Pacira BioSciences (PCRX) 10-Q 2 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 25, 2016
Document and Entity Information
Entity Registrant Name	Pacira Pharmaceuticals, Inc.
Entity Central Index Key	1,396,814
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus (Q1,Q2,Q3,FY)	Q1
Amendment Flag	false
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding		37,167,255

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 35,029	$ 56,984
Short-term investments	114,992	101,981
Accounts receivable, net	25,901	25,855
Inventories, net	63,744	61,645
Prepaid expenses and other current assets	8,959	6,117
Total current assets	248,625	252,582
Long-term investments	13,470	13,462
Fixed assets, net	95,846	90,324
Goodwill	32,784	30,880
Intangibles, net	0	81
Other assets	481	406
Total assets	391,206	387,735
Current liabilities:
Accounts payable	10,484	8,739
Accrued expenses	29,067	35,375
Convertible senior notes	105,215	104,040
Current portion of deferred revenue	1,275	1,426
Income taxes payable	98	208
Total current liabilities	146,139	149,788
Deferred revenue	7,877	8,082
Other liabilities	11,020	11,473
Total liabilities	$ 165,036	$ 169,343
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.001; 5,000,000 shares authorized; none issued and outstanding at March 31, 2016 and December 31, 2015	$ 0	$ 0
Common stock, par value $0.001, 250,000,000 shares authorized; 37,103,427 shares issued and outstanding at March 31, 2016; 36,848,319 shares issued and outstanding at December 31, 2015	37	37
Additional paid-in capital	538,227	526,696
Accumulated deficit	(312,143)	(308,289)
Accumulated other comprehensive income (loss)	49	(52)
Total stockholders’ equity	226,170	218,392
Total liabilities and stockholders’ equity	$ 391,206	$ 387,735

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	37,103,427	36,848,319
Common stock, shares outstanding	37,103,427	36,848,319
Treasury stock at cost, shares	0	0

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Net product sales	$ 64,502	$ 57,086
Collaborative licensing and milestone revenue	356	356
Royalty revenue	616	874
Total revenues	65,474	58,316
Operating expenses:
Cost of goods sold	20,278	17,580
Research and development	9,493	5,967
Selling, general and administrative	37,957	31,428
Total operating expenses	67,728	54,975
Income (loss) from operations	(2,254)	3,341
Other (expense) income:
Interest income	252	155
Interest expense	(1,868)	(1,996)
Royalty interest obligation	0	(71)
Other, net	48	(117)
Total other expense, net	(1,568)	(2,029)
Income (loss) before income taxes	(3,822)	1,312
Income tax expense	(32)	(52)
Net income (loss)	$ (3,854)	$ 1,260
Basic and diluted net income (loss) per share of common stock	$ (0.10)	$ 0.03
Weighted average common shares outstanding:
Weighted Average Number of Shares Outstanding, Basic (shares)	37,020	36,235
Weighted Average Number of Shares Outstanding, Diluted (shares)	37,020	41,779

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (3,854)	$ 1,260
Other comprehensive income:
Net unrealized gain on investments	101	52
Total other comprehensive income	101	52
Comprehensive income (loss)	$ (3,753)	$ 1,312

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - 3 months ended Mar. 31, 2016 - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income
Balances (in shares) at Dec. 31, 2015		36,848
Balances at Dec. 31, 2015	$ 218,392	$ 37	$ 526,696	$ (308,289)	$ (52)
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (shares)		254
Exercise of stock options	3,041	$ 0	3,041
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period		1
Vested restricted stock units	0	$ 0
Stock-based compensation	8,490		8,490
Net unrealized gain on investments	101				101
Net loss	(3,854)			(3,854)
Balances (in shares) at Mar. 31, 2016		37,103
Balances at Mar. 31, 2016	$ 226,170	$ 37	$ 538,227	$ (312,143)	$ 49

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating activities:
Net income (loss)	$ (3,854,000)	$ 1,260,000
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of fixed assets and amortization of intangibles	3,165,000	2,743,000
Amortization of unfavorable lease obligation and debt issuance costs, net	120,000	122,000
Amortization of debt discount	1,022,000	1,035,000
Stock-based compensation	8,490,000	7,517,000
Changes in operating assets and liabilities:
Restricted cash	0	1,509,000
Accounts receivable, net	(46,000)	(2,145,000)
Inventories, net	(2,099,000)	(7,001,000)
Prepaid expenses and other assets	(2,917,000)	372,000
Accounts payable and accrued expenses	(6,227,000)	(5,679,000)
Royalty interest obligation	0	(276,000)
Other liabilities	(419,000)	29,000
Deferred revenue	(356,000)	(356,000)
Net cash used in operating activities	(3,121,000)	(870,000)
Investing activities:
Purchases of fixed assets	(7,053,000)	(7,874,000)
Purchases of investments	(67,843,000)	(49,937,000)
Sales of investments	54,925,000	59,631,000
Payment of contingent consideration	(1,904,000)	(1,620,000)
Net cash provided by (used in) investing activities	(21,875,000)	200,000
Financing activities:
Proceeds from exercise of stock options	3,041,000	4,047,000
Net cash provided by financing activities	3,041,000	4,047,000
Net (decrease) increase in cash and cash equivalents	(21,955,000)	3,377,000
Cash and cash equivalents, beginning of period	56,984,000	37,520,000
Cash and cash equivalents, end of period	35,029,000	40,897,000
Supplemental cash flow information:
Cash paid for interest, including royalty interest obligation	1,926,000	2,297,000
Cash paid for income taxes, net of refunds	142,000	160,000
Non-cash investing and financing activities:
Net increase in accrued fixed assets	$ 1,554,000	$ 1,363,000

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS	3 Months Ended
	Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
DESCRIPTION OF BUSINESS	DESCRIPTION OF BUSINESS Pacira Pharmaceuticals, Inc. and its subsidiaries (collectively, the “Company” or “Pacira”) is a specialty pharmaceutical company focused on the development, commercialization and manufacture of proprietary pharmaceutical products, based on its proprietary DepoFoam ® extended release drug delivery technology, for use primarily in hospitals and ambulatory surgery centers. The Company’s lead product, EXPAREL ® (bupivacaine liposome injectable suspension), which consists of bupivacaine encapsulated in DepoFoam, was approved by the United States Food and Drug Administration, or FDA, on October 28, 2011 and launched commercially in April 2012. DepoFoam is also the basis for the Company’s other FDA-approved commercial product, DepoCyt(e), which the Company manufactures for its commercial partners. Pacira is subject to risks common to companies in similar industries and stages of development, including, but not limited to, competition from larger companies, reliance on revenue from few products, reliance on a single manufacturing site, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, protection of proprietary technology and compliance with government regulations.

