SUPERNUS PHARMACEUTICALS, INC. (SUPN) FY 2023 MD&A

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 thereto, appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, some of the information in this discussion and analysis contains forward-looking statements reflecting our current expectations and involving risk and uncertainties. For example, statements regarding our expectations as to our plans and strategy for our business, future financial performance, expense levels, and liquidity sources are forward-looking statements. Our actual results and the timing of those events could differ materially from those discussed in our forward-looking statements because of many factors, including those set forth under the "Risk Factors" section and elsewhere in this report.

Unless the content requires otherwise, the words "Supernus," "we," "our" and "the Company" refer to Supernus Pharmaceuticals, Inc. and/or one or more of its subsidiaries, as the case may be. These terms are used solely for the convenience of the reader. Supernus Pharmaceuticals, Inc. and each of its subsidiaries are distinct legal entities. For example, MDD US Operations, LLC, a wholly-owned indirect subsidiary of Supernus Pharmaceuticals, Inc., is the exclusive licensee and distributor of APOKYN in the United States and its territories. Adamas Operations, LLC, a wholly-owned indirect subsidiary of Supernus Pharmaceuticals, Inc., wholly owns the patents and patent applications related to GOCOVRI and Osmolex ER and has a license agreement with Supernus Pharmaceuticals, Inc., granting Supernus Pharmaceuticals, Inc. rights to market and sell GOCOVRI and Osmolex ER.

Overview

We are a biopharmaceutical company focused on developing and commercializing products for the treatment of central nervous system (CNS) diseases. Our diverse neuroscience portfolio includes approved treatments for epilepsy, migraine, attention-deficit hyperactivity disorder (ADHD), hypomobility in Parkinson’s Disease (PD), cervical dystonia, chronic sialorrhea, dyskinesia in PD patients receiving levodopa-based therapy, and drug-induced extrapyramidal reactions in adult patients. The Company is developing a broad range of novel CNS product candidates including new potential treatments for hypomobility in PD, epilepsy, depression, and other CNS disorders.

Commercial Products

•Qelbree® (viloxazine) extended-release capsules is a novel non-stimulant product indicated for the treatment of ADHD in adults and pediatric patients 6 years and older. The United States Food and Drug Administration (FDA) approved Qelbree for the treatment of ADHD in pediatric patients 6 to 17 years of age in April 2021, and in adult patients in April 2022. The Company launched Qelbree for pediatric patients in May 2021 and for adult patients in May 2022 in the United States (U.S.).

•GOCOVRI® (amantadine) extended-release capsules is the first and only FDA approved medicine indicated for the treatment of dyskinesia in patients with PD receiving levodopa-based therapy, with or without concomitant dopaminergic medications, and as an adjunctive treatment to levodopa/carbidopa with PD experiencing "off" episodes.

•Oxtellar XR® (oxcarbazepine) is indicated as therapy for the treatment of partial onset seizures in patients 6 years of age and older. It is also the first once-daily extended-release oxcarbazepine product indicated for the treatment of epilepsy in the U.S. market.

•Trokendi XR® (topiramate) is the first once-daily extended-release topiramate product indicated for the treatment of epilepsy in patients 6 years of age and older in the U.S. market. It is also indicated for the prophylaxis of migraine headache in adults and adolescents 12 years and older.

•APOKYN® (apomorphine hydrochloride injection) is a product indicated for the acute, intermittent treatment of hypomobility, "off" episodes ("end-of-dose wearing off" and unpredictable "on/off" episodes) in patients with advanced PD.

•XADAGO® (safinamide) is a once-daily product indicated as adjunctive treatment to levodopa/carbidopa in patients with PD experiencing "off" episodes.

•MYOBLOC® (rimabotulinumtoxinB injection) is a product indicated for the treatment of cervical dystonia and chronic sialorrhea in adults. It is the only botulinum toxin type B available on the market.

•Osmolex ER® (amantadine) extended-release tablets is for the treatment of PD and drug-induced extrapyramidal reactions in adult patients. In December 2023, the Company submitted to the FDA a notification of discontinuance to

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withdraw Osmolex ER from distribution, stating that manufacturing has been discontinued and distribution of the product will cease by April 1, 2024.

