The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the interim unaudited
financial statements contained in Part I, Item 1 of this Quarterly Report, and
the audited financial statements and notes thereto for the year ended December
31, 2021 and the related Management's Discussion and Analysis of Financial
Condition and Results of Operations, both of which are contained in our Annual
Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on
March 16, 2022. As used in this Quarterly Report, unless the context suggests
otherwise, "we," "us," "our," the "Company" or "Baudax Bio" refer to Baudax Bio,
Inc. and its consolidated subsidiaries.

Overview



We are a pharmaceutical company primarily focused on innovative products for
hospital and related acute care settings. We believe that we can bring valuable
therapeutic options for patients, prescribers and payers to the hospital and
related acute care markets.

In mid-2020, we launched our first commercial product, ANJESO, in the United
States. ANJESO is the first and only 24-hour, intravenous, or IV, analgesia
agent. ANJESO is a cyclooxygenase-2, or COX-2, preferential, non-steroidal
anti-inflammatory, or NSAID, for the management of moderate to severe pain,
which can be administered alone or in combination with other non-NSAID
analgesics. We have successfully completed three Phase III clinical trials,
including two pivotal efficacy trials, a large double-blind Phase III safety
trial and two Phase IIIb programs evaluating ANJESO clinical safety and efficacy
along with its health economic impacts in specific surgical settings. We
continue to evaluate strategic partnerships to commercialize ANJESO outside of
the United States.

We utilize our internal field team and collaborate with contracted third
parties, to market ANJESO to health care professionals at key targeted
institutions for the commercialization of ANJESO in the United States. The
Centers for Medicare and Medicaid Services, or CMS, established a unique J-code
for ANJESO in the fourth quarter of 2020. ANJESO has transitional pass-through
status under traditional Medicare plans for a period of 3 years. We have also
entered into agreements with leading group purchasing organizations in the U.S.,
including Vizient Inc., Premier Inc. and HealthTrust, as well as one of the top
three integrated delivery networks that serves over twelve million patients
nationwide, for availability of ANJESO to their member institutions. In
September 2021, we signed an agreement for terms of availability with a leading
operator of surgical facilities and ancillary services nationally, with over 150
locations nationwide, which became effective October 1, 2021. In addition,
ANJESO is currently approved for use within the Department of Veterans Affairs,
the Department of Defense, Indian Health Service, 340B covered entities, and
multiple state Medicaid programs.

We have seen continued growth of ANJESO through deepening usage at existing
accounts, as well as through the addition of new accounts in the quarter, which
contributed to the first quarter of 2022 being our best quarter since launch.
The number of vials sold to end-users increased approximately 20% in the first
quarter of 2022 versus the fourth quarter of 2021 and increased approximately
141% over the first quarter of prior year.

Our costs consist primarily of expenses incurred in conducting our
manufacturing, commercialization of ANJESO, public company and personnel costs,
clinical trials and preclinical studies, and regulatory activities. We expect to
incur operating losses for at least the next few years. We expect substantially
all of our operating losses to result from costs incurred in connection with our
commercialization activities, including manufacturing costs, and development
programs, including our clinical, non-clinical and formulation development
activities. Our expenses over the next several years are expected to primarily
relate to the commercialization of ANJESO and continuing to develop our other
current and future product candidates. In addition, we may incur costs
associated with the acquisition or in-license of products and successful
commercialization of the acquired or in-licensed products.

Our pipeline also includes other early-stage product candidates, including two novel NMBs and a related proprietary chemical reversal agent and Dex-IN, a proprietary intranasal formulation of dexmedetomidine, or Dex, an alpha-2 adrenergic agonist that we are evaluating for possible partnering.