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Mar. 31, 2016
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the Securities and Exchange Commission for interim reporting. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted. Therefore, these interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . The consolidated financial statements at March 31, 2016 , and for the three months ended March 31, 2016 and 2015 , are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information set forth herein in accordance with GAAP. The consolidated balance sheet as of December 31, 2015 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . The consolidated financial statements as presented reflect certain reclassifications from previously issued financial statements to conform to the current year presentation. The accounts of wholly owned subsidiaries are included in the consolidated financial statements. Intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim periods or for the full year. Concentration of Major Customers The Company’s customers are national and regional wholesalers of pharmaceutical products as well as commercial, collaborative and licensing partners. The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers (including AmerisourceBergen Health Corporation, Cardinal Health, Inc. and McKesson Drug Company), but shipments of the product are sent directly to individual accounts, such as hospitals, ambulatory surgery centers and individual doctors. The table below includes the percentage of revenue comprised by the Company’s three largest customers (i.e., wholesalers or commercial partners) in each period presented: Three Months Ended March 31, 2016 2015 Largest customer 33% 29% Second largest customer 28% 29% Third largest customer 27% 28% 88% 86% Recent Accounting Pronouncements Recently Adopted In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years beginning after December 15, 2015. The Company adopted this standard on January 1, 2016. The Company applied the new guidance retrospectively to all prior periods presented in the financial statements to conform to the 2016 presentation. As a result, $1.9 million of debt issuance costs related to the Company’s convertible senior notes at December 31, 2015 were reclassified from other assets to a reduction in the carrying value of the Company’s convertible senior notes. Not Adopted as of March 31, 2016 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which requires that an entity recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to its customers. In order to achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date . This latest standard defers the effective date of revenue standard ASU 2014-09 by one year and permits early adoption on a limited basis. This update will replace existing revenue recognition guidance under GAAP when it becomes effective for the Company beginning January 1, 2018, with early adoption permitted in the first quarter of 2017. The updated standard will permit the use of either the retrospective or cumulative effect transition method. The Company is continuing to evaluate the impact of these updates on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory . The standard requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures, one of which is net realizable value). The standard is effective for the Company prospectively beginning January 1, 2017. The adoption of ASU 2015-11 is not expected to have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) . This update requires lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. This update also introduces new disclosure requirements for leasing arrangements. The standard is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The Company is evaluating the impact of ASU 2016-02 on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . This update includes multiple provisions intended to simplify various aspects of the accounting for share-based payment transactions including accounting for excess tax benefits and tax deficiencies, classification of excess tax benefits in the statement of cash flows and accounting for forfeitures. This update is effective for annual and interim reporting periods of public entities beginning after December 15, 2016, with early adoption permitted. The Company is evaluating the impact of ASU 2016-09 on its consolidated financial statements. Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the consolidated financial statements of the Company.

INVENTORIES

INVENTORIES	3 Months Ended
	Mar. 31, 2016
Inventory Disclosure [Abstract]
INVENTORIES	INVENTORIES The components of inventories are as follows (in thousands): March 31, December 31, 2016 2015 Raw materials $ 16,015 $ 16,712 Work-in-process 9,939 12,152 Finished goods 37,790 32,781 Total $ 63,744 $ 61,645

FIXED ASSETS

FIXED ASSETS	3 Months Ended
	Mar. 31, 2016
Property, Plant and Equipment [Abstract]
FIXED ASSETS	FIXED ASSETS Fixed assets, summarized by major category, consist of the following (in thousands): March 31, December 31, 2016 2015 Machinery and laboratory equipment $ 31,086 $ 29,864 Leasehold improvements 32,359 30,834 Computer equipment and software 4,724 4,007 Office furniture and equipment 1,440 1,439 Construction in progress 54,234 49,097 Total 123,843 115,241 Less: accumulated depreciation (27,997 ) (24,917 ) Fixed assets, net $ 95,846 $ 90,324 For the three months ended March 31, 2016 and 2015, depreciation expense was $3.1 million and $2.7 million , respectively. For the three months ended March 31, 2016 and 2015, capitalized interest on the construction of manufacturing sites was $0.3 million and $0.2 million , respectively. As of March 31, 2016 and December 31, 2015, total fixed assets, net, includes leasehold improvements and manufacturing process equipment located in England in the amount of $28.4 million and $25.9 million , respectively.

