| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Nature of Operations. Avadel Pharmaceuticals PLC (“Avadel,” the “Company,” “we,” “our,” or “us”) is a specialty pharmaceutical company engaged in identifying, developing, and commercializing niche branded pharmaceutical products mainly in the U.S. Our business model consists of three distinct strategies: • the development of differentiated, patent protected products through application of the Company’s proprietary patented drug delivery platforms, Micropump® and LiquiTime®, that target high-value solid and liquid oral and alternative dosages forms through the U.S. Food and Drug Administration (FDA) 505(b)(2) approval process, which allows a sponsor to submit an application that doesn’t depend on efficacy, safety, and toxicity data created by the sponsor. In addition to Micropump® and LiquiTime®, the Company has two other proprietary drug delivery platforms, Medusa™ (hydrogel depot technology for use with large molecules and peptides) and Trigger Lock™ (controlled release of opioid analgesics with potential abuse deterrent properties). • the identification of Unapproved Marketed Drugs (“UMDs”), which are currently sold in the U.S., but unapproved by the FDA, and the pursuit of approval for these products via a 505(b)(2) New Drug Application (NDA). To date, the Company has received approvals through this “unapproved-to-approved” avenue for three products: Bloxiverz® (neostigmine methylsulfate injection), Vazculep® (phenylephrine hydrochloride injection) and Akovaz® (ephedrine sulfate injection). As a potential source of near-term revenue growth, Avadel is working on the development of a fourth product for potential NDA submission by year-end 2017, and seeks to identify additional product candidates for development with this strategy. • the acquisition of commercial and or late-stage products or businesses. The Company markets three branded pediatric-focused pharmaceutical products in the primary care space, and a 510(k) approved device that will launch in the second quarter of 2017, all of which were purchased through the acquisition of FSC Laboratories and FSC Pediatrics on February 5, 2016. We will consider further acquisitions, and the Company continues to look for assets that could fit strategically into its current or potential future commercial sales force. The Company was incorporated in Ireland on December 1, 2015 as a private limited company, and re-registered as an Irish public limited company on November 21, 2016. Its headquarters are in Dublin, Ireland and it has operations in St. Louis, Missouri, United States, and Lyon, France. The Company is an Irish public limited company, or plc, and is the successor to Flamel Technologies S.A., a French société anonyme (“Flamel”), as the result of the merger of Flamel with and into the Company which was completed at 11:59:59 p.m., Central Europe Time, on December 31, 2016 (the “Merger”) pursuant to the agreement between Flamel and Avadel entitled Common Draft Terms of Cross-Border Merger dated as of June 29, 2016 (the “Merger Agreement”). Immediately prior to the Merger, the Company was a wholly owned subsidiary of Flamel. As a result of the Merger Agreement: • Flamel ceased to exist as a separate entity and the Company continued as the surviving entity and assumed all of the assets and liabilities of Flamel. • our authorized share capital is $5,500 divided into 500,000 ordinary shares with a nominal value of $0.01 each and 50,000 preferred shares with a nominal value of $0.01 each ◦ all outstanding ordinary shares of Flamel, €0.122 nominal value per share, were canceled and exchanged on a one-for-one basis for newly issued ordinary shares of the Company, $0.01 nominal value per share. This change in nominal value of our outstanding shares resulted in our reclassifying $5,937 on our balance sheet from ordinary shares to additional paid-in capital ◦ our board of directors is authorized to issue preferred shares on a non-pre-emptive basis, for a maximum period of five years, at which point it may be renewed by shareholders. The board of directors has discretion to dictate terms attached to the preferred shares, including voting, dividend, conversion rights, and priority relative to other classes of shares with respect to dividends and upon a liquidation. • all outstanding American Depositary Shares (ADSs) representing ordinary shares of Flamel were canceled and exchanged on a one-for-one basis for ADSs representing ordinary shares of the Company. Thus, the Merger changed the jurisdiction of our incorporation from France to Ireland, and an ordinary share of the Company held (either directly or represented by an ADS) immediately after the Merger continued to represent the same proportional interest in our equity owned by the holder of a share of Flamel immediately prior to the Merger. References in these consolidated financial statements and the notes thereto to “Avadel,” the “Company,” “we,” "our," “us,” and similar terms