COVID-19 Impact



Our efforts to commercialize ANJESO were impacted in 2020, 2021, and continue to
impact us in 2022 on a variable basis depending on the timing, location and
extent of the outbreaks. There may continue to be impact from the COVID-19
pandemic, particularly in light of the surge of new COVID-19 cases relating to
new variants, such as the Delta and Omicron variants, and any new and
potentially more virulent variants that may emerge. Intermittent impacts in the
reduction of elective surgeries have occurred and this has had an impact in the
recent quarter, especially in January and February. Overall, many centers have
yet returned to pre-COVID levels of surgeries even where the impact of COVID-19
and its variants have not been as great. In addition, COVID-19 has impacted
revenue for many hospitals, caused a reduction in hospital staffing, lead to a
diversion in resources from other normal activities to patients suffering from
COVID-19, and caused a limitation in hospital access for nonpatients, including
our sales professionals, which we believe has impacted and will continue to
impact our marketing and commercialization efforts. Further, hospitals and
ambulatory surgical centers may experience staffing shortages as a result of
employee non-compliance with government or employer mandated vaccination
requirements, which could reduce the number of elective surgeries that can be
performed at hospitals with staffing shortages. We believe a reduction in
elective surgeries during the COVID-19 pandemic has impacted and may continue to
impact demand for ANJESO.

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We anticipate that many hospitals and health care providers will continue to
suffer negative financial consequences due to an increase in unexpected costs,
including for personal protective equipment, and ventilators, and this impact
may result in ongoing decreased revenue. If fewer elective procedures are being
performed, we believe this may negatively impact ANJESO growth rates. In
addition, in some areas the absence of hospital formulary meetings where new
drugs can be adopted has had ongoing variable impact on our efforts to
commercialize ANJESO. Many hospital formularies have resumed meetings after a
6-month, or longer, absence. Despite the existence of a backlog of products
scheduled to be reviewed, we believe we will make progress with having ANJESO
added to additional hospital formularies over the near term. Due to the rapidly
evolving environment, continued uncertainties from the impact of the COVID-19
global pandemic, and the recent regional outbreaks that are impacting the
recovery, we cannot estimate the full extent to which our commercialization of
ANJESO and financial results may be adversely impacted.

2022 Reduction in Force



Due to our current cash position, in March of 2022, we implemented a reduction
in workforce by approximately 66 employees (representing approximately 80% of
our total workforce), including 43 members of our sales force. We estimate that
the reorganization will be substantially completed by the end of the second
quarter and that we will incur approximately $4.0 million of charges for
severance and other related costs, primarily during the first half of 2022 The
reduction in force is designed to reduce our operational expenses substantially
and conserve cash resources.

Financial Overview

Revenue

Subsequent to regulatory approval for ANJESO from the FDA, we began selling
ANJESO in the U.S. through a single third-party logistics provider, or 3PL,
which takes title to and control of the goods. We recognize revenue from ANJESO
product sales at the point the title to the product is transferred to the
customer and the customer obtains control of the product. The transaction price
that is recognized as revenue for products includes an estimate of variable
consideration for reserves, which result from discounts, returns, chargebacks,
rebates, and other allowances that are offered within contracts between us and
our end-user customers, wholesalers, group purchasing organizations and other
indirect customers.

Our estimates of variable consideration and determination of whether to include
estimated amounts in the transaction price are based largely on an assessment of
its anticipated performance and all information (historical, current and
forecasted) that is reasonably available. These reserves reflect our best
estimate of the amount of consideration to which we are entitled based on the
terms of the contracts. The amount of variable consideration that is included in
the transaction price may be constrained and is included in the net sales price
only to the extent that is considered probable that a significant reversal in
the amount of the cumulative revenue recognized will not occur in a future
period. Actual amounts of consideration ultimately received may differ from our
estimates. If actual results in the future vary from our estimates, we will
adjust these estimates, which would affect net product revenue and earnings in
the period such variances become known.

Cost of Sales



Cost of sales includes product costs, manufacturing costs, transportation and
freight, royalty expense, qualification costs for a secondary manufacturing
suite for increased available capacity to meet anticipated demand and indirect
overhead costs associated with the manufacturing and distribution of ANJESO
including supply chain and quality personnel costs. Cost of sales may also
include period costs related to certain manufacturing services and inventory
adjustment charges. We expensed a significant portion of the cost of producing
ANJESO that we are using in the commercialization as research and development
expense prior to the regulatory approval of ANJESO. We expect that over time,
product costs in cost of sales will increase as sales increase and inventory
associated with the units manufactured prior to FDA approval are sold.