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS	3 Months Ended
	Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and Intangible Assets	GOODWILL AND INTANGIBLE ASSETS In March 2007, the Company acquired from SkyePharma Holding, Inc., or Skyepharma, its California operating subsidiary (“Pacira California”), referred to herein as the Acquisition. The Company’s goodwill arose in April 2012 from a contingent milestone payment to Skyepharma in connection with the Acquisition. The Acquisition was accounted for under Statement of Financial Accounting Standards 141, Accounting for Business Combinations , which was the effective GAAP standard at the Acquisition date. In connection with the Acquisition, the Company agreed to certain earn-out payments based on a percentage of net sales of EXPAREL collected and certain other yet-to-be-developed products, as well as milestone payments for EXPAREL, as follows: (i) $10.0 million upon the first commercial sale in the United States (met April 2012); (ii) $4.0 million upon the first commercial sale in a major E.U. country (United Kingdom, France, Germany, Italy and Spain); (iii) $8.0 million when annual net sales collected reach $100.0 million (met September 2014); (iv) $8.0 million when annual net sales collected reach $250.0 million ; and (v) $32.0 million when annual net sales collected reach $500.0 million . The first milestone was met in April 2012, resulting in a $10.0 million payment to Skyepharma. The Company recorded this payment net of a $2.0 million contingent consideration liability recognized at the time of the Acquisition, resulting in $8.0 million recorded as goodwill. In September 2014, the Company made an $8.0 million milestone payment to Skyepharma in connection with achieving $100.0 million of annual EXPAREL net sales collected. For purposes of meeting future milestone payments, annual net sales are measured on a rolling quarterly basis. Cumulatively through March 31, 2016 , the Company has recorded an additional $16.8 million as goodwill for earn-out payments which are based on a percentage of net sales of EXPAREL collected. Any remaining earn-out payments will also be treated as additional costs of the Acquisition and, therefore, recorded as goodwill if and when each contingency is resolved. The change in the carrying value of goodwill is summarized as follows (in thousands): Carrying Value Balance at December 31, 2015 $ 30,880 Percentage payments on collections of net sales of EXPAREL 1,904 Balance at March 31, 2016 $ 32,784 Intangible assets, net, consist of core technology, developed technology and trademarks and trade names acquired in the Acquisition and are summarized as follows (in thousands): March 31, 2016 December 31, 2015 Gross Accumulated Intangible Gross Carrying Value Accumulated Amortization Intangible Assets, Net Estimated Amortizable intangible assets: Core technology $ 2,900 $ (2,900 ) $ — $ 2,900 $ (2,819 ) $ 81 9 Years Developed technology 11,700 (11,700 ) — 11,700 (11,700 ) — 7 Years Trademarks and trade names 400 (400 ) — 400 (400 ) — 7 Years Total intangible assets $ 15,000 $ (15,000 ) $ — $ 15,000 $ (14,919 ) $ 81 Amortization expense for intangible assets was $0.1 million for the three months ended March 31, 2016 and 2015 .

DEBT

DEBT	3 Months Ended
	Mar. 31, 2016
Debt Disclosure [Abstract]
DEBT	DEBT The composition of the Company’s debt and financing obligations is as follows (in thousands): March 31, December 31, 2016 2015 Debt: 3.25% convertible senior notes $ 118,533 $ 118,533 Deferred financing costs (1,735 ) (1,888 ) Discount on debt (11,583 ) (12,605 ) Total debt, net of debt discount $ 105,215 $ 104,040 On January 23, 2013, the Company completed a private placement of $120.0 million in aggregate principal amount of 3.25% convertible senior notes due 2019, or Notes, and entered into an indenture agreement, or Indenture, with respect to the Notes. The Notes accrue interest at a fixed rate of 3.25% per year, payable semiannually in arrears on February 1 and August 1 of each year. The Notes mature on February 1, 2019. On or after August 1, 2018, until the close of business on the second scheduled trading day immediately preceding February 1, 2019, holders may convert their Notes at any time. Upon conversion, holders will receive cash up to the principal amount of the Notes and, with respect to any excess conversion value, may receive cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s option. The initial conversion rate for the Notes was 40.2945 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $24.82 per share of the Company’s common stock. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. Holders may convert their Notes prior to August 1, 2018, only if certain circumstances are met, including if during the previous calendar quarter, the sales price of the Company’s common stock was greater than 130% of the conversion price then applicable for at least 20 out of the last 30 consecutive trading days of the quarter. During the quarter ended March 31, 2016 , this condition for conversion was met. As a result, the Notes are classified as a current obligation and will be convertible until June 30, 2016 . As of March 31, 2016 , the Notes had a market price of $2,215 per $1,000 principal amount, compared to an estimated conversion value of $2,135 . In the event of conversion, holders would forgo all future interest payments, any unpaid accrued interest and the possibility of further stock price appreciation. Upon the receipt of conversion requests, the settlement of the Notes will be paid pursuant to the terms of the Indenture, which state that the principal must be settled in cash. In the event that all of the Notes are converted, the Company would be required to repay the $118.5 million in principal value and approximately $134.5 million of cash or issue approximately 2.5 million shares of its common stock (or a combination of cash and shares of its common stock at the Company’s option) to settle the conversion premium as of March 31, 2016 , causing dilution to the Company’s shareholders and/or significant expenditures of the Company’s cash and liquid securities. While the Notes are classified in the Company’s consolidated balance sheets at March 31, 2016 and December 31, 2015 as a current obligation, the future convertibility and resulting balance sheet classification of this liability will be monitored at each quarterly reporting date and will be analyzed dependent upon market prices of the Company’s common stock during the prescribed measurement periods. In the event that the holders of the Notes continue to have the election to convert the Notes at any time during the prescribed measurement period, the Notes will continue to be considered a current obligation and classified as such. Prior to August 1, 2017, in the event that none of the conversion conditions are met in a given quarter, the Notes would be reclassified as a long-term liability. Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options , an entity must separately account for the liability and equity components of convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The equity component is recorded in additional paid-in capital in the consolidated balance sheet at the issuance date and that equity component is treated as a discount on the liability component of the Notes. The initial carrying value of the liability component of $95.1 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying value of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. The Company allocated the total transaction costs of $4.7 million related to the issuance of the Notes to the liability and equity components of the Notes based on their relative values. Transaction costs attributable to the liability component are amortized to interest expense over the six -year term of the Notes, and transaction costs attributable to the equity component are netted with the equity component in stockholders’ equity. The following table sets forth the total interest expense recognized (in thousands): Three Months Ended March 31, 2016 2015 Contractual interest expense $ 963 $ 967 Amortization of debt issuance costs 153 155 Amortization of debt discount 1,022 1,035 Capitalized interest (Note 4) (270 ) (161 ) Total $ 1,868 $ 1,996 Effective interest rate on the Notes 7.22 % 7.19 %