Research and Development

We are committed to the development of innovative product candidates in neurology and psychiatry, including the following:

SPN-830 (apomorphine infusion device)

SPN-830 is a late-stage drug/device combination product candidate for the continuous treatment of motor fluctuations ("off" episodes) in PD patients that are not adequately controlled with oral levodopa and one or more adjunct PD medications. If approved, it would be the only continuous infusion of apomorphine available in the U.S. and an important step for PD patients that would have otherwise been candidates for potentially invasive surgical procedures, such as deep brain stimulation. Continuous slow infusion may also limit some of the side effects of a bolus injection of apomorphine.

In December 2021, we resubmitted the (New Drug Application) NDA to the FDA. In February 2022, we received a notice from the FDA that the resubmission of the NDA for SPN-830 was considered as a Standard Review and was assigned a PDUFA target action date in early October 2022. In October 2022, the FDA issued a Complete Response Letter (CRL) regarding the NDA for SPN-830. The CRL requires additional information and analysis related to the infusion device and drug product across several areas of the NDA including, but not limited to, labeling, product quality and manufacturing, device performance and risk analysis. In addition, the FDA mentions that approval of the NDA requires inspections that could not be completed in a timely manner due to COVID-19 travel restrictions. The CRL does not request additional efficacy and safety clinical studies. The FDA has made an initial determination that the amendment to the Company’s application in response to the CRL will be subject to a Class 2, or six-month, review timeline. In April 2023, the Company met with the FDA to discuss the CRL. In October 2023, the Company resubmitted the NDA for SPN-830. Refer to discussion under the Operational Highlights section below for further regulatory update. In November 2023, the FDA accepted the resubmission of the NDA for SPN-830. The resubmission is now considered filed, with a user fee goal date (PDUFA date) of April 5, 2024.

SPN-820 – Novel first-in-class molecule that increases mTORC1 mediated synaptic function for depression

SPN-820 is a first-in-class, orally active small molecule that increases the brain mechanistic target of rapamycin complex 1 (mTORC1) mediated synaptic function intracellularly. SPN-820 does not bind to or modulate any cell surface receptors and therefore is unlikely to have abuse potential given lack of binding to targets implicated in drug abuse. In addition, unlike leucine, it is not incorporated into proteins during protein synthesis, and therefore, it is more available at the target site in the brain than leucine.

SPN-817 – Novel first-in-class highly selective AChE inhibitor for epilepsy

SPN-817 represents a novel mechanism of action (MOA) for an anticonvulsant. SPN-817 is a novel synthetic form of

huperzine A, a first in class, highly selective acetylcholinesterase (AChE) inhibitor, with pharmacological activities in CNS conditions such as focal epilepsy. The development will initially focus on the drug's anticonvulsant activity, which has been

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shown in preclinical models to be effective for the treatment of epilepsy. SPN-817 is in clinical development and has received Orphan Drug designation for several epilepsy indications from the FDA.

Operational Highlights

Qelbree - Novel non-stimulant for ADHD Update

•Total IQVIA prescriptions were 617,192 for full year 2023, an increase of 91% compared to full year 2022.

•The Company initiated a Phase IV open-label study to assess the efficacy of Qelbree over the course of 14 weeks of treatment in approximately 500 adults with ADHD and mood symptoms. The primary outcome measure is change from baseline in the Adult ADHD Investigator Symptom Rating Scale (AISRS).

SPN-830 (apomorphine infusion device) - Continuous treatment of motor fluctuations (“off” episodes) in Parkinson's Disease (PD)

•As previously disclosed, the FDA accepted the resubmission of the New Drug Application for SPN-830 for continuous treatment of motor fluctuations ("off" episodes) in Parkinson's disease (PD) and set a user fee goal date (PDUFA date) of April 5, 2024.

•Assuming FDA approval, the Company expects to launch SPN-830 in the second half of 2024.

SPN-820 - Novel first-in-class activator of mTORC1 for the treatment of depression

•The Phase IIb multi-center randomized double-blind placebo-controlled parallel design study of SPN-820 in adults with treatment-resistant depression is ongoing. The study will examine the efficacy and safety of SPN-820 over a course of five weeks of treatment in approximately 268 patients in up to 50 clinical sites. The primary outcome measure is the change from baseline to end of treatment period on the Montgomery-Asberg Depression Rating Scale (MADRS) Total Score. Approximately 118 patients have been enrolled in the trials, to date. Topline data from the Phase IIb trial is expected in the first half of 2025.

