol                                                   367              5,000               (4,633)
Pemfexy                                                     (56)             2,502               (2,558)
All other projects                                        1,425              2,475               (1,050)
Salary and other personnel related costs                  9,883             11,382               (1,499)
Research and development                             $   26,871          $  47,488          $   (20,617)



Our research and development expenses decreased $20.6 million in the nine months
ended September 30, 2022 as compared to the nine months ended September 30,
2021. The decrease primarily resulted from non-recurrence of development costs
of $7.9 million for vasopressin, $3.1 million for Ryanodex related projects,
$2.6 million related to Pemfexy and $1.5 million total decrease in salaries,
bonus, severance, included with salary and other personnel related costs.
Coupled with decreases for $3.3
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million for the CAL02 project and $4.6 million for Landiolol projects. These decreases were partially offset by an increase in $3.4 million in the fulvestrant project.

General and administrative salesman

                                                        Nine Months Ended September 30,
                                                           2022                   2021              Increase
                                                                          (in thousands)
Selling, general and administrative                 $         82,476        

$54,997 $27,479




Our selling, general and administrative expenses increased $27.5 million in the
nine months ended September 30, 2022 as compared to the nine months ended
September 30, 2021. The increase is primarily related to $9.8 million of
professional fees related to the Acacia acquisition, $8.2 million of severance
related to the integration of Acacia, $4.7 million of external legal costs, $2.0
million of increased salaries and bonus for increased in salesforce headcount,
and $1.9 million of sales and marketing costs for Pemfexy, partially offset by a
decrease in stock compensation expense of $2.2 million.

Other expense, net
                                                     Nine Months Ended September 30,           (Decrease) /
                                                         2022                2021                Increase
                                                                         (in thousands)
Interest income                                     $       (46)         $      395          $        (441)
Interest expense                                         (2,065)             (1,240)                   825

Other expense                                           (21,254)             (1,797)               (19,457)
Total other expense, net                            $   (23,365)         $  

(2,642) $(20,723)




Our interest income decreased $0.4 million in the nine months ended September
30, 2022 as compared to the nine months ended September 30, 2021. This decrease
was primarily due to the impairment of $0.5 million of interest receivable
associated with the convertible promissory note which was impaired during the
third quarter 2022.

Our interest expense increased $0.8 million in the nine months ended September
30, 2022 as compared to the nine months ended September 30, 2021. This increase
was due to higher outstanding debt during the nine months ended September 30,
2022.

Our other expense was a net expense amount of $21.3 million for the nine months
ended September 30, 2022 as compared to the net expense of $1.8 million for the
nine months ended September 30, 2021. The change was primarily due to a $12.8
million loss related to foreign exchange losses and a forward contract settled
during the period and $3.2 million loss related to fair value adjustments on our
investment in Syros during the nine months ended September 30, 2022.

Income tax provision
                                               Nine Months Ended September 30,
                                               2022                            2021
                                                       (in thousands)
(Provision) benefit for income taxes   $        (20,652)                    $ 3,341
Effective tax rate                                   43   %                      58  %



The effective tax rate for the nine months ended September 30, 2022, reflects an
interim tax provision resulting from impact of certain non-deductible executive
compensation and the impact of certain non-deductible costs from the acquisition
of Acacia, partially offset by credits for research and development activity.

Liquidity and Capital Resources

Our main sources of liquidity are our cash and cash equivalents, cash flows from operations and the availability of loans.

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under our revolving credit facility. Our primary uses of cash are to fund
working capital requirements, including repayment of debt, product development
costs and operating expenses. We may also use cash for business acquisitions or
other strategic transactions, such as in our acquisition of Acacia. Cash and
cash equivalents were $15.4 million and $99.7 million as of September 30, 2022
and September 30, 2021, respectively.

On November 1, 2022, we entered into the Third Amended and Restated Credit
Agreement ("Third Amended Credit Agreement"),with the Administrative Agent and
the lenders party thereto, which replaced the Prior Credit Agreement. The terms
and amounts borrowed under the Third Amended Credit Agreement include a drawn
term loan of $50 million and a $100 million revolving credit facility of which
$15.0 million was drawn on November 1, 2022. In addition, approximately $35.4
million of the proceeds of the credit facility were used to refinance all
amounts outstanding under the Prior Credit Agreement, and we currently intend to
use the remaining proceeds to repay certain indebtedness of our wholly-owned
subsidiary, Acacia Pharma Group Limited, and for other corporate purposes. The
new maturity date of the schedule of principal payments for each of the
revolving credit facility and the term loan facility is October 31, 2025, unless
required to mature earlier or extended pursuant to the terms of the Third
Amended Credit Agreement.