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS	3 Months Ended
	Mar. 31, 2016
Fair Value Disclosures [Abstract]
FINANCIAL INSTRUMENTS	FINANCIAL INSTRUMENTS Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in the principal or most advantageous market in an orderly transaction. To increase consistency and comparability in fair value measurements, the FASB established a three-level hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of fair value measurements are: • Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. • Level 2—Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. • Level 3—Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximate their respective fair values due to the short-term nature of these items. The fair value of the Notes at March 31, 2016 is calculated utilizing market quotations from an over-the-counter trading market for these Notes (Level 2). The carrying amount and fair value of the Notes are as follows (in thousands): Financial Liabilities Carried at Historical Cost Carrying Value Fair Value Measurements Using March 31, 2016 Level 1 Level 2 Level 3 3.25% convertible senior notes * $ 105,215 $ — $ 262,551 $ — * The fair value of the Notes was based on the closing price of the Company’s common stock of $52.98 per share at March 31, 2016 compared to a conversion price of $24.82 per share which, if converted, would result in an approximate conversion premium of 2.5 million shares or $134.5 million of cash. The maximum conversion premium that can be due on the Notes is 4.8 million shares, which assumes no increases in the conversion rate for certain corporate events. Short-term investments consist of asset-backed securities collateralized by credit card receivables, investment grade commercial paper and corporate bonds with maturities less than one year. Long-term investments consist of corporate bonds with maturities greater than one year. The net unrealized gains and losses from the Company’s short-term and long-term investments are reported in other comprehensive income. At March 31, 2016 , all of the Company’s short-term and long-term investments are classified as available for sale investments and are determined to be Level 2 instruments, which are measured at fair value using standard industry models with observable inputs. The fair value of the commercial paper is measured based on a standard industry model that uses the three-month Treasury bill rate as an observable input. The fair value of the asset-backed securities and corporate bonds is principally measured or corroborated by trade data for identical issues in which related trading activity is not sufficiently frequent to be considered a Level 1 input or that of comparable securities. At March 31, 2016 , the Company’s short-term and long-term investments were rated A or better by Standard & Poor’s. The following summarizes the Company’s investments at March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 Cost Gross Gross Fair Value Debt securities: Short-term: Asset-backed securities $ 26,164 $ 6 $ (4 ) $ 26,166 Commercial paper 36,650 64 — 36,714 Corporate bonds 52,098 22 (8 ) 52,112 Subtotal 114,912 92 (12 ) 114,992 Long-term: Corporate bonds 13,501 — (31 ) 13,470 Total $ 128,413 $ 92 $ (43 ) $ 128,462 December 31, 2015 Cost Gross Gross Fair Value Debt securities: Short-term: Asset-backed securities $ 27,484 $ — $ (15 ) $ 27,469 Commercial paper 35,191 31 — 35,222 Corporate bonds 39,319 2 (31 ) 39,290 Subtotal 101,994 33 (46 ) 101,981 Long-term: Corporate bonds 13,501 — (39 ) 13,462 Total $ 115,495 $ 33 $ (85 ) $ 115,443 The fair value in these instances would be determined using Level 3 inputs. At March 31, 2016 , the Company had no financial instruments which were measured using Level 3 inputs. Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, long-term investments and accounts receivable. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed federally-insured limits. The Company performs ongoing credit evaluations of its customers as warranted and generally does not require collateral. As of March 31, 2016 , three customers each accounted for over 10% of the Company’s accounts receivable, at 30% , 30% and 28% , respectively. At December 31, 2015 , three customers each accounted for over 10% of the Company’s accounts receivable, at 34% , 28% and 27% , respectively (for additional information regarding the Company’s customers, see Note 2 , Summary of Significant Accounting Policies ). Revenues are primarily derived from major wholesalers and pharmaceutical companies which generally have significant cash resources. Allowances for doubtful accounts receivable are maintained based on historical payment patterns, aging of accounts receivable and the Company’s actual write-off history. As of March 31, 2016 and December 31, 2015 , no allowances for doubtful accounts were deemed necessary by the Company on its accounts receivable.

STOCK PLANS

STOCK PLANS	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity Note [Abstract]
STOCK PLANS	STOCK PLANS Stock-Based Compensation The Company recognized stock-based compensation expense in its consolidated statements of operations as follows (in thousands): Three Months Ended March 31, 2016 2015 Cost of goods sold $ 1,549 $ 1,103 Research and development 893 1,510 Selling, general and administrative 6,048 4,904 Total $ 8,490 $ 7,517 Stock-based compensation from: Stock options (employee awards) $ 6,856 $ 6,309 Stock options (consultant awards) 274 997 Restricted stock units (employee awards) 1,085 — Employee stock purchase plan 275 211 Total $ 8,490 $ 7,517 Employee Stock Purchase Plan The Company’s 2014 Employee Stock Purchase Plan, or ESPP, features two six-month offering periods per year, running from January 1 to June 30 and July 1 to December 31. Under the ESPP, employees may elect to contribute after-tax earnings to purchase shares at 85% of the fair market value of the Company’s common stock on either the offering date or the purchase date, whichever is less. During the three months ended March 31, 2016 , no shares were purchased under the ESPP. The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the three months ended March 31, 2016 : Stock Options Number of Options Weighted Average Exercise Price Outstanding at December 31, 2015 4,645,722 $ 44.03 Granted 41,250 61.70 Exercised (254,170 ) 11.97 Forfeited (216,515 ) 71.22 Expired (28,755 ) 79.53 Outstanding at March 31, 2016 4,187,532 44.51 Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Unvested at December 31, 2015 216,198 $ 78.59 Granted 1,150 63.84 Vested (938 ) 79.43 Forfeited (17,838 ) 79.43 Unvested at March 31, 2016 198,572 78.34

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity Note [Abstract]
Stockholders' Equity	STOCKHOLDERS’ EQUITY Accumulated Other Comprehensive Income (Loss) The following table illustrates the changes in the balances of the Company’s accumulated other comprehensive income (loss) for the periods presented (in thousands): Three Months Ended March 31, Net unrealized gains (losses) from available for sale investments: 2016 2015 Balance at beginning of period $ (52 ) $ (80 ) Other comprehensive income before reclassifications 101 52 Amounts reclassified from accumulated other comprehensive income (loss) — — Balance at end of period $ 49 $ (28 )