shall be deemed to be references to Flamel prior to the completion of the Merger, unless the context otherwise requires. Prior to completion of the Merger, the Flamel ADSs were listed on the Nasdaq Global Market (“ Nasdaq ”) under the trading symbol “FLML”; and immediately after the Merger the Company’s ADSs were listed for and began trading on Nasdaq on January 3, 2017 under the trading symbol “AVDL.” Further details about the reincorporation, the Merger and the Merger Agreement are contained in our definitive proxy statement filed with the Securities and Exchange Commission on July 5, 2016, and within the Annual Report on Form 10-K of which these financial statements are a part in Item 1 thereof under the caption “Business - The Flamel Merger.” Under Irish law, the Company can only pay dividends and repurchase shares out of distributable reserves, as discussed further in the Company's proxy statement filed with the SEC as of July 5, 2016. Upon completion of the Merger, the Company did not have any distributable reserves. On February 15, 2017, the Company filed a petition with the High Court of Ireland seeking the court's confirmation of a reduction of the Company's share premium so that it can be treated as distributable reserves for the purposes of Irish law. On March 6, 2017, the High Court issued its order approving the reduction of the Company's share premium which can be treated as distributable reserves. Basis of Presentation. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany accounts and transactions have been eliminated. Reclassifications and Immaterial Corrections of Prior Period Amounts . The consolidated financial statements for prior periods contain certain reclassifications to conform to the presentation used in 2016. Additionally, the Company has identified certain immaterial errors related to prior reporting periods. The Company has assessed the impact of the errors on its prior period financial statements and concluded that the errors were not material to those financial statements. Although the effect of the errors was not material to any previously issued financial statements, the cumulative effect of correcting the errors would have been material for the period ended December 31, 2016. Consequently, the Company has presented the effects of these errors and reclassifications on its prior period financial statements in the tables below. In future filings, the financial statements for comparative periods affected by these errors and reclassifications will be revised. The impact of the above errors and reclassifications on previously presented line items for each comparative period presented is as follows: Twelve Months Ended December 31, 2014 Correction of Immaterial Errors Consolidated Statement of Loss: As filed (b) (f) As revised Product sales and services $ 11,993 $ 200 $ — $ 12,193 Total revenue 14,775 200 — 14,975 Operating income (loss) (93,857 ) 200 — (93,657 ) Income (loss) before income taxes (90,331 ) 200 — (90,131 ) Income tax provision (benefit) (1,407 ) 70 693 (644 ) Net income (loss) from continuing operations (88,924 ) 130 (693 ) (89,487 ) Net income (loss) (84,906 ) 130 (693 ) (85,469 ) Net loss per share - basic $ (2.34 ) $ — $ (0.02 ) $ (2.36 ) Net loss per share - diluted $ (2.34 ) $ — $ (0.02 ) $ (2.36 ) Twelve Months Ended December 31, 2015 Correction of Immaterial Errors Consolidated Statement of Income: As filed (a) (b) (c) As revised Product sales and services $ 172,488 $ — $ (200 ) $ — $ 172,288 Total revenue 173,209 — (200 ) — 173,009 Cost of products and services sold 10,921 — — 489 11,410 Total operating expenses 101,762 — — 489 102,251 Operating income (loss) 71,447 — (200 ) (489 ) 70,758 Income (loss) before income taxes 78,394 — (200 ) (489 ) 77,705 Income tax provision (benefit) 37,735 (1,587 ) (70 ) (171 ) 35,907 Net income (loss) from continuing operations 40,659 1,587 (130 ) (318 ) 41,798 Net income (loss) 40,659 1,587 (130 ) (318 ) 41,798 Net income (loss) per share - basic $ 1.00 $ 0.04 $ — $ (0.01 ) 1.03 Net income (loss) per share - diluted $ 0.93 $ 0.04 $ — $ (0.01 ) $ 0.96 December 31, 2015 Correction of Immaterial Errors Reclassifications Consolidated Balance Sheet: As filed (a) (c) (d) (e) (g) As revised Accounts receivable $ 6,978 $ — $ — $ — $ 509 $ — $ 7,487 Inventories 4,155 — (489 ) — — — 3,666 Prepaid expenses and other current assets 7,989 — — — — 75 8,064 Total current assets 166,306 — (489 ) — 509 75 166,401 Other 158 — — — — 9 167 Total assets 214,977 — (489 ) — 509 84 215,081 Current portion of long-term related party payable 28,614 — — (3,410 ) — — 25,204 Accounts payable 10,565 — — — (5,517 ) — 5,048 Accrued expenses 3,598 — — — 5,710 — 9,308 Income taxes 323 (228 ) (171 ) — — 76 — Total current liabilities 48,788 (228 ) (171 ) (3,410 ) 193 76 45,248 Long-term related party payable 94,079 — — 3,410 — — 97,489 Deferred taxes 1,351 (1,359 ) — — — 8 — Other 2,210 — — — 316 — 2,526 Total liabilities 147,112 (1,587 ) (171 ) — 509 84 145,947 