For the nine months ended September 30, 2022We generated a net income of $27.5 million. From September 30, 2022our working capital surplus was $63.2 million.


We believe that our cash and cash equivalents and future cash flows from
operations will be sufficient to fund our currently anticipated working capital
requirements for at least the next 12 months. We believe we will be able to meet
our expected future cash and working capital requirements through a combination
of cash flows from operations, cash and cash equivalents, availability of
borrowings under our revolving credit facility and additional funding in the
capital markets, if needed. We have based this estimate on assumptions that may
prove to be wrong.

We may opportunistically seek access to additional capital to fund potential
licenses, acquisitions or investments to expand our operations or for general
corporate purposes. Raising additional capital could be accomplished through one
or more public or private debt or equity financings, collaborations or
partnering arrangements. As a result of the COVID-19 pandemic, as well as the
ongoing military conflict between Russia and Ukraine and the related sanctions
imposed against Russia and countermeasures related thereto in addition to
macroeconomic conditions including rising inflation, the global credit and
financial markets have experienced significant volatility and disruption. If
these market conditions persist and deepen, we could experience an inability to
access additional capital or our liquidity could otherwise be impacted, which
could in the future negatively affect our capacity for certain corporate
development transactions or our ability to make other important, opportunistic
investments or acquisitions. An inability to borrow or raise additional capital
in a timely manner and on attractive terms could prevent us from expanding our
business or taking advantage of acquisition opportunities, and could otherwise
have a material adverse effect on our business and growth prospects. In
addition, if we use a substantial amount of our funds for any such potential
acquisition or investment activities, we may not have sufficient additional
funds to conduct all of our operations in the manner we would otherwise choose.
Furthermore, any equity financing would be dilutive to our shareholders, and any
financing could require the consent of the lenders under our credit facility.

The COVID-19 pandemic has disrupted and continues to disrupt the U.S. healthcare
system, global economies and global capital markets. There are significant
uncertainties surrounding the full extent and duration of the impact of the
COVID-19 pandemic, geopolitical and macroeconomic conditions on our business and
operations. We have experienced variable financial impacts to date, as a result
of the COVID-19 pandemic and the ongoing pandemic could have a material adverse
impact on our financial condition and results of operations in the future,
including our ability to obtain financing when and if needed. The impact of
COVID-19 on our business and financial condition is more fully described below
in Trends and Uncertainties.

Operating Activities:

Net cash used in operating activities for the nine months ended September 30,
2022 was $13.1 million. Net income for the period was $27.5 million enhanced by
the net of non-cash adjustments of approximately $31.2 million from deferred
income taxes, depreciation expense, amortization expense of right-of-use assets,
amortization expense of intangible assets, fair value adjustments on equity
investment, stock-based compensation expense, amortization of debt issuance
costs, foreign exchange gains and losses, and other items. Net changes in
working capital decreased cash from operating activities by approximately $46.4
million, due to changes in working capital accounts. The total amount of
accounts receivable at September 30, 2022 was approximately $96.9 million, which
included $69.1 million related to product sales and $27.8 million related to
royalty revenue. Receivables from our product sales have payment terms ranging
from 30 to 75 days with select extended terms to wholesalers on initial
purchases of product launch quantities. Our receivables from royalty revenue are
due 45 days from the end of the quarter.

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Investment activities:


Net cash used in investing activities for the nine months ended September 30,
2022 was $86.8 million, primarily as a result of our acquisition of Acacia
coupled with an equity investment in Enalare of $12.5 million and $0.2 million
for purchases of property and equipment.

Financing activities:


Net cash used in financing activities for the nine months ended September 30,
2022 was $8.6 million, as a result of $6 million of principal payments for debt
required by our Prior Credit Agreement, $18 million in payments related to the
repurchases of our common stock, $1.3 million of payments associated with
employee withholding tax upon vesting of stock-based awards, offset by $15
million from a drawdown from our revolving credit facility under the Credit
Agreement coupled with $1.7 million in proceeds received from the exercise of
employee stock options.