NET INCOME (LOSS) PER SHARE

NET INCOME (LOSS) PER SHARE	3 Months Ended
	Mar. 31, 2016
Earnings Per Share [Abstract]
NET INCOME (LOSS) PER SHARE	NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is calculated by dividing the net income (loss) attributable to common shares by the weighted average number of shares outstanding plus dilutive potential common stock outstanding during the period. Potential common shares include the shares of common stock issuable upon the exercise of outstanding stock options and warrants, the vesting of RSUs and the purchase of shares from the ESPP (using the treasury stock method) as well as the conversion of the excess conversion value on the Notes. As discussed in Note 6, Debt, the Company must settle the principal of the Notes in cash upon conversion, and it may settle any conversion premium in either cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s discretion. For purposes of calculating the dilutive impact of the conversion premium on the Notes, it is presumed that the conversion premium will be settled in common stock. Potential common shares are excluded from the diluted net income (loss) per share computation to the extent that they would be antidilutive. Because the Company reported a net loss for the three months ended March 31, 2016 , no potentially dilutive securities have been included in the computation of diluted net loss per share for that period. The following table sets forth the computation of basic and diluted net income (loss) per share for the three months ended March 31, 2016 and 2015 (in thousands, except per share amounts): Three Months Ended March 31, 2016 2015 Numerator: Net income (loss) $ (3,854 ) $ 1,260 Denominator: Weighted average shares of common stock outstanding—basic 37,020 36,235 Computation of diluted securities: Dilutive effect of stock options — 1,885 Dilutive effect of conversion premium on the Notes — 3,652 Dilutive effect of warrants — 6 Dilutive effect of ESPP — 1 Weighted average shares of common stock outstanding—diluted 37,020 41,779 Net income (loss) per share: Basic and diluted net income (loss) per share of common stock $ (0.10 ) $ 0.03 The following outstanding stock options, RSUs, conversion premium on the Notes, warrants and ESPP purchase options are antidilutive in the periods presented (in thousands): Three Months Ended March 31, 2016 2015 Weighted average number of stock options 4,324 1,323 Weighted average number of RSUs 205 — Conversion premium on the Notes 2,749 — Weighted average number of warrants 3 — Weighted average purchase options under ESPP 23 — Total 7,304 1,323

TAXES

TAXES	3 Months Ended
	Mar. 31, 2016
Income Tax Disclosure [Abstract]
TAXES	TAXES Income (loss) before income taxes is as follows (in thousands): Three Months Ended March 31, 2016 2015 Income (loss) before income taxes: Domestic $ (3,499 ) $ 1,886 Foreign (323 ) (574 ) Total income (loss) before income taxes $ (3,822 ) $ 1,312 The Company recorded tax provisions of less than $0.1 million in both of the three month periods ended March 31, 2016 and 2015. The provision for income taxes is recorded based upon the best current estimate of the Company’s annual effective tax rate, or AETR. Generally, the AETR is the result of a mix of profits and losses the Company and its subsidiaries earn in multiple tax jurisdictions with different income tax rates. For the three months ended March 31, 2016 , the Company determined that its actual year-to-date rate was the best estimate of its AETR. For the three months ended March 31, 2015 , the Company estimated its AETR based on full-year estimates for ordinary income and related tax expense. The tax provisions reflect federal alternative minimum taxes as well as state income taxes. Due to the fact that the Company’s deferred tax assets are fully offset by a valuation allowance, the tax provisions do not reflect deferred tax expenses.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES Leases The Company leases research and development, manufacturing and warehouse facilities in San Diego, California which expire in 2020 and its corporate headquarters in Parsippany, New Jersey which expires in March 2028. As of March 31, 2016 , annual aggregate minimum payments due under the Company’s lease obligations are as follows (in thousands): Year Aggregate Minimum Payments 2016 (remaining nine months) $ 5,749 2017 7,878 2018 8,081 2019 8,303 2020 6,420 2021 through 2028 8,731 Total $ 45,162 CrossLink Agreement In October 2013, the Company and CrossLink BioScience, LLC, or CrossLink, commenced a five-year arrangement for the promotion and sale of EXPAREL, pursuant to the terms of a Master Distributor Agreement. In February 2015, the Company entered into a Third Amendment to the Master Distributor Agreement (the “Third Amendment”) with CrossLink to, among other things, amend certain payment terms of the agreement and specify certain sub-distributors that may promote and sell EXPAREL under the agreement. Under the terms of the Third Amendment, the Company and CrossLink have mutual termination rights under the Agreement, and the Company is permitted to terminate the Agreement without cause effective September 30, 2016, subject to certain terms and conditions set forth in the Agreement. In the event the Company terminates the agreement, a material termination payment based on a percentage of earned performance-based fees will be due to CrossLink. Litigation From time to time, the Company has been and may again become involved in legal proceedings arising in the ordinary course of its business, including those related to patents, product liability and government investigations. Except as described below, the Company is not presently a party to any litigation which it believes to be material, and is not aware of any pending or threatened litigation against the Company which it believes could have a material adverse effect on its business, operating results, financial condition or cash flows. In April 2015, the Company received a subpoena from the U.S. Department of Justice, U.S. Attorney’s Office for the District of New Jersey, requiring the production of a broad range of documents pertaining to marketing and promotional practices related to EXPAREL. The Company is cooperating with the government’s inquiry. The Company can make no assurances as to the time or resources that will need to be devoted to this inquiry or its final outcome, or the impact, if any, of this inquiry or any proceedings on its business, financial condition, results of operations and cash flows.