Accumulated deficit (279,793 ) 1,587 (318 ) — — — (278,524 ) Total shareholders' equity 67,865 1,587 (318 ) — — — 69,134 Total liabilities and shareholders' equity 214,977 — (489 ) — 509 84 215,081 (a) Reflects the cumulative 2015 correction of $1,587 of income tax benefits related to the deductibility of the U.S. Internal Revenue Code Section 483 imputed interest on contingent consideration liabilities which should have been recorded in prior periods ( $866 , $292 , $863 and ( $434 ) in the first, second, third and fourth quarters of 2015, respectively). (b) Reflects the correction of a $200 overstatement of revenue in the first quarter of 2015 resulting from errors in certain estimates of ending inventory amounts at our wholesalers which were originally corrected in the first quarter of 2015 but should have been recorded in the fourth quarter of 2014. As this item was originally corrected in the first quarter of 2015, no adjustment was required to correct the consolidated balance sheet at December 31, 2015. (c) Reflects the correction of a $489 error in the Company’s inventory obsolescence reserve accrual and expense which was originally recorded in the first quarter of 2016 but should have been recorded in the fourth quarter of 2015. (d) Reflects the correction of a balance sheet classification error which overstated the current portion of the long-term related party payable by $3,410 . (e) Reflects revisions to the presentation of certain gross to net revenue reserves which were previously included in accounts payable and are now included in accrued expenses. (f) Reflects the correction of $2,606 of income tax benefits from stock-based compensation and certain other items which were originally recorded in the fourth quarter of 2015 but should have been recorded in prior periods ( $360 in 2012, $333 in 2013, $( 693 ) in 2014, and $ 830 , $1,026 and $750 in the first, second and third quarters of 2015, respectively). As these items were originally corrected in the fourth quarter of 2015, no adjustment was required to correct the consolidated balance sheet at December 31, 2015. (g) Reflects balance sheet reclassifications required to properly net the accrued income tax and deferred income tax amounts within the balance sheet as a result of the adjustments made in items (a) through (f) above. In addition to the specific amounts identified within the tables above, the Company also changed the names of the previously-reported “Interest expense – changes in fair value of related party financing related contingent consideration” line on the consolidated statement of income (loss) to “Other expense – changes in fair value of related party payable”, and the previously-reported “Long-term related party contingent consideration payable” line on the consolidated balance sheet to “Long-term related party payable” to better reflect the underlying nature of certain royalty agreements. While the balance sheet revisions and reclassifications noted in the tables above impact their corresponding captions within the cash flows provided by (used in) operating activities section of the Company’s consolidated statements of cash flows in each quarterly period of 2015, there was no impact to the total net cash provided by (used in) operating activities in any of these periods. Additionally, $76,213 of marketable securities as of December 31, 2015 were reclassified from a Level 1 fair value hierarchy classification, as reported in prior filings, to a Level 2 classification based on the criteria set forth in Note 3: Fair Value Measurement . Revenue Revenue includes sales of pharmaceutical products, amortization of licensing fees and, if any, milestone payments for R&D achievements. Product Sales and Services Revenue is generally realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable, and collectability is reasonably assured. The Company records revenue from product sales when title and risk of ownership have been transferred to the customer, which is typically upon delivery to the customer and when the selling price is determinable. As is customary in the pharmaceutical industry, the Company’s gross product sales are subject to a variety of deductions in arriving at reported net product sales. These adjustments include estimates for product returns, chargebacks, payment discounts, rebates, and other sales allowances and are estimated based on analysis of historical data for the product or comparable products, as well as future expectations for such products. For generic and branded products sold in mature markets where the ultimate net selling price to the customer is estimable, the Company recognizes revenues upon shipment to the wholesaler. For new product launches, we recognize revenue once sufficient data is available to determine product acceptance in the marketplace such that product returns and other deductions may be estimated based on historical data and there is evidence of reorders and consideration is made of wholesaler inventory