•The Company has initiated a Phase II open-label study in approximately 40 subjects with major depressive disorder (MDD). The primary objective of the study is to assess efficacy in MDD, as well as onset of efficacy.

SPN-817 – Novel first-in-class selective acetylcholinesterase (AChE) inhibitor for the treatment of epilepsy

•An open-label Phase IIa clinical study of SPN-817 for treatment-resistant seizures is ongoing. The study is examining the safety and tolerability of SPN-817 as adjunctive therapy in adult patients with treatment-resistant seizures, as well as assessing efficacy. The Company expects to report interim results from approximately half of the target randomized patients in May 2024, and topline results from the Phase IIa study in the second half of 2024.

•The Company now expects to initiate a Phase IIb randomized, double-blind, placebo-controlled study in approximately 436 patients with treatment-resistant focal seizures in the second half of 2024. The primary endpoint is change from baseline in focal seizure frequency per 28 days. Topline results from the Phase IIb study are expected in 2026.

SPN-443 – Novel stimulant for the treatment of ADHD/CNS

•The Company plans to initiate a Phase I single dose study in healthy adults in 2024 following submission of an Investigational New Drug (IND) application. The primary objective of the study is to assess safety and tolerability.

Critical Accounting Policies and the Use of Estimates

The significant accounting policies and basis of presentation for our consolidated financial statements are described in Part II, Item 8—Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements. Our consolidated financial statements are prepared in accordance with the U.S. generally accepted accounting principles (U.S. GAAP), requiring us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and other related disclosures. Some judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.

We believe the judgments, estimates, and assumptions associated with the following critical accounting policies have the greatest potential impact on our consolidated financial statements:

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•Revenue recognition; and

•Impairment of Indefinite-Lived Intangible Assets

•Impairment of Definite-Lived Intangible Assets

Revenue Recognition

Our principal source of revenue is product sales. Revenue from product sales is recognized when physical control of our products is transferred to our customers, who are primarily pharmaceutical wholesalers, specialty pharmacies, and distributors. Product sales are recorded net of various forms of variable consideration, including: estimated rebates; sales discounts; and an estimated liability for future product returns (collectively, "sales deductions").

The variability in the net transaction price for our products arises primarily from the aforementioned sales deductions. Significant judgment is required in estimating certain sales deductions, including rebates and returns. In making these estimates, we consider: historical experience; product price increases; current contractual arrangements under applicable payor programs; unbilled claims; processing time lags for claims; inventory levels in the wholesale, specialty pharmacy, and retail distribution channel; and product life cycle. We adjust our estimates at the earlier of when the most likely amount of consideration we expect to receive changes, or when the consideration becomes fixed. Variable consideration on product sales is only recognized when it is probable that a significant reversal will not occur. If actual results in the future vary from our estimates, we adjust our estimates in the period identified. These adjustments could materially affect net product sales and earnings in the period in which the adjustment(s) is recorded. Refer to Part II, Item 8—Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements, for further discussion on each of the different sales deductions. While sales rebates have been relatively predictable based on historical experience such that there have not been material changes in estimates in prior periods, there have been critical estimates associated with rebates and returns that may result in significant variability as further discussed below.

Returns

We maintain a return policy that allows our customers to return products within a specified period of time. Sales of our products are not subject to a general right of return; however, we will accept return of expired product 6 months prior to and up to 12 months subsequent to the product's expiry date for certain products. Our products have a shelf life of up to 48 months from date of manufacture. The product return accrual is estimated principally based on historical experience, the level and estimated shelf life of inventory in the distribution channel, changes in the current wholesaler prices, our return policy and expected market events, including generic competition. The time lag from date of sale of our products when we accrue our provision for product returns and the time at which we issue credit for expired product can occur up to several years after the sale of our product. Estimates associated with our provision for product returns are particularly susceptible to adjustment given the extensive time lag. In regards to Trokendi XR, the Company has entered into settlement agreements with third parties permitting the sale of a generic version of Trokendi XR on January 1, 2023. The Company is actively monitoring returns activity in light of the loss of exclusivity and actual and possible further future sales decline based on timing of generic entry. The recent entry of a generic competitor may cause our future Trokendi XR product return rates to change from historical trends, and this change could have a material effect on the future provision for product returns. Historically, we have experienced changes in estimates in return reserve calculations, but those adjustments have not been material to net earnings. However, given the extensive number of inputs and assumptions, described above, future changes in our return reserves could be material. The Company has also entered into settlement and license agreements with third parties, permitting sale of a generic version of Oxtellar XR beginning in September 2024, or sooner under certain conditions. Similarly, the Company is actively monitoring returns activity in light of the upcoming loss of exclusivity of Oxtellar XR.