SUMMARY OF SIGNIFICANT ACCOUN20

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2016
Accounting Policies [Abstract]
Basis of Presentation and Principles of Consolidation	Basis of Presentation and Principles of Consolidation These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the Securities and Exchange Commission for interim reporting. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted. Therefore, these interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . The consolidated financial statements at March 31, 2016 , and for the three months ended March 31, 2016 and 2015 , are unaudited, but include all adjustments (consisting of only normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial information set forth herein in accordance with GAAP. The consolidated balance sheet as of December 31, 2015 has been derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . The consolidated financial statements as presented reflect certain reclassifications from previously issued financial statements to conform to the current year presentation. The accounts of wholly owned subsidiaries are included in the consolidated financial statements. Intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim periods or for the full year.
Concentration of Major Customers	Concentration of Major Customers The Company’s customers are national and regional wholesalers of pharmaceutical products as well as commercial, collaborative and licensing partners. The Company sells EXPAREL through a drop-ship program under which orders are processed through wholesalers (including AmerisourceBergen Health Corporation, Cardinal Health, Inc. and McKesson Drug Company), but shipments of the product are sent directly to individual accounts, such as hospitals, ambulatory surgery centers and individual doctors.
Recent Accounting Pronouncements	Recent Accounting Pronouncements Recently Adopted In April 2015, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years beginning after December 15, 2015. The Company adopted this standard on January 1, 2016. The Company applied the new guidance retrospectively to all prior periods presented in the financial statements to conform to the 2016 presentation. As a result, $1.9 million of debt issuance costs related to the Company’s convertible senior notes at December 31, 2015 were reclassified from other assets to a reduction in the carrying value of the Company’s convertible senior notes. Not Adopted as of March 31, 2016 In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which requires that an entity recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to its customers. In order to achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date . This latest standard defers the effective date of revenue standard ASU 2014-09 by one year and permits early adoption on a limited basis. This update will replace existing revenue recognition guidance under GAAP when it becomes effective for the Company beginning January 1, 2018, with early adoption permitted in the first quarter of 2017. The updated standard will permit the use of either the retrospective or cumulative effect transition method. The Company is continuing to evaluate the impact of these updates on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory . The standard requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures, one of which is net realizable value). The standard is effective for the Company prospectively beginning January 1, 2017. The adoption of ASU 2015-11 is not expected to have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842) . This update requires lessees to recognize lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous authoritative guidance. This update also introduces new disclosure requirements for leasing arrangements. The standard is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The Company is evaluating the impact of ASU 2016-02 on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting . This update includes multiple provisions intended to simplify various aspects of the accounting for share-based payment transactions including accounting for excess tax benefits and tax deficiencies, classification of excess tax benefits in the statement of cash flows and accounting for forfeitures. This update is effective for annual and interim reporting periods of public entities beginning after December 15, 2016, with early adoption permitted. The Company is evaluating the impact of ASU 2016-09 on its consolidated financial statements. Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the consolidated financial statements of the Company.

SUMMARY OF SIGNIFICANT ACCOUN21

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Mar. 31, 2016
Accounting Policies [Abstract]
Schedule of percentage of revenue comprised by the three largest customers (i.e. wholesalers or commercial partners)	The table below includes the percentage of revenue comprised by the Company’s three largest customers (i.e., wholesalers or commercial partners) in each period presented: Three Months Ended March 31, 2016 2015 Largest customer 33% 29% Second largest customer 28% 29% Third largest customer 27% 28% 88% 86%

INVENTORIES (Tables)

INVENTORIES (Tables)	3 Months Ended
	Mar. 31, 2016
Inventory Disclosure [Abstract]
Schedule of components of inventories	The components of inventories are as follows (in thousands): March 31, December 31, 2016 2015 Raw materials $ 16,015 $ 16,712 Work-in-process 9,939 12,152 Finished goods 37,790 32,781 Total $ 63,744 $ 61,645

FIXED ASSETS (Tables)

FIXED ASSETS (Tables)	3 Months Ended
	Mar. 31, 2016
Property, Plant and Equipment [Abstract]
Schedule of fixed assets summarized by major category	Fixed assets, summarized by major category, consist of the following (in thousands): March 31, December 31, 2016 2015 Machinery and laboratory equipment $ 31,086 $ 29,864 Leasehold improvements 32,359 30,834 Computer equipment and software 4,724 4,007 Office furniture and equipment 1,440 1,439 Construction in progress 54,234 49,097 Total 123,843 115,241 Less: accumulated depreciation (27,997 ) (24,917 ) Fixed assets, net $ 95,846 $ 90,324

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS (Tables)	3 Months Ended
	Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of Goodwill	The change in the carrying value of goodwill is summarized as follows (in thousands): Carrying Value Balance at December 31, 2015 $ 30,880 Percentage payments on collections of net sales of EXPAREL 1,904 Balance at March 31, 2016 $ 32,784
Summary of intangible assets	Intangible assets, net, consist of core technology, developed technology and trademarks and trade names acquired in the Acquisition and are summarized as follows (in thousands): March 31, 2016 December 31, 2015 Gross Accumulated Intangible Gross Carrying Value Accumulated Amortization Intangible Assets, Net Estimated Amortizable intangible assets: Core technology $ 2,900 $ (2,900 ) $ — $ 2,900 $ (2,819 ) $ 81 9 Years Developed technology 11,700 (11,700 ) — 11,700 (11,700 ) — 7 Years Trademarks and trade names 400 (400 ) — 400 (400 ) — 7 Years Total intangible assets $ 15,000 $ (15,000 ) $ — $ 15,000 $ (14,919 ) $ 81

DEBT (Tables)

DEBT (Tables)	3 Months Ended
	Mar. 31, 2016
Debt Disclosure [Abstract]
Schedule of composition of the Company's debt and financing obligations	The composition of the Company’s debt and financing obligations is as follows (in thousands): March 31, December 31, 2016 2015 Debt: 3.25% convertible senior notes $ 118,533 $ 118,533 Deferred financing costs (1,735 ) (1,888 ) Discount on debt (11,583 ) (12,605 ) Total debt, net of debt discount $ 105,215 $ 104,040
Schedule of total interest expense recognized related to the Notes	The following table sets forth the total interest expense recognized (in thousands): Three Months Ended March 31, 2016 2015 Contractual interest expense $ 963 $ 967 Amortization of debt issuance costs 153 155 Amortization of debt discount 1,022 1,035 Capitalized interest (Note 4) (270 ) (161 ) Total $ 1,868 $ 1,996 Effective interest rate on the Notes 7.22 % 7.19 %

FINANCIAL INSTRUMENTS (Tables)