Research and Development Expenses



Research and development expenses currently consist primarily of costs incurred
in connection with the pediatric development of ANJESO and the NMB portfolio
activities. These expenses consist primarily of:

•


expenses incurred under agreements with investigative sites, consultants and
other service providers that conduct or support our clinical and pre-clinical
trials;

•

the cost of acquiring and manufacturing clinical trial drug supply and related manufacturing services and pre-commercial product validation and inventory manufacturing expenses;

•

costs related to facilities, depreciation and other allocated expenses;

•

acquired in-process research and development;


                                       31
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•

costs associated with regulatory activities and responses to the FDA; and

•

salaries and related costs for personnel in research and development and pre-commercial regulatory functions.



The majority of our external research and development costs have related to
clinical trials, manufacturing of drug supply for pre-commercial products,
analysis and testing of product candidates and patent costs. We expense costs
related to clinical inventory and pre-commercial inventory until we receive
approval from the FDA to market a product, at which time we commence
capitalization of costs relating to that product to inventory. Costs related to
facilities, depreciation and support are not charged to specific programs.
Subsequent to regulatory approval of ANJESO, we allocated or recategorized
certain personnel and overhead expenses related to medical affairs, supply
chain, quality and regulatory support functions that had previously been
recorded within research and development, to cost of sales or selling, general
and administrative expenses in support of the commercialization of ANJESO.
Pre-commercial activities directly utilizing personnel and overhead expenses
from the medical affairs, supply chain, quality and regulatory support function
continue to be recorded within research and development.

The development of our other product candidates is highly uncertain and subject to a number of risks, including, but not limited to:

•

the costs, timing and outcome of regulatory review of a product candidate;

•

the duration of clinical trials, which varies substantially according to the type, complexity and novelty of the product candidate;

•


substantial requirements on the introduction of pharmaceutical products imposed
by the FDA and comparable agencies in foreign countries, which require lengthy
and detailed laboratory and clinical testing procedures, sampling activities and
other costly and time-consuming procedures;

•


the possibility that data obtained from pre-clinical and clinical activities at
any step in the testing process may be adverse and lead to discontinuation or
redirection of development activity or may be susceptible to varying
interpretations, which could delay, limit or prevent regulatory approval;

•

risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;

•


the emergence of competing technologies and products, including obtaining and
maintaining patent protections, and other adverse market developments, which
could impede our commercial efforts; and

•

the other risks disclosed in the sections titled "Risk Factors" of our 2021 Annual Report and this Quarterly Report.



Development timelines, probability of success and development costs vary widely.
As a result of the uncertainties discussed above, we will assess our product
candidate's commercial potential and our available capital resources. As a
result of these uncertainties surrounding the timing and outcome of any
approval, we are currently unable to estimate precisely when, if ever, any of
our product candidates will generate revenues and cash flows.

We expect our research and development costs to relate to ANJESO, including
required pediatric post-marketing studies, as well as development and
commercialization scale-up of our other product candidates. We may elect to seek
collaborative relationships in order to provide us with a diversified revenue
stream and to help facilitate the development and commercialization of our
product candidate pipeline.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of sales and marketing expenses and general and administrative expenses.



Sales and marketing expenses primarily consist of compensation and benefits for
our sales force and personnel that support our sales and marketing efforts as
well as third party consulting costs for the promotion and sale of ANJESO. In
addition, sales and marketing expenses include expenses related to communicating
the clinical and economic benefits of ANJESO and educational programs for our
indirect customers.

General and administrative expenses consist principally of salaries and related
costs for personnel in executive, finance and information technology functions,
as well as the commercial portion of the medical affairs and regulatory
functions. General and administrative expenses also include public company
costs, directors and officer's insurance, professional fees for legal, including
patent-related expenses, consulting, auditing, and tax services.

We expect our selling, general and administrative expenses to increase in the future as a result of our commercialization of ANJESO.