Rebates

Rebates are discounts which we pay under either public sector or private sector health care programs. Rebates paid under public sector programs are generally mandated under law, whereas private sector rebates are generally contractually negotiated by us with managed care providers. Both types of rebates vary over time. Rebate amounts are typically based upon the volume of purchases using contractual or statutory prices, which may vary by product and by payer. For each type of rebate, the factors used in the calculations of the accruals for that rebate include the identification of the products subject to the rebate, applicable price terms and estimated lag time between sale and payment of the rebate, which can be significant. In order to establish the rebate accruals, we use both internal and external data to estimate the level of inventory in the distribution channel and the rebate claims processing lag time for each type of rebate. To estimate the rebate percentage or net price, we track sales by product and by customer or payer. We evaluate inventory data reported by wholesalers, available prescription volume information, product pricing, historical experience and other factors in order to determine the adequacy of our accruals. We regularly monitor our

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accruals and record adjustments when rebate trends, rebate programs and contract terms, legislative changes, or other significant events indicate that a change in reserve is appropriate. Historically, adjustments to rebate accruals have not been material to net earnings.

Specifically, a significant portion of rebates we pay are on state Medicaid programs. We participate in state Medicaid programs wherein the lag time from the date of sale of our product when we accrue for provision for rebates and the ultimate invoicing by the individual state Medicaid program can occur up to several quarters after the sale of our product. Because of the time lag for Medicaid, in any particular quarter, our adjustments may incorporate revisions of accruals for prior periods. Estimates associated with our participation in state Medicaid programs are particularly susceptible to adjustment given the extensive time lag. Historically, adjustments to rebate accruals have not been material to net earnings, but there continues to be an extensive time lag related to certain programs that could result in variability in future periods.

For a roll-forward of the accrued sales deductions, see the section entitled Results of Operations - Revenues - Sales deductions and related accruals.

Impairment of Indefinite-Lived Intangible Assets

In 2020, the Company acquired the right to further develop and commercialize SPN-830 (apomorphine infusion device), a late-stage product candidate (IPR&D intangible asset). The In Process Research and Development (IPR&D) intangible asset represents the estimate of the fair value of acquired technology which has not yet reached technological feasibility. The primary basis for determining the technological feasibility is obtaining specific regulatory approvals. IPR&D is accounted for as an indefinite-lived intangible asset until completion or abandonment of the IPR&D project. Upon completion of the development project, the IPR&D will be amortized over its estimated useful life. We review intangible assets with indefinite lives for impairment annually or more often if impairment indicators are identified. Our annual evaluation is generally based on an assessment of qualitative factors to determine whether it is more likely than not the fair value of the asset is less than its carrying amount. If the Company is unable to conclude that the indefinite-lived intangible asset is not impaired during its qualitative assessment, the Company will perform a quantitative assessment by estimating the fair value of the indefinite-lived intangible asset and comparing the fair value to the carrying amount. The significant inputs and assumptions used to estimate the fair value of the IPR&D intangible asset include: the timing and probability of success of clinical and regulatory approvals for the IPR&D asset, the estimated future cash flows from product sales, and the timing and projection of costs and expenses. We believe that the timing and probability of success of clinical and regulatory approval for the IPR&D asset is key and directly drives the timing and realization of the estimated future cashflows from product sales and the incurrence of costs and expenses. The drug regulatory approval process is inherently uncertain, lengthy, and difficult. The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. In addition, the actual review and approval process time required may vary substantially based upon the type, complexity, and novelty of the product or disease. Any adverse action by the FDA can potentially impact our estimated fair value of the IPR&D intangible asset. In October 2022, the FDA issued a CRL regarding the NDA for SPN-830. In October 2023, we resubmitted the NDA for SPN-830. In November 2023, the FDA accepted the resubmission of the NDA for SPN-830. The resubmission is now considered filed, with a user fee goal date (PDUFA date) of April 5, 2024. We consider the positive results of clinical trials, industry benchmarks, available market data, and recent communications with the FDA regarding SPN-830 in determining the probability of technical and regulatory success input and assumption. The carrying amount of the indefinite-lived intangible asset was $124.0 million as of December 31, 2023. Although we believe the assumptions, judgments, and estimates we have used in our assessments are reasonable and appropriate, a material change in any of our assumptions or external factors could lead to impairment charges. If the IPR&D project is abandoned or regulatory approvals are not obtained, we may have a full or partial impairment charge related to the IPR&D, calculated as the excess carrying value of the IPR&D assets over the estimated fair value.