FINANCIAL INSTRUMENTS (Tables)	3 Months Ended
	Mar. 31, 2016
Fair Value Disclosures [Abstract]
Schedule of carrying amount and fair value of the long-term debt	The carrying amount and fair value of the Notes are as follows (in thousands): Financial Liabilities Carried at Historical Cost Carrying Value Fair Value Measurements Using March 31, 2016 Level 1 Level 2 Level 3 3.25% convertible senior notes * $ 105,215 $ — $ 262,551 $ — * The fair value of the Notes was based on the closing price of the Company’s common stock of $52.98 per share at March 31, 2016 compared to a conversion price of $24.82 per share which, if converted, would result in an approximate conversion premium of 2.5 million shares or $134.5 million of cash. The maximum conversion premium that can be due on the Notes is 4.8 million shares, which assumes no increases in the conversion rate for certain corporate events.
Schedule of short-term investments	The following summarizes the Company’s investments at March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 Cost Gross Gross Fair Value Debt securities: Short-term: Asset-backed securities $ 26,164 $ 6 $ (4 ) $ 26,166 Commercial paper 36,650 64 — 36,714 Corporate bonds 52,098 22 (8 ) 52,112 Subtotal 114,912 92 (12 ) 114,992 Long-term: Corporate bonds 13,501 — (31 ) 13,470 Total $ 128,413 $ 92 $ (43 ) $ 128,462 December 31, 2015 Cost Gross Gross Fair Value Debt securities: Short-term: Asset-backed securities $ 27,484 $ — $ (15 ) $ 27,469 Commercial paper 35,191 31 — 35,222 Corporate bonds 39,319 2 (31 ) 39,290 Subtotal 101,994 33 (46 ) 101,981 Long-term: Corporate bonds 13,501 — (39 ) 13,462 Total $ 115,495 $ 33 $ (85 ) $ 115,443

STOCK PLANS (Tables)

STOCK PLANS (Tables)	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity Note [Abstract]
Schedule of recognized stock-based compensation in consolidated statements of operations	The Company recognized stock-based compensation expense in its consolidated statements of operations as follows (in thousands): Three Months Ended March 31, 2016 2015 Cost of goods sold $ 1,549 $ 1,103 Research and development 893 1,510 Selling, general and administrative 6,048 4,904 Total $ 8,490 $ 7,517 Stock-based compensation from: Stock options (employee awards) $ 6,856 $ 6,309 Stock options (consultant awards) 274 997 Restricted stock units (employee awards) 1,085 — Employee stock purchase plan 275 211 Total $ 8,490 $ 7,517
Schedule of the Company's stock option activity and related information	The following tables contain information about the Company’s stock option and restricted stock unit, or RSU, activity for the three months ended March 31, 2016 : Stock Options Number of Options Weighted Average Exercise Price Outstanding at December 31, 2015 4,645,722 $ 44.03 Granted 41,250 61.70 Exercised (254,170 ) 11.97 Forfeited (216,515 ) 71.22 Expired (28,755 ) 79.53 Outstanding at March 31, 2016 4,187,532 44.51 Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Unvested at December 31, 2015 216,198 $ 78.59 Granted 1,150 63.84 Vested (938 ) 79.43 Forfeited (17,838 ) 79.43 Unvested at March 31, 2016 198,572 78.34

STOCKHOLDERS' EQUITY (Tables)

STOCKHOLDERS' EQUITY (Tables)	3 Months Ended
	Mar. 31, 2016
Stockholders' Equity Note [Abstract]
Schedule of accumulated other comprehensive income (loss)	The following table illustrates the changes in the balances of the Company’s accumulated other comprehensive income (loss) for the periods presented (in thousands): Three Months Ended March 31, Net unrealized gains (losses) from available for sale investments: 2016 2015 Balance at beginning of period $ (52 ) $ (80 ) Other comprehensive income before reclassifications 101 52 Amounts reclassified from accumulated other comprehensive income (loss) — — Balance at end of period $ 49 $ (28 )

NET INCOME (LOSS) PER SHARE (Ta

NET INCOME (LOSS) PER SHARE (Tables)	3 Months Ended
	Mar. 31, 2016
Earnings Per Share [Abstract]
Schedule of computation of basic and diluted loss per share	The following table sets forth the computation of basic and diluted net income (loss) per share for the three months ended March 31, 2016 and 2015 (in thousands, except per share amounts): Three Months Ended March 31, 2016 2015 Numerator: Net income (loss) $ (3,854 ) $ 1,260 Denominator: Weighted average shares of common stock outstanding—basic 37,020 36,235 Computation of diluted securities: Dilutive effect of stock options — 1,885 Dilutive effect of conversion premium on the Notes — 3,652 Dilutive effect of warrants — 6 Dilutive effect of ESPP — 1 Weighted average shares of common stock outstanding—diluted 37,020 41,779 Net income (loss) per share: Basic and diluted net income (loss) per share of common stock $ (0.10 ) $ 0.03
Schedule of potential dilutive effect of the securities excluded from the calculation of diluted loss per share	The following outstanding stock options, RSUs, conversion premium on the Notes, warrants and ESPP purchase options are antidilutive in the periods presented (in thousands): Three Months Ended March 31, 2016 2015 Weighted average number of stock options 4,324 1,323 Weighted average number of RSUs 205 — Conversion premium on the Notes 2,749 — Weighted average number of warrants 3 — Weighted average purchase options under ESPP 23 — Total 7,304 1,323

TAXES Taxes (Tables)

TAXES Taxes (Tables)	3 Months Ended
	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Schedule of Income before Income Tax, Domestic and Foreign	Income (loss) before income taxes is as follows (in thousands): Three Months Ended March 31, 2016 2015 Income (loss) before income taxes: Domestic $ (3,499 ) $ 1,886 Foreign (323 ) (574 ) Total income (loss) before income taxes $ (3,822 ) $ 1,312

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Tables)	3 Months Ended
	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Schedule of future minimum lease payments	As of March 31, 2016 , annual aggregate minimum payments due under the Company’s lease obligations are as follows (in thousands): Year Aggregate Minimum Payments 2016 (remaining nine months) $ 5,749 2017 7,878 2018 8,081 2019 8,303 2020 6,420 2021 through 2028 8,731 Total $ 45,162

SUMMARY OF SIGNIFICANT ACCOUN32

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Net revenue - Concentration risk by major customer	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Concentration of Major Customers
Percentage of revenue from customers to total revenue	88.00%	86.00%
Largest customer
Concentration of Major Customers
Percentage of revenue from customers to total revenue	33.00%	29.00%
Second largest customer
Concentration of Major Customers
Percentage of revenue from customers to total revenue	28.00%	29.00%
Third largest customer
Concentration of Major Customers
Percentage of revenue from customers to total revenue	27.00%	28.00%

INVENTORIES (Details)

INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 16,015	$ 16,712
Work-in-process	9,939	12,152
Finished goods	37,790	32,781
Total	$ 63,744	$ 61,645

FIXED ASSETS (Details)