Trends and Uncertainties

During the three and nine months ended September 30, 2022, we have experienced a
variable impact on our business and financial condition due to the COVID-19
pandemic. We also incurred an insignificant amount of incremental administrative
costs related to the COVID-19 pandemic. The COVID-19 pandemic, including
containment and mitigation measures, has impacted, and is expected to continue
to impact, our business and operations in a number of ways, including:
•Day-to-Day Operations: During the second quarter of 2021, we developed and
implemented plans to resume in-person work practices while adhering to relevant
health authority guidance, for certain of our employees, including
customer-facing employees, that had been primarily working remotely. We may
incur additional expenses in 2022 related to the impact of the COVID-19 pandemic
on our operations, including updates to our facilities to align with safety
protocols.
•Manufacturing and Supply Chain: We are working closely with our commercial
partners and third-party manufacturers to mitigate potential disruptions as a
result of the COVID-19 pandemic by continuing to monitor the supply and
availability of Bendeka, Ryanodex, and Belrapzo, Treskysim, Pemfexy,
vasopressin, Barhemsys, and Byfavo for the patients who rely on these products.
We anticipate that the COVID-19 pandemic will continue to delay our supply chain
and marketing and sales efforts for certain of our products, including Bendeka,
although it is not currently expected that any disruption would be material. If
the COVID-19 pandemic continues to persist for an extended period of time and
impacts essential distribution systems such as FedEx and postal delivery, we
could experience future disruptions to our supply chain and operations, and
associated delays in the manufacturing and our clinical supply, which would
adversely impact our development activities.
•Marketing and Sale of Products: In addition to the impact on our product
revenues resulting in a decrease in sales from Belrapzo, driven, in part, by the
COVID-19 pandemic, we have also observed a reduction in the number of Bendeka
patients visiting infusion centers, hospitals and clinics for intravenous
administration of Bendeka due to interruptions in healthcare services, and the
patients' inability to visit administration sites as well as desire to avoid
contact with infected individuals. In addition, our sales and marketing teams
have been working remotely and our virtual initiatives with respect to marketing
and supporting the sale and administration of our products have not been as
effective as our in-person sales and marketing activities.
•Liquidity and Capital Resources: We believe that our future cash and cash
equivalents and availability of borrowings under our Third Amended Credit
Agreement flows from operations will be sufficient to fund our currently
anticipated working capital requirements for the next 12 months. We have based
this estimate on assumptions that may prove to be wrong While the COVID-19
pandemic has not had, and we do not expect it to have, a material adverse effect
on our liquidity, the situation continues to evolve and has already resulted in
a significant disruption of global financial markets. If the disruption persists
or deepens, we could experience an inability to access additional capital when
and if needed. If we are unable to obtain funding, we could be forced to delay,
reduce or eliminate distribution of our commercialized products, product
portfolio expansion or some or all of our research and development programs,
which would adversely affect our business prospects. We expect to be able to
obtain future funding under the terms of the Third Amended Credit Agreement, for
general corporate purposes and any strategic acquisitions.
•Regulatory Activities: We may experience further delays in the review and/or
our interactions with FDA due to, for example, absenteeism by governmental
employees, inability to conduct planned physical inspections related to
regulatory approval, or the diversion of FDA's efforts and attention to approval
of other therapeutics or other activities related to the COVID-19 pandemic,
which could further delay approval decisions with respect to regulatory
submissions or obtain new product approvals.
•Clinical Development Timelines: The clinical trial timelines for certain of our
product candidates have been delayed given difficulties with limited patient
enrollment resulting from the impact of the COVID-19 pandemic, and we expect
that our clinical trial timelines will continue to be impacted for the duration
of the pandemic.

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There are significant uncertainties surrounding the extent and duration of the
impact of the COVID-19 pandemic on our business and operations. We continue to
evaluate the impact of the COVID-19 pandemic on our operating results and
financial condition. The COVID-19 pandemic has had a variable impact on our
results of operations during the three and nine months ended September 30, 2022
and, it could have a material adverse impact on our financial condition and
results of operations in the future.

In addition, the U.S. government and other nations have imposed significant
restrictions on most companies' ability to do business in Russia as a result of
the ongoing military conflict between Russia and Ukraine. It is not possible to
predict the broader or longer-term consequences of this conflict, which could
include further sanctions, embargoes, regional instability, geopolitical shifts
and adverse effects on macroeconomic conditions, security conditions, currency
exchange rates and financial markets. Such geopolitical instability and
uncertainty could have a negative impact on our ability to further expand our
business and to otherwise generate revenues and develop our product candidates.
In addition, a significant escalation or expansion of economic disruption or the
conflict's current scope could have a material adverse effect on our business,
financial condition, results of operations and growth prospects.
We continue to monitor the impacts of other global and worsening macroeconomic
conditions, such as global geopolitical tension, increasing inflation and
interest rates, exchange rate fluctuations, supply chain disruptions and
increases in commodity, energy and fuel prices.

Contractual obligations

Other than as set out below, there have been no material changes to our contractual and business obligations during the nine months ended September 30, 2022compared to the obligations disclosed in our Annual Report.