levels. In connection with the third quarter 2016 launch of Akovaz, we determined that sufficient data was available to determine the ultimate net selling price to the customer, and therefore, we began to recognize revenue upon shipment to our wholesaler customers. Prior to the second quarter 2016, we did not have sufficient historical data to estimate certain revenue deductions. As such, we could not accurately estimate the ultimate net selling price of our Avadel Legacy Pharmaceuticals (formerly Éclat) portfolio of products. As a result, we delayed revenue recognition on these products until the wholesaler sold the product through to its customers. During the second quarter of 2016, it was determined that we now had sufficient evidence, history, data and internal controls to estimate the ultimate selling price of our products upon shipment from our warehouse to our customers, the wholesalers. Accordingly, we discontinued the sell-through revenue approach and now recognize revenue once the product is shipped from the warehouse to the wholesaler. As a result of this change in accounting estimate, we recognized $5,981 in additional revenue, or $0.05 per diluted share, for the twelve months ended December 31, 2016 that previously would have been deferred until sold by the wholesalers to the hospitals. License and Research Revenue Our license and research revenues consist of fees and milestone payments. Non-refundable fees where we have continuing performance obligations are deferred and are recognized ratably over the projected performance period. We recognize milestone payments, which are typically related to regulatory, commercial or other achievements by us or our licensees and distributors, as revenues when the milestone is accomplished and collection is reasonably assured. For the year ended December 31, 2016, we recognized $3,024 of revenue from license agreements. Government Grants The Company receives financial support for various research or investment projects from governmental agencies. From time to time we receive funds, primarily from the French government, to finance certain R&D projects. These funds are repayable on commercial success of the project. In the absence of commercial success, the Company is released of its obligation to repay the funds and as such the funds are recognized in the consolidated statements of income (loss) as an offset to R&D expense. The absence of commercial success must be formally confirmed by the granting authority. Should the Company wish to discontinue the R&D to which the funding is associated, the granting authority must be informed and a determination made as to how much, if any, of the grant must be repaid. Research and Development Research and development expenses consist primarily of costs related to clinical studies and outside services, personnel expenses, and other research and development expenses. Clinical studies and outside services costs relate primarily to services performed by clinical research organizations and related clinical or development manufacturing costs, materials and supplies, filing fees, regulatory support, and other third party fees. Personnel expenses relate primarily to salaries, benefits and stock-based compensation. Other research and development expenses primarily include overhead allocations consisting of various support and facilities-related costs. R&D expenditures are charged to operations as incurred. The Company recognizes R&D tax credits received from the French government for spending on innovative R&D as an offset of R&D expenses. Stock-based Compensation The Company accounts for stock-based compensation based on grant-date fair value estimated in accordance with ASC 718. The fair value of stock options and warrants is estimated using Black-Scholes option-pricing valuation models (“Black-Scholes model”). As required by the Black-Sholes model, estimates are made of the underlying volatility of AVDL stock, a risk-free rate and an expected term of the option or warrant. We estimated the expected term using a simplified method, as we do not have enough historical exercise data for a majority of such options and warrants upon which to estimate an expected term. The Company recognizes compensation cost, net of an estimated forfeiture rate, using the accelerated method over the requisite service period of the award. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet. Discontinued Operations The Company followed the guidance in Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 205 Presentation of Financial Statements (ASC 205), Topic 360 Property, Plant and Equipment (ASC 360) and Accounting Standards Update (ASU 2014-8), Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity in determining the accounting for the divestiture of the Company's Pessac, France facility and the related business to Recipharm in December 2014. In 2014, the Company opted to early adopt the provisions of ASU 2014-8 as management believed that all criteria for presenting the disposal of Pessac facility and its business as a discontinued operation were met, and that presenting the disposal as a discontinued operation would better reflect the Company's ongoing operations. The divestiture of the Pessac facility was part of a strategic shift that had and will have a major effect on the Company’s operations and financial results. Prior to the acquisition of the Avadel Legacy Pharmaceutical (formerly Éclat) products in March 2012, the Company’s primary focus was to develop and license its proprietary drug delivery platforms (Micropump®, LiquiTime®, Trigger Lock™ and Medusa™) with pharmaceutical companies and biotechnology partners (e.g. the licensing of Micropump® to GSK to develop Coreg CR® with GSK bringing and commercializing the product to market). With the acquisition of the Avadel Legacy Pharmaceutical (formerly Éclat) products, the Company shifted its focus to combining novel, high-value internally developed products with its leading drug delivery platforms -- reducing its reliance on products developed with partners -- and commercializing niche branded and generic pharmaceutical products. The divestiture of the Pessac facility to Recipharm and the transfer to Recipharm of the GSK’s Supply Agreement and royalty income relating to Coreg CR ® was an implementation of this strategic shift. Avadel sold over 50% of its historical revenues as a result of the divestiture of the Pessac facility, which has a major impact on the Company’s operations and results. The divestiture of the Pessac facility was accomplished in a single transaction and the assets, contracts and liabilities referred to in the Asset Purchase Agreement signed between Avadel and Recipharm were determined to represent a disposal group. This disposal group was considered to be a component of the Company. While the Pessac facility and its related business were not identified as reportable segment or operating segment, as the Company operates in only one segment, the Pessac facility and its related business is considered to be an asset group as the transferred assets, liabilities and contracts represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company transferred all future cash outflows and inflows relating to the Pessac Facility that can be clearly distinguished operationally and for financial reporting purposes. The results of discontinued operations, less income taxes, have been reported as a separate component of income in the consolidated statements of income (loss). The assets and liabilities of the discontinued operation have been reported separately in the asset and liability sections of the consolidated balance sheets for the periods presented therein. Note 19: Discontinued Operations contains a description of the facts and circumstances related to the disposal, the gain and loss on disposal and the specific line items included in the consolidated statements of income (loss), consolidated balance sheets and consolidated statements of cash flows relative to the disposal group. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, cash on deposit and fixed term deposits which are highly liquid investments with original maturities of less than three months. Marketable Securities The Company’s marketable securities are carried at fair value, with unrealized gains and losses, net of taxes, reported as a component of accumulated other comprehensive income (“AOCI”) in shareholders’ equity, with the exception of unrealized losses believed to be other-than-temporary, if any, which are reported in earnings in the current period. The cost of securities sold is based upon the specific identification method. Accounts Receivable Accounts receivable are stated at amounts invoiced net of allowances for doubtful accounts and certain other gross to net deductions. The Company makes judgments as to its ability to collect outstanding receivables and provides allowances for the portion of receivables deemed uncollectible. Provision is made based upon a specific review of all significant outstanding invoices. A majority of accounts receivable is due from three significant customers. See Note 18: Company Operations by Product, Customer and Geographic Area. Inventories Inventories consist of raw materials and finished products, which are stated at lower of cost or market determined under the first-in, first-out ("FIFO") method. Raw materials used in the production of pre-clinical and clinical products are expensed as R&D costs when consumed. The Company establishes reserves for inventory estimated to be obsolete, unmarketable or slow-moving on a case by case basis. Property and Equipment Property and equipment is stated at historical cost less accumulated depreciation. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives: Laboratory equipment 4-8 years Office and computer equipment 3 years Leasehold improvements, furniture, fixtures and fittings 5-10 years Goodwill Goodwill represents the excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed. The Company has determined that it operates in a single segment and has a single reporting unit associated with the development and commercialization of pharmaceutical products. The annual test for goodwill impairment is a two-step process. The first step is a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If this step indicates impairment, then, in the second step, the loss is measured as the excess of recorded goodwill over the implied fair value of the goodwill. Implied fair value of goodwill is the excess of the fair value of the reporting unit as a whole over the fair value of all separately identified assets and liabilities within the reporting unit. The Company tests goodwill for impairment annually and when events or changes in circumstances indicate that the carrying value may not be recoverable. The Company uses projections of future discounted cash flows and takes into account assumptions regarding the evolution of the market and the Company's ability to successfully develop and commercialize its products. Changes in market conditions could have a major impact on the valuation of these assets and could result in potential associated impairment. During the fourth quarter of 2016, we performed our required annual impairment test of goodwill and have determined that no impairment of goodwill existed at December 31, 2016 or 2015. Long-Lived Assets Long-lived assets include fixed assets and intangible assets. Intangible assets consist primarily of purchased licenses, in-process R&D and intangible assets recognized as part of the Éclat and FSC acquisitions. Acquired IPR&D has an indefinite life and is not amortized until completion and development of the project, at which time the IPR&D becomes an amortizable asset. Amortization of acquired IPR&D is computed using the straight-line method over the estimated useful life of the assets. Long-lived assets are reviewed for impairment whenever conditions indicate that the carrying value of the assets may not be fully recoverable. Such impairment tests are based on a comparison of the pretax undiscounted cash flows expected to be generated by the asset to the recorded value of the asset. If impairment is indicated, the asset value is written down to its market value if readily determinable or its estimated fair value based on discounted cash flows. Any significant changes in business or market conditions that vary from current expectations could have an impact on the fair value of these assets and any potential associated impairment. The Company has determined that no indications of impairment existed at December 31, 2016 or 2015. Acquisition-related Contingent Consideration The acquisition-related contingent consideration payables arising from the acquisition of Éclat Pharmaceuticals (i.e., our Avadel Legacy Pharmaceutical products business) and FSC are accounted for at fair-value (see Note 10: Long-Term Related Party Payable ). The fair value of the warrants issued in connection with the Éclat acquisition are estimated using a Black-Scholes option pricing model. The fair value of acquisition-related contingent consideration payable is estimated using a discounted cash flow model based on the long-term sales or gross profit forecasts of the specified Éclat or FSC products using an appropriate discount rate. There are a number of estimates used when determining the fair value of these earn-out payments. These estimates include, but are not limited to, the long-term pricing environment, market size, market share the related products are forecast to achieve, the cost of goods related to such products and an appropriate discount rate to use when present valuing the related cash flows. These estimates can and often do change based on changes in current market conditions, competition, management judgment and other factors. Changes to these estimates can have and have had a material impact on our consolidated statements of income (loss), balance sheets and statements of cash flows. Changes in fair value of these liabilities are recorded in the consolidated statements of income (loss) within operating expenses as changes in fair value of related party contingent consideration. Financing-related Royalty Agreements We also entered into two royalty agreements with related parties in connection with certain financing arrangements. We elected the fair value option for the measurement of the financing-related contingent consideration payable associated with the royalty agreements with certain Deerfield and Broadfin entities, both of whom are related parties (see Note 10: Long-Term Related Party Payable ). The fair value of financing-related royalty agreements is estimated using many of the components used to determine the fair value of the acquisition-related contingent consideration noted above. Changes to these components can also have a material impact on our consolidated statements of income (loss), balance sheets and statements of cash flow |