Impairment of Definite-Lived Intangible Assets

Management assesses the potential impairment of our finite-lived intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying amount of the definite-lived intangible assets, net was $475.9 million as of December 31, 2023. Changes that could prompt such an assessment may include significant or adverse changes in the legal and regulatory environment, the introduction or advancement of competitive products and product candidates, changes in market demand, declining revenue and/or other events that indicate it is more likely than not that fair value is less than its carrying value. If a review of the definite-lived intangibles indicates that the carrying value of certain of these assets is more than the estimated undiscounted future cash flows, an impairment charge is made, as required, to adjust the carrying value to the estimated fair value. Evaluating for impairment requires judgment, including evaluating current economic and competitive circumstances, estimating future cash flows, future growth rates and future profitability. The primary inputs and assumptions used in the model included timing and projections of estimated future revenues and cash flows, loss of exclusivity, and discount rate. If the carrying amount of the asset exceeds its fair value, the Company writes down the asset to its estimated fair value, and an impairment loss equal to the difference between the assets fair value and carrying value is recognized in the consolidated statement of earnings in the period at which such determination is made. The use of different assumptions could

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increase or decrease the estimated fair value of assets and could therefore affect any impairment measurement. The Company recognized impairment charges of $20.2 million in 2023 mainly due to the partial write-off of the carrying value of some of its acquired intangible assets, primarily XADAGO. The primary factors that led to the impairment determinations were the following: (1) the performance of the commercial products; (2) forthcoming loss of exclusivity of XADAGO in December 2027, or earlier under certain circumstances, due to settlement agreements with third party generic companies; and (3) the change in the Company's future outlook of the brands.

Results of Operations

In this section, we discuss the results of our operations for the year ended December 31, 2023, compared to the year ended December 31, 2022. Our Annual Report on Form 10-K for the year ended December 31, 2022, includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2021, in Part II,

Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations.

Revenues

Revenues consist primarily of net product sales of our commercial products in the U.S., supplemented by royalty and licensing revenues from our collaborative licensing arrangements. The following table provides information regarding our revenues during the years ended December 31, 2023 and 2022 (dollars in thousands):

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(1) Includes net product sales of MYOBLOC, XADAGO and Osmolex ER.

Net Product Sales

Net product sales decreased by $75.5 million from $649.4 million in 2022 to $573.9 million in 2023. The decrease in net product sales was primarily due to the decline in net product sales of Trokendi XR which was partially offset by the increase in net product sales from Qelbree and GOCOVRI.

Qelbree net product sales increased from $61.3 million in 2022 to $140.2 million in 2023 primarily due to favorable unit prescription volume growth, the price increase taken during the year, and improvements in gross-to-net. The Company launched Qelbree for pediatric patients in May 2021 and for adult patients in May 2022 in the U.S. Trokendi XR net product sales decreased from $261.2 million in 2022 to $94.3 million in 2023 due to the loss of exclusivity with generics entering the market in January 2023.

Sales deductions and related accruals

We record accrued product returns and accrued product rebates as current liabilities in Accrued product returns and rebates, on our consolidated balance sheets. We record sales discounts as a reduction against Accounts receivable, net on the consolidated balance sheets. Both amounts are generally affected by changes in gross product sales, changes in the provision for net product sales deductions, and the timing of payments/credits.