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Change in Fair Value of Contingent Consideration



In connection with the Separation, we entered into an Assignment and a Partial
Assignment, Assumption and Bifurcation Agreement, or the Alkermes Agreements,
relating to the Purchase and Sale Agreement for the acquisition of certain
assets, including the worldwide rights to injectable meloxicam and Societal
CDMO's development, formulation and manufacturing business from Alkermes, or the
Alkermes Transaction, as amended in December 2018 and August 2020. Pursuant to
the Alkermes Agreements, we are required to pay up to $140.0 million in
milestone payments, including $10.0 million that was paid during 2019, $3.6
million paid in 2020, another $1.4 million paid in 2021, and $45.0 million over
seven years beginning one year after approval, of which the first payment was
made in the first quarter of 2021 and a partial payment was made on the second
payment, which was due in the first quarter of 2022, with monthly payments of
$0.2 million paid thereafter until fully paid, as well as net sales milestones
and a royalty percentage of future product net sales related to injectable
meloxicam between 10% and 12% (subject to a 30% reduction when no longer covered
by patent), which is paid quarterly. The estimated fair value of the initial
$54.6 million payment obligation was recorded as part of the purchase price for
the Alkermes Transaction. We have continued to reevaluate the fair value each
subsequent period and as of March 31, 2022 recorded a $19.6 million payment
obligation, representing the estimated probability adjusted fair value of the
liability. Each reporting period, we revalue this estimated obligation with
changes in fair value recognized as a non-cash operating expense or gain. As of
March 31, 2022, we have paid $21.9 million in milestone payments to Alkermes.

Interest Expense



Interest expense for the periods presented primarily includes interest expense
incurred on our Credit Agreement with MAM Eagle Lender, the amortization of
related financing costs, and interest expense on a promissory note with PNC Bank
under the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief and
Economic Security Act of 2020 (the "CARES Act") administered by the Small
Business Administration (the "SBA"), which was fully forgiven during the year
ended December 31, 2021.

Income Taxation

We maintained a valuation allowance against our deferred tax assets as of March 31, 2022 and 2021.



Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021



                                                  Three Months Ended March 31,
                                                    2022                 2021
                                                     (amounts in thousands)
Revenue, net                                   $          422       $          198

Operating expenses:
Cost of sales                                             648                  821
Research and development                                1,293                1,108
Selling, general and administrative                    14,190

12,088


Amortization of intangible assets                         644

644


Change in warrant valuation                                (5 )

18


Change in contingent consideration valuation           (3,803 )              1,841
Total operating expenses                               12,967               16,520
Operating loss                                        (12,545 )            (16,322 )
Other expense:
Other expense, net                                       (264 )               (590 )
Net loss                                       $      (12,809 )     $      (16,912 )


Revenue, net. For the three months ended March 31, 2022 and 2021, net product
revenue was $0.4 million and $0.2 million, respectively, related to sales of
ANJESO in the U.S. While utilizing the title model of distribution, product
revenue is recognized as shipments are made to our 3PL provider. The increase of
$0.2 million was attributable to securing additional formulary approvals and
generating trial and adoption of ANJESO, as well as increased end-user demand
leading to increased purchasing by direct customers.

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Cost of Sales. Our cost of sales was $0.6 million and $0.8 million for the three
months ended March 31, 2022 and 2021, respectively, and consists of product
costs, royalty expense and certain fixed costs associated with the manufacturing
of ANJESO, including supply chain and quality costs. We expensed costs
associated with the manufacturing of our products as research and development
prior to regulatory approval. Certain product costs of ANJESO units recognized
as revenue during the three months ended March 31, 2022 and 2021 were expensed
prior to FDA approval of ANJESO in February 2020, and therefore are not included
in cost of sales during the related periods. We expect that over time, product
costs in cost of sales will increase as sales increase and inventory associated
with the units manufactured prior to FDA approval are sold. The decrease of $0.2
million was primarily a result of the reduction of inventory scrap expense
recorded in the current year compared to the prior year of $0.2 million.

Research and Development. Our research and development expenses were $1.3
million and $1.1 million for the three months ended March 31, 2022 and 2021,
respectively. The increase of $0.2 million was primarily due to an increase in
clinical trials costs associated with our ANJESO pediatric program of $0.2
million.

Selling, General and Administrative. Our selling, general and administrative
expenses were $14.2 million and $12.1 million for the three months ended March
31, 2022 and 2021, respectively. The increase of $2.1 million was primarily a
result of accrued severance costs associated with the reduction in force of the
commercial team in the first quarter of 2022 of $1.7 million, as well as other
marketing and travel costs of $0.4 million.