Our future material contractual obligations included the following as of
September 30, 2022 (in thousands):

Obligations                         Total               2022              2023              2024              2025                        Beyond
Operating leases (1)             $   3,621          $     414          $  1,672          $  1,122          $   413                      $      -
Credit facility and Term
Loans (2)                           59,324             35,000             4,257            12,162            7,905                             -
Investment in Enalare (4)           12,500                  -            12,500                 -                -                             -
Purchase obligations (3)            99,403             99,403                 -                 -                -                             -
Total obligations                $ 174,848          $ 134,817          $ 18,429          $ 13,284          $ 8,318                      $      -


(1) We lease our corporate office location. On August 8, 2019, we amended the
lease for our corporate office location in order to rent additional office space
and extend the term of our existing lease to June 30, 2025. We also lease lab
space under a lease agreement that expires on April 1, 2024, office space
located in Indianapolis, Indiana through November 2023, and an office space
located in Palm Beach Gardens, Florida, through October 31, 2024.

(2) See Note 9 and Note 16. Subsequent Events for details of our Prior Credit Agreement and the Third Modified Credit Agreement and Term Loans.


(3) As of September 30, 2022, we had purchase obligations in the amount of $99.4
million which represents the contractual commitments under contract
manufacturing and supply agreements with suppliers. The obligation under the
supply agreement is primarily for finished product, inventory, and research and
development.

(4) We invest $12.5 million in Enalare at the time of signing the agreement in August 2022and we are contractually obligated to invest another $12.5 million six months later August 2022. See Note 15 for more details.

Critical Accounting Policies and Estimates


Our significant accounting policies and estimates are disclosed in "Note 2.
Summary of Significant Accounting Policies" in our audited financial statements
for the year ended December 31, 2021 included in our Annual Report. Since the
date of such financial statements, there have been no changes to our significant
accounting policies and estimates other than those described in Note 2 of the
notes to our unaudited condensed consolidated financial statements included
elsewhere in this Quarterly Report.

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Recent Accounting Pronouncements


In March 2020, the FASB issued Update 2020-04 Reference Rate Reform (Topic 848),
Facilitation of the Effects of Reference Rate Reform on Financial Reporting to
provide temporary optional guidance to ease the potential burden in accounting
for reference rate reform. The amendments in Update 2020-04 are elective and
apply to all entities that have contracts, hedging relationships, and other
transactions that reference LIBOR, formerly known as the London Interbank
Offered Rate,
or another reference rate expected to be discontinued due to reference rate
reform. The new guidance provides optional expedients, including; (1) Simplify
accounting analyses under current GAAP for contract modifications, such as
modifications of contracts within the scope of Topic 470, Debt, that will be
accounted for by prospectively adjusting the effective interest rate, as if any
modification was not substantial. That is, the original contract and the new
contract shall be accounted for as if they were not substantially different from
one another; (2) Simplify the assessment of hedge effectiveness and allow
hedging relationships affected by reference rate reform to continue; (3) Allow a
one-time election to sell or transfer debt securities classified as held to
maturity before January 1, 2020 that reference a rate affected by reference rate
reform. The amendments are effective for all entities from the beginning of an
interim period that includes the issuance date of the ASU. An entity may elect
to apply the amendments prospectively through December 31, 2022. The adoption of
ASU 2020-4 is not expected to have a material impact on our financial position
or results of operations.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):
Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers, which requires an acquirer to recognize and measure contract assets
and liabilities acquired in a business combination in accordance with Revenue
from Contracts with Customers (Topic 606) rather than adjust them to fair value
at the acquisition date. This accounting standard update will be effective for
public business entities in fiscal years beginning after December 15, 2022,
including interim periods within those fiscal years; therefore for us beginning
in the first quarter of 2023. We are currently evaluating the impact of this
accounting standard, but do not expect it to have a material impact on our
condensed consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, Derivatives and Hedging (Topic 801):
Fair Value Hedging - Portfolio Layer Method, which expands the current
single-layer hedging model to allow multiple-layer hedges of a single closed
portfolio of prepayable financial assets or one or more beneficial interests
secured by a portfolio of prepayable financial instruments under the method.
This accounting standards update will be effective for public business entities
in fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years; therefore for us beginning in the first quarter of
2023. We are currently evaluating the impact of this accounting standard, but do
not expect it to have a material impact on our condensed consolidated financial
statements.

There are other new accounting pronouncements issued by the FASB that we have
adopted or will adopt, as applicable. We do not believe any of these accounting
pronouncements have had, or will have, a material impact on our condensed
consolidated financial statements or disclosures.

Impact of inflation


While it is difficult to accurately measure the impact of inflation due to the
imprecise nature of the estimates required, we believe the effects of inflation,
if any, on our results of operations and financial condition have been
immaterial.
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