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The following table provides a summary of activities with respect to accrued product returns and rebates for the years ended December 31, 2023 and 2022 (dollars in thousands):

Accrued product returns and rebates

The accrued product returns balance increased from $45.0 million as of December 31, 2022 to $57.3 million as of December 31, 2023 due to timing of related return activity, and an increase in provision for product returns primarily for Qelbree.

The accrued product rebates balance decreased from $106.7 million as of December 31, 2022 to $97.0 million as of December 31, 2023 due to lower gross sales primarily related to the loss of exclusivity on Trokendi XR, and timing of payments.

Provision for returns and rebates

The provision for product returns increased from $18.3 million in 2022 to $22.7 million in 2023. The increase was primarily attributable to an increase in volume of products sold with the launch of Qelbree for adults in 2022, partially offset by lower sales of Trokendi XR.

The provision for product rebates decreased from $437.2 million in 2022 to $408.0 million in 2023. The decrease was primarily attributable to lower Trokendi XR sales partially offset by higher Qelbree sales.

Allowance for sales discounts

The provision for sales discounts decreased from $76.1 million in 2022 to $65.9 million in 2023 primarily attributable to lower Trokendi XR sales.

Adjustments related to prior year sales

Adjustments related to prior year sales in 2023 of $1.5 million was less than 1% of both net product sales and total provision for the year ended December 31, 2023. Adjustments related to prior year sales in 2022 of $4.0 million was less than 1% of both net product sales and total provision for the year ended December 31, 2022.

Royalty and Licensing Revenues

Royalty and licensing revenues increased by approximately $15.8 million, or 89% in 2023 compared to 2022, primarily due to royalties on generic Trokendi XR. The Company entered into settlement agreements on Trokendi XR that allowed third party generics to enter the market beginning January 1, 2023 and required them to pay royalties to the Company. Noncash royalty

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revenue decreased from $9.8 million in 2022 to $4.0 million in 2023 due to full ownership of the royalty rights from its royalty agreement with United Therapeutics reverting back to the Company in the second quarter of 2023.

Cost of Goods Sold

The following table provides information regarding our cost of goods sold for the years indicated (dollars in thousands):

Cost of goods sold includes the cost of royalties; cost of materials, including active pharmaceutical ingredients (API); and cost to manufacture, including tableting, packaging, personnel, overhead, stability testing, and distribution.

Cost of goods sold decreased from $87.2 million in 2022 to $83.8 million in 2023. The decrease was primarily due to lower Trokendi XR costs in 2023 due to loss of patent exclusivity for Trokendi XR in January 2023 and a higher GOCOVRI inventory reserve in 2022 offset by Qelbree costs in 2023.

Research and Development Expense

The following table provides information regarding our research and development (R&D) expenses for the years indicated (dollars in thousands):

R&D expenses increased from $74.6 million in 2022 to $91.6 million in 2023. The increase was primarily due to increased clinical program costs on SPN-817 and SPN-820 and increased manufacturing costs of our product candidates.

Selling, General, and Administrative Expense

The table below provides information regarding our selling, general, and administrative (SG&A) expenses for the years indicated (dollars in thousands):

Selling and Marketing Expense

Selling and marketing expenses decreased from $267.8 million in 2022 to $229.2 million in 2023. The decrease was primarily attributable to activities to support the launch of Qelbree to the adult population in 2022.

General and Administrative Expense

General and administrative expenses decreased from $109.4 million in 2022 to $107.2 million in 2023. The decrease was primarily due to higher professional and consulting costs in 2022, mainly to support finance and information technology operations, which was partially offset by higher legal costs and share-based compensation expense in 2023.

Amortization of Intangible Assets

The following table provides information regarding the amortization expense for intangible assets during the periods indicated (dollars in thousands):

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Amortization of intangible assets was materially consistent year-over-year.

Intangible Asset Impairment Charges

The following table provides information regarding the intangible asset impairment charges during the periods indicated (dollars in thousands):

In the fourth quarter of 2023, the Company recognized impairment charges of $20.2 million mainly due to the partial write-off of the carrying value of some of its acquired intangible assets, primarily XADAGO. The primary factors that led to the impairment determinations were the following: (1) the performance of the commercial products; (2) forthcoming loss of exclusivity of XADAGO in December 2027, or earlier under certain circumstances, due to settlement agreements in the fourth quarter of 2023 with third party generic companies; and (3) the change in the Company's future outlook of the brands.