Amortization of Intangible Assets. Amortization expense was $0.6 million for
each of the three months ended March 31, 2022 and 2021, which was related to the
amortization of our intangible asset resulting from research and development
activities over its estimated useful life beginning in the first quarter of
fiscal 2020.

Change in Contingent Consideration Valuation. The change in contingent
consideration valuation was a decrease in value of $3.8 million for the three
months ended March 31, 2022 and an increase in value of $1.8 million for the
three months ended March 31, 2021. The non-cash charge for contingent
consideration in each period related to the revaluation of the
probability-adjusted fair value of the Alkermes Transaction payment obligation.
The decrease in contingent consideration value for the three months ended March
31, 2022 was primarily due to updated forecasts for ANJESO due to the
significant reduction of our commercial team. The increase in contingent
consideration valuation for the three months ended March 31, 2021 was primarily
due to the time value of money and change in interest rates, partially offset by
adjusted timing of estimated milestone and royalty payments due to updated
forecasts reflecting an estimate of the launch trajectory of ANJESO.

Other Expense, net. Other expense was $0.3 million and $0.6 million for the
three months ended March 31, 2022 and 2021, respectively, which was related to
the interest expense incurred on our Credit Agreement with MAM Eagle Lender and
the amortization of related financing costs.

Liquidity and Capital Resources

As of March 31, 2022, we had $11.5 million in cash and cash equivalents.



On March 1, 2022, we closed an underwritten public offering of 1,831,631 shares
of common stock, pre-funded warrants to purchase 1,677,141 shares of common
stock at an exercise price of $0.01 per share and warrants to purchase 3,508,772
shares of common stock at an exercise price of $3.25 per share, as well as up to
526,315 additional shares of common stock and/or additional warrants to purchase
up to 526,315 shares of common stock which may be purchased pursuant to a 30-day
option to purchase additional securities granted to H.C. Wainwright & Co., LLC
(the "Underwriter") by us. The public offering price for each share of common
stock and accompanying warrant to purchase one share of common stock was $2.85,
and the public offering price for each pre-funded warrant and accompanying
warrant was $2.84. As compensation to the Underwriter, we agreed to pay to the
Underwriter a cash fee of 7.0% of the gross proceeds, plus a cash management fee
equal to 1.0% of the gross proceeds and reimbursement of certain expenses and
legal fees. We also issued to designees of the Underwriter warrants to purchase
210,526 shares of common stock at an exercise price of $3.5625 per share. On
February 28, 2022, the Underwriter partially exercised its option to purchase an
additional 113,896 warrants. Net proceeds, after deducting underwriting
discounts and commissions and offering expenses, was $8.8 million.

On December 28, 2021, we closed a registered direct offering of 42,289.3 shares
of Series A Preferred Stock, par value $0.01 per share, or the Preferred Stock,
and warrants to purchase 362,479 shares of common stock, or the December 2021
Warrants, for net proceeds of $3.7 million. The shares of Preferred Stock will
have a stated value of $100.00 per share and are convertible, on the date after
the issuance thereof, into an aggregate of 483,306 shares of common stock at a
conversion price of $8.75 per share. As compensation to H.C. Wainwright & Co.,
LLC, or the Placement Agent, we agreed to pay the Placement Agent a cash fee of
7.0% of the gross proceeds raised in the December 2021 Offering, plus a
management fee equal to 1.0% of the gross proceeds raised in the December 2021
Offering and reimbursement of certain expenses and legal fees. We also issued to
designees of the Placement Agent warrants to purchase 28,996 shares of common
stock, or the December 2021 Placement Agent Warrants. The December 2021 Warrants
and the December 2021 Placement Agent Warrants have an exercise price of $11.20
per share and will be exercisable upon the six-month anniversary of their
issuance.

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On May 31, 2021, we closed a registered direct offering of 400,815 shares of
common stock, or the May Offering, at an offering price of $29.75 per share and
warrants to purchase 400,812 shares of common stock, or the May Warrants, at an
exercise price of $0.90 per share, for net proceeds of $10.9 million. As
compensation to the Placement Agent, we agreed to pay the Placement Agent a cash
fee of 6.0% of the gross proceeds raised in the May Offering, plus a management
fee equal to 1.0% of the gross proceeds raised in the May Offering and
reimbursement of certain expenses and legal fees. We also issued to designees of
the Placement Agent warrants to purchase 24,076 shares of common stock (the "May
Placement Agent Warrants") at an exercise price of $37.1875 per share. The May
Warrants and May Placement Agent Warrants were exercisable on the six-month
anniversary of the closing date of the May Offering.

