GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The Company’s goodwill results from the acquisition of Pacira Pharmaceuticals, Inc. from SkyePharma Holding, Inc. (now a subsidiary of Vectura Group plc), or Skyepharma, in 2007 (the “Skyepharma Acquisition”), the MyoScience Acquisition in 2019 and the Flexion Acquisition in 2021. The change in the carrying value of the Company’s goodwill is summarized as follows (in thousands):


	Carrying Value
Balance at December 31, 2020	$	99,547
Goodwill arising from milestones achieved under the Skyepharma Acquisition	36,000
Goodwill arising from the Flexion Acquisition	9,628
Balance at December 31, 2021	145,175
Goodwill arising from measurement period adjustments associated with the Flexion Acquisition (Note 5)	18,068
Balance at December 31, 2022	$	163,243

The Skyepharma Acquisition was accounted for under Statement of Financial Accounting Standards 141, Accounting for Business Combinations, which was the effective GAAP standard at the date of acquisition. In connection with the Skyepharma Acquisition, the Company agreed to certain milestone payments for DepoBupivacaine products, including EXPAREL. In the fourth quarter of 2021, the Company met both of its two remaining milestones due to Skyepharma: $4.0 million upon the first commercial sale in the U.K., France, Germany, Italy or Spain, which was paid in the fourth quarter of 2021; and $32.0 million when annual net sales collected reached $500.0 million, which was paid in the first quarter of 2022. These milestone payments were treated as additions to the Skyepharma Acquisition and, therefore, recorded as goodwill.

Upon the Flexion Acquisition, the Company recorded goodwill totaling $9.6 million. Within one year from the Flexion Acquisition date, measurement period adjustments of $18.1 million were recorded to goodwill as the facts and circumstances existed prior to the acquisition date. The adjustments primarily represent the finalization of a tax study and pre-acquisition expenses. The acquired goodwill and intangible assets are not deductible for tax purposes.

Intangible Assets

Intangible assets, net, consists of the developed technology and IPR&D from the Flexion Acquisition and developed technology and customer relationships from the MyoScience Acquisition and are summarized as follows (dollar amounts in thousands):


December 31, 2022	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net		Weighted-Average Useful Lives
Developed technologies	$	590,000	$	(84,376)	$	505,624	10 years, 5 months
Customer relationships	90		(34)		56		10 years
Total finite-lived intangible assets, net	590,090		(84,410)		505,680
Acquired IPR&D	34,866		—		34,866
Total intangible assets, net	$	624,956	$	(84,410)	$	540,546

December 31, 2021	Gross Carrying Value		Accumulated Amortization		Intangible Assets, Net		Weighted-Average Useful Lives
Developed technology	$	590,000	$	(27,097)	$	562,903	10 years, 5 months
Customer relationships	90		(25)		65		10 years
Total finite-lived intangible assets, net	590,090		(27,122)		562,968
Acquired IPR&D	61,000		—		61,000
Total intangible assets, net	$	651,090	$	(27,122)	$	623,968

Amortization expense on intangible assets for the years ended December 31, 2022 and 2021 was $57.3 million and $13.6 million, respectively. The increase in expense in 2022 is the result of a full year of amortization associated with ZILRETTA for OA knee pain acquired as part of the Flexion Acquisition in November 2021.

Assuming no changes in the gross carrying amount of these intangible assets, the future estimated amortization expense on the finite-lived intangible assets will be $57.3 million from 2023 to 2030, $37.4 million in 2031, $7.9 million in 2032 and $2.2 million in 2033.The Company reviews its indefinite-lived intangible assets for impairment annually and whenever an event or change in circumstances arises that indicates the carrying amount of an indefinite-lived intangible asset is at risk of not being recoverable. During the year ended December 31, 2022, the annual impairment assessment for ZILRETTA acquired IPR&D for the treatment of OA pain of the shoulder was conducted through a recoverability test at December 31, 2022 by comparing the $60.0 million carrying value of the asset against the fair value through a discounted cash flow model of $33.9 million based on new facts and circumstances. The change in fair value was primarily driven by later timelines for the completion of clinical trials impacting revenue forecasts, among other factors. An impairment of $26.1 million was recognized within acquisition-related charges (gains), impairment and other in the consolidated statements of operations for the year ended December 31, 2022 based on the amount its previous carrying value exceeded its updated fair value.