Contingent Consideration Gain

The following table provides information regarding the contingent consideration expense during the periods indicated (dollars in thousands):

Contingent consideration gain recorded for the years ended December 31, 2023 and December 31, 2022 of $1.5 million and $0.5 million, respectively. The change of $1.0 million was primarily driven by the gain recognized due to the passage of time related to the Adamas contingent consideration, offset by the expense recognized from the accretion to the payout amount related to the USWM contingent consideration milestone achieved in the first quarter of 2022.

Other Income (Expense)

The following table provides the components of other income (expense) during the years indicated (dollars in thousands):

Interest and other income, net includes primarily interest earned from cash, cash equivalents, and marketable securities holdings. Interest and other income, net decreased from $21.7 million in 2022 to $10.5 million in 2023. The decrease in interest and other income, net was primarily due to $12.9 million recorded in 2022 in connection with the gain associated with the Navitor investment. The decrease in interest expense and noncash interest expense on debt of $2.8 million was due to the 2023 Notes being fully repaid on April 1, 2023. The decrease in noncash interest expense of $1.9 million was due to the nonrecourse royalty liability related to the HC Royalty agreement being fully amortized as of June 30, 2023.

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Income Tax Expense

The following table provides information regarding our income tax expense during the periods indicated (dollars in thousands):

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** Indicates calculation result is equal to or greater than 100%

Income tax expense was $1.5 million and $32.0 thousand for the years ended December 31, 2023 and December 31, 2022, respectively. The income tax expense and effective tax rate in 2023 was primarily driven by near break-even pre-tax book income. The income tax expense and effective tax rate in 2022 was primarily driven by tax benefits associated with the Adamas legal entities reorganization in the first quarter of 2022.

Net Earnings

The following table provides information regarding our net earnings during the periods indicated (dollars in thousands):

The decrease in net earnings was primarily due to the lower revenues in 2023 with the loss of exclusivity of Trokendi XR and the intangible asset impairment charges in the fourth quarter of 2023, partially offset by lower operating expenses.

Summary of Cash Flows

The following table summarizes the major sources and uses of cash for the periods set forth below (dollars in thousands):

Operating Activities

Net cash provided by operating activities is comprised of two components: cash provided by operating earnings; and cash provided by (used in) changes in working capital. The net cash provided by operating activities was $111.1 million in 2023 compared to $116.8 million in 2022. The year over year change was primarily driven by a decrease in working capital which reflects the timing impacts of cash collections on receivables and settlement of payables, lower inventory purchases in 2023 compared to 2022, and a decrease in operating earnings offset by an increase in non-cash items.

Investing Activities

Net cash provided by investing activities was $268.7 million in 2023 compared to $216.7 million used in 2022. The year over year change is primarily due to the proceeds from the maturities of investments in marketable securities which were used to pay off the 2023 Notes.

Financing Activities

Net cash used in financing activities was $397.9 million in 2023 compared to $10.5 million used in the same period in 2022. The increase in cash flows used by financing activities is primarily due to the payment of the total principal amount and accrued interest due on the 2023 Notes. On March 30, 2023, the Company transferred funds totaling $403.8 million to the Trustee (Wilmington Trust) related to the repayment of the 2023 Notes which was reported as restricted cash in the first quarter of 2023. On April 1, 2023, the Company paid the total principal amount of $402.5 million under the 2023 Notes and the remaining

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outstanding interest due of $1.3 million with the restricted cash. This increase was slightly offset by the payment of $22.9 million for a contingent consideration milestone associated with the USWM Acquisition during the same period in 2022.

Liquidity and Capital Resources

Cash and cash equivalents, marketable securities, and long term marketable securities presented below are as follows (dollars in thousands):

We have financed our operations primarily with cash generated from product sales, supplemented by revenues from royalty and licensing arrangements, as well as proceeds from the sale of equity and debt securities. Continued cash generation is highly dependent on the success of our commercial products, as well as the success of our product candidates if approved by the FDA. While we expect continued profitability in future years, we anticipate there may be significant variability from year to year in the level of our profits particularly due to continued market and payor pressures for our commercial products; the unfavorable impact of the loss of patent exclusivity for Trokendi XR in January 2023; the potential unfavorable impact of the forthcoming loss of exclusivity of Oxtellar XR and XADAGO; funding for research and development of our product candidates; and the additional funding to launch SPN-830, if approved by the FDA.