On February 8, 2021, we entered into an agreement to issue and sell 314,286
shares of common stock, or the February Offering, at an offering price of $56.00
per share, for net proceeds of $16.2 million. As compensation to the Placement
Agent, we agreed to pay the Placement Agent a cash fee of 6.0% of the gross
proceeds raised in the February Offering, plus a management fee equal to 1.0% of
the gross proceeds raised in the February Offering and reimbursement of certain
expenses and legal fees. We also issued to designees of the Placement Agent
warrants to purchase up to 18,854 shares of common stock, or the February
Placement Agent Warrants. The February Placement Agent Warrants have an exercise
price of $70.00 per share.

On January 21, 2021, we entered into an agreement to issue and sell warrants
exercisable for an aggregate of 294,298 shares of common stock, or the January
Warrants, at an offering price of $4.375 per warrant in exchange for the
exercise of the institutional investor's existing December Series A warrants
that were issued to them on December 21, 2020, at an exercise price of $41.30
per warrant. The January Warrants have an exercise price of $56.00 per share.
The January Warrants are immediately exercisable and will expire five years from
the issuance date. As compensation to the Placement Agent, we agreed to pay a
cash fee of 6.0% of the aggregate gross proceeds raised in the January Offering
(including the proceeds relating to the exercise of the December Series A
Warrants), plus a management fee equal to 1.0% of the gross proceeds raised in
the January Offering (including the proceeds relating to the exercise of the
December Series A Warrants) and reimbursement of certain expenses and legal
fees. We also issued to designees of the Placement Agent warrants to purchase up
to 17654 shares of common stock, or the January Placement Agent Warrants. The
January Placement Agent Warrants have substantially the same terms as the
January Warrants, except that the January Placement Agent Warrants have an
exercise price equal to $70.00 per share.

On May 29, 2020, we entered in a $50.0 million Credit Agreement with MAM Eagle
Lender, pursuant to which we have drawn $10.0 million as of the date of this
Quarterly Report and may draw upon four additional tranches of term loans. The
Tranche Two Loans in an amount not to exceed $5.0 million may be drawn upon on
or before August 29, 2021 provided that we generate at least $5.0 million in net
revenue in the three consecutive calendar months immediately preceding the date
such Tranche Two Loans are funded. The Tranche Two Loans may also be drawn on a
subsequent date with the satisfaction of the conditions for the Tranche Three
Loans, Tranche Four Loans, or Tranche Five Loans, as applicable, provided that
the Tranche Two Loans may not be drawn more than once. The Tranche Three Loans
in an amount not to exceed $5.0 million may be drawn upon on or before November
29, 2021 provided that we generate at least $10.0 million in net revenue in the
three consecutive calendar months immediately preceding such date such Tranche
Three Loans are funded. The Tranche Three Loans may also be drawn on a
subsequent date with the satisfaction of the conditions for the Tranche Four
Loans or Tranche Five Loans, as applicable, provided that the Tranche Three
Loans may not be drawn more than once. The Tranche Four Loans in an amount not
to exceed $10.0 million may be drawn upon, subject to the consent of the
Lenders, on or before August 29, 2022 provided that we generate at least $20.0
million in net revenue in the three consecutive calendar months immediately
preceding the date such Tranche Four Loans are funded. The Tranche Four Loans
may also be drawn on a subsequent date with the satisfaction of the conditions
for the Tranche Five Loans provided that the Tranche Four Loans may not be drawn
more than once. The Tranche Five Loans in an amount not to exceed $20.0 million
may be drawn upon, subject to the consent of the Lenders, on or before March 1,
2023 provided that we generate at least $100.0 million in net revenue in the
twelve consecutive calendar months immediately preceding the date such Tranche
Five Loans are funded.