The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, which totaled $271.5 million as of December 31, 2023, along with cash generated from ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements over the next 12 months and beyond.

We may, from time to time, consider raising additional capital through: new collaborative arrangements; strategic alliances; additional equity and/or debt financings; or financing from other sources, especially in conjunction with opportunistic business development initiatives. We will continue to actively manage our capital structure and to consider all financing opportunities that could strengthen our long-term financial profile. Any such capital raises may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.

Our material cash requirements include the following contractual and other obligations.

Leases

Our operating lease commitments include leases of fleet vehicles, leases of certain facilities, including the lease of the current headquarters office and laboratory space. As of December 31, 2023, we have fixed lease payment obligations of $48.6 million, with $9.9 million payable within 12 months. Refer to Note 12, Leases in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report.

Manufacturing Purchase Obligations

In October 2021, we entered into an amendment to the Merz Agreement which increased the price of the annual purchase commitment of MYOBLOC from €3.0 million to approximately €3.9 million. For further discussion on the embedded operating lease related to the Merz Agreement, refer to Note 12, Leases in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report.

Milestone Payment Obligations from Acquisitions

The Company has contingent consideration milestones payable related to the Adamas Acquisition. The possible outcomes for the contingent consideration range, on an undiscounted basis, from $0 to $50.9 million. One Milestone Payment is payable (subject to certain terms and conditions) upon the first occurrence of the achievement of aggregate worldwide net sales of GOCOVRI in excess of $150 million during any consecutive 12-month period ending on or before December 31, 2024 (Milestone 2024). Another Milestone Payment is payable (subject to certain terms and conditions) upon the first occurrence of the achievement of aggregate worldwide net sales of GOCOVRI in excess of $225 million during any consecutive 12-month period

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ending on or before December 31, 2025 (Milestone 2025 and, together with Milestone 2024, the Milestones). Each Milestone may only be achieved once.

We also have contingent consideration milestones payable related to the USWM Acquisition. On February 18, 2022, the FDA accepted the SPN-830 NDA for review, and we paid the resulting $25 million milestone in the first quarter of 2022. In addition, there are two other regulatory and developmental contingent consideration milestone payments: the first is a $25 million milestone due upon the FDA's regulatory approval and $30 million upon commercial launch of SPN-830. If SPN-830 is approved by the FDA and commercially launched, we expect these milestones to become due and be paid in 2024.

Navitor Development Agreement

We have obligations from the Development Agreement with Navitor we entered into in April 2020. The Company can terminate the Development Agreement upon 30 days' notice. Under the terms of the Development Agreement, the Company and Navitor will jointly conduct a Phase II clinical program for NV-5138 (SPN-820) for treatment-resistant depression. The Company will bear all of Phase I and Phase II development costs incurred by either party, up to a maximum of $50 million. There are certain additional payments which could be incurred by the Company that are contingent upon Navitor Inc. achieving defined milestones. These milestone payments include an additional license or acquisition fee depending on whether the Company ultimately licenses or acquires NV-5138, and subsequent clinical, regulatory and sales milestone payments. The Company has an option to acquire or license NV-5138 (SPN-820), for which additional payments would be required.

Royalty Payments

We obtained exclusive licenses from third parties for proprietary rights to support our commercial products and product candidates. We are obligated to pay royalties to third parties, computed as a percentage of net product sales, for each respective product under a license agreement, beginning upon commercialization. The amount of future royalty obligations are dependent on future net product sales of each of the respective products under a license agreement.

Other Obligations

We have other obligations in which the timing, likelihood and, in some situations, the amount of such payments are not known, which include the following:

•any milestone payments which may become payable to third parties under license agreements or contractual agreements regarding our clinical trials, or those which may become payable upon achieving sales, regulatory, and developmental milestones per contractual agreements.

•liabilities related to uncertain tax positions. Due to uncertainties in the timing of potential tax audits, the timing and the amounts associated with the resolution of these positions is uncertain. As such, we are unable to make a reasonably reliable estimate regarding the timing of payments beyond 12 months.

Off-Balance Sheet Arrangements

We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.

Recently Issued Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 2 in the Notes to Consolidated Financial Statements in Part II, Item 8 of this report.

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