On May 8, 2020, we entered into a promissory note for $1.5 million under the PPP
of the CARES Act administered by the SBA. We have used the loan proceeds for
covered payroll costs in accordance with the relevant terms and conditions of
the CARES Act. This Loan may be partially or fully forgiven if we comply with
the provisions of the CARES Act including the use of Loan proceeds for payroll
costs, rent, utilities, and other expenses, and at least 60% of the loan
proceeds must be for payroll costs as defined by the CARES Act. During the year
ended December 31, 2021, we received a Notice of PPP Forgiveness Payment from
the SBA regarding the approval of our application for forgiveness of the PPP
Loan of $1.5 million and accrued interest. As a result, we recognized a gain on
extinguishment of the PPP Loan of $1.5 million during the year ended December
31, 2021.

We anticipate that our principal uses of cash in the future will be primarily to
fund our operations, pipeline development activities, ongoing modest ANJESO
commercialization, working capital needs, capital expenditures and other general
corporate purposes.

We expect to seek additional funding to sustain our future operations and while
we have successfully raised capital in the past, the ability to raise capital in
future periods is not assured. Based on our available cash as of March 31, 2022,
we will need to raise additional capital in the next twelve months to continue
as a going concern.

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Sources and Uses of Cash



Cash used in operations was $12.9 million and $14.0 million for the three months
ended March 31, 2022 and 2021, respectively, which represents our operating
losses less our non-cash items including: stock-based compensation, non-cash
interest expense, depreciation, amortization, changes in warrant valuations, and
changes in fair value of contingent consideration, as well as changes in
operating assets and liabilities.

There was no significant cash used in investing activities for the three months
ended March 31, 2022. Cash used in investing activities for the three months
ended March 31, 2021 was $7.6 million, which was primarily due to purchases of
short-term investments in the current year, partially offset by the maturities
of these short-term investments.

There was $8.6 million of cash provided by financing activities in the three
months ended March 31, 2022 consisting of net proceeds of $9.1 million from
public offerings of common stock and warrants, partially offset by a payment of
contingent consideration of $0.5 million. There was $21.9 million of cash
provided by financing activities for the three months ended March 31, 2021
consisting of net proceeds of $16.2 million from registered direct offerings of
common stock and warrants and net proceeds of $12.2 million from warrant
exercises, partially offset by a payment of contingent consideration of $6.4
million.

Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

•

our relationships with third parties, licensors, collaborators, and our employees;

•

our ability to continue to operate as a standalone company and execute our strategic priorities;

•

potential indemnification liabilities we may owe to Societal CDMO;

•

the timing of the Alkermes Transaction milestone payments and other contingent consideration;

•

the costs of continued manufacturing scale-up and commercialization activities, for ANJESO;

•

the level of market acceptance of ANJESO;

•

the scope, progress, results, and costs of development for our other product candidates;

•

the cost, timing and outcome of regulatory review of our other product candidates;

•

the cost of manufacturing scale-up, acquiring drug product and other capital equipment for our other product candidates;

•

the extent to which we in-license, acquire or invest in products, businesses and technologies;

•

our ability to raise additional funds through equity or debt financings or the sale of certain assets;

•

our ability to achieve certain milestones to access and draw down additional tranches of debt under the Credit Agreement;

•

the extent to which holders of our warrants exercise their warrants resulting in the payment of cash proceeds to us;

•

the costs of preparing, submitting and prosecuting patent applications and maintaining, enforcing and defending intellectual property claims; and

•


the effect of any changes in our effective tax rate due to changes in the mix of
earnings in countries with differing statutory tax rates, changes in the
valuation of deferred tax assets and liabilities, tax impacts and net operating
loss utilization related to the Separation and changes in tax laws.

We might use existing cash and cash equivalents on hand, debt, equity financing,
sale of assets or out-licensing revenue or a combination thereof to fund our
operations or product acquisitions. If we increase our debt levels, we might be
restricted in our ability to raise additional capital and might be subject to
financial and restrictive covenants. Our shareholders may experience dilution as
a result of the issuance of additional equity or debt securities. This dilution
may be significant depending upon the amount of equity or debt securities that
we issue and the prices at which we issue any securities.

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Contractual Commitments

The table below reflects our contractual commitments as of March 31, 2022:



                                                              Payments Due by Period (in 000s)
                                                         Less than                                       More than
Contractual Obligations                     Total         1 year         1-3 years       3-5 years        5 years
Debt Obligations (1):
Debt                                      $  10,000     $     3,056     $     6,667     $       278     $         -
Interest on Debt                              2,478           1,271           1,196              10               -

Purchase Obligations (2):                 $   4,489     $       553     $       301     $        19     $         -
Operating Leases (3)                          1,755             415             550             569             221
Other Long-Term Liabilities:
Other License Commitments and Milestone
  payments (4), (5)                          52,805              70             270             125               -
Alkermes Payments (6)                       118,071           8,729          16,486          12,857               -
Employment Agreements (7)                     1,317           1,008             309               -               -

Total Contractual Obligations             $ 190,915     $    15,102     $    25,779     $    13,858     $       221



(1)
Debt obligations consist of principal, an exit fee of 2.5% of that principal and
interest on the $10.0 million outstanding term loan under our Credit Agreement.
In accordance with U.S. GAAP, the future interest obligations are not recorded
on our Consolidated Balance Sheet. See Note 11 to the Consolidated Financial
Statements included in this Quarterly Report.

(2)


These obligations consist of cancelable and non-cancelable purchase commitments
related to inventory and other goods or services. The timing of certain purchase
commitments cannot be estimated as it is dependent on sales launch trajectory or
the outcome of other strategic evaluations. In accordance with U.S. GAAP, these
obligations are not recorded on our Consolidated Balance Sheets. See Note 12(d)
to the Consolidated Financial Statements included in this Quarterly Report.

(3)


We have become party to certain operating leases for the leased space in
Malvern, Pennsylvania, and Dublin, Ireland, as well as for office equipment, for
which the minimum lease payments are presented. See Note 8 to the Consolidated
Financial Statements included in this Quarterly Report.

(4)


We are party to exclusive licenses with Orion for the development and
commercialization of certain pipeline product candidates, under which we may be
required to make certain milestone and royalty payments to Orion. See Note 12(a)
to the Consolidated Financial Statements included in the Quarterly Report. The
amount reflects only payment obligations that are fixed and determinable that
may arise based on meeting certain milestones. We are unable to reliably
estimate the timing of these payments because they are dependent on the type and
complexity of the clinical studies and intended uses of the products, which have
not been established. In accordance with U.S. GAAP, these obligations are not
recorded on our Consolidated Balance Sheets.

(5)


We license the neuromuscular blocking agents, or NMBs, from Cornell University
pursuant to a license agreement under which we are obligated to make annual
license maintenance fee payments, milestone payments and patent cost payments
and to pay royalties on net sales of the NMBs. The amount reflects only payment
obligations that are fixed and determinable. We are unable to reliably estimate
the timing of certain of these payments because they are dependent on the type
and complexity of the clinical studies and intended uses of the products, which
have not been established. In accordance with U.S. GAAP, certain of these
obligations are not recorded on our Consolidated Balance Sheets. See 12(a) to
the Consolidated Financial Statements included in this Quarterly Report.

(6)


Pursuant to the purchase and sale agreement governing the Alkermes Transaction,
we agreed to pay to Alkermes milestone and royalty payments. The amount reflects
only payment obligations that are fixed and determinable and in some instances
may only arise based on meeting certain commercial milestones. We are unable to
reliably estimate the timing of these payments because they are in some
instances, events that not in our control and dependent on the commercial
success of the product. In accordance with U.S. GAAP, the fair value of these
obligations is recorded as contingent consideration on our Consolidated Balance
Sheets. See Note 12(b) to the Consolidated Financial Statements included in this
Quarterly Report.

(7)


We have entered into employment agreements with certain of our named executive
officers. As of March 31, 2022, these employment agreements provided for, among
other things, annual base salaries in an aggregate amount of not less than this
amount, from that date through September 2023. In accordance with U.S. GAAP,
these obligations are not recorded on our Consolidated Balance Sheets. See Note
12(e) to the Consolidated Financial Statements included in this Quarterly
Report.

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Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our 2021 Annual Report. In the three months ended March 31, 2022, there were no significant changes to the application of critical accounting policies previously disclosed in our 2021 Annual Report.

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