FIXED ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
FIXED ASSETS
Total	$ 123,843		$ 115,241
Less: accumulated depreciation	(27,997)		(24,917)
Fixed assets, net	95,846		90,324
Depreciation expense	3,100	$ 2,700
Capitalized interest	300	$ 200
Foreign Property, Plant and Equipment, Net	28,400		25,900
Machinery and laboratory equipment
FIXED ASSETS
Total	31,086		29,864
Leasehold improvements
FIXED ASSETS
Total	32,359		30,834
Computer equipment and software
FIXED ASSETS
Total	4,724		4,007
Office furniture and equipment
FIXED ASSETS
Total	1,440		1,439
Construction in progress
FIXED ASSETS
Total	$ 54,234		$ 49,097

GOODWILL AND INTANGIBLE ASSET35

GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015	Apr. 30, 2012
Goodwill
Payment obligation arising in connection with the acquisition			$ 10,000,000
Contingent consideration liability recognized at the time of the acquisition			2,000,000
Goodwill recorded in connection with the acquisition	$ 32,784,000	$ 30,880,000	$ 8,000,000
Goodwill recorded for the percentage payments on net sales of EXPAREL collected	16,800,000
Upon first commercial sale in the United States
Goodwill
Milestone payments for EXPAREL agreed in connection with acquisition	10,000,000
Upon first commercial sale in a major EU country (United Kingdom, France, Germany, Italy and Spain)
Goodwill
Milestone payments for EXPAREL agreed in connection with acquisition	4,000,000
When annual net sales collected reach $100.0 million
Goodwill
Milestone payments for EXPAREL agreed in connection with acquisition	8,000,000
Annual net sales threshold	100,000,000
Payment Obligation Arising Due to Net Sales Collected Threshold of $100 Million	8,000,000
Net Sales Collected Threshold Which Triggers a Payment Obligation	100,000,000
When annual net sales collected reach $250.0 million
Goodwill
Milestone payments for EXPAREL agreed in connection with acquisition	8,000,000
Annual net sales threshold	250,000,000
When annual net sales collected reach $500.0 million
Goodwill
Milestone payments for EXPAREL agreed in connection with acquisition	32,000,000
Annual net sales threshold	$ 500,000,000

GOODWILL AND INTANGIBLE ASSET36

GOODWILL AND INTANGIBLE ASSETS (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2016USD ($)
Goodwill [Roll Forward]
Balance at December 31, 2015	$ 30,880
Percentage payments on collections of net sales of EXPAREL	1,904
Balance at March 31, 2016	32,784
When annual net sales collected reach $100.0 million
Goodwill
Payment Obligation Arising Due to Net Sales Collected Threshold of $100 Million	8,000
Net Sales Collected Threshold Which Triggers a Payment Obligation	$ 100,000

GOODWILL AND INTANGIBLE ASSET37

GOODWILL AND INTANGIBLE ASSETS (Details 3) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Intangible Assets
Finite-Lived Intangible Assets, Gross	$ 15,000		$ 15,000
Finite-Lived Intangible Assets, Accumulated Amortization	(15,000)		(14,919)
Intangibles, net	0		81
Amortization expense for intangibles	100	$ 100
Core technology
Intangible Assets
Finite-Lived Intangible Assets, Gross	2,900		2,900
Finite-Lived Intangible Assets, Accumulated Amortization	(2,900)		(2,819)
Intangibles, net	$ 0		$ 81
Finite-Lived Intangible Asset, Useful Life	9 years		9 years
Developed technology
Intangible Assets
Finite-Lived Intangible Assets, Gross	$ 11,700		$ 11,700
Finite-Lived Intangible Assets, Accumulated Amortization	(11,700)		(11,700)
Intangibles, net	$ 0		$ 0
Finite-Lived Intangible Asset, Useful Life	7 years		7 years
Trademarks and trade names
Intangible Assets
Finite-Lived Intangible Assets, Gross	$ 400		$ 400
Finite-Lived Intangible Assets, Accumulated Amortization	(400)		(400)
Intangibles, net	$ 0		$ 0
Finite-Lived Intangible Asset, Useful Life	7 years		7 years

DEBT (Details)

DEBT (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Debt:
3.25% convertible senior notes	$ 118,533	$ 118,533
Deferred financing costs	(1,735)	(1,888)
Discount on debt	(11,583)	(12,605)
Total debt, net of debt discount	$ 105,215	$ 104,040

DEBT (Details 2)

DEBT (Details 2) $ / shares in Units, shares in Millions	Jan. 23, 2013USD ($)$ / shares	Mar. 31, 2016USD ($)dshares	Mar. 31, 2015	Dec. 31, 2015USD ($)
DEBT AND FINANCING OBLIGATIONS
Convertible debt, threshold percentage of stock price trigger		130.00%
Convertible debt, threshold trading days | d		20
Convertible debt, threshold consecutive trading days		30 days
Estimated conversion value		$ 134,500,000
Shares issued to settle the conversion premium | shares		2.5
Debt Instrument, Convertible, Conversion Premium, Shares | shares		2.5
Liability component of convertible debt		$ 118,533,000		$ 118,533,000
Notes
DEBT AND FINANCING OBLIGATIONS
Debt issued in private placement	$ 120,000,000
Stated interest rate (as a percent)	3.25%
Principal amount used for debt instrument conversion ratio	$ 1,000
Initial conversion price of notes into common stock (in dollars per share) | $ / shares	$ 24.82
Initial conversion rate of common stock per $1000 of principal amount of Notes (in shares)			0.0402945
Repayments of Debt	$ 118,500,000
Liability component of convertible debt		95,100,000
Total transaction costs related to the issuance of Notes	$ 4,700,000
Term of Notes	6 years
Notes | Conversion terms, prior to close of business on business day immediately preceding August 1, 2018
DEBT AND FINANCING OBLIGATIONS
Principal amount used for debt instrument conversion ratio		1,000
Market price per $1000 of principal amount of notes		2,215
Estimated conversion value		$ 2,135

DEBT DEBT (Details 3)

DEBT DEBT (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Debt Instrument [Line Items]
Amortization of debt discount	$ 1,022	$ 1,035
Interest Costs Capitalized	(300)	(200)
Notes
Debt Instrument [Line Items]
Interest Expense, Debt, Excluding Amortization	963	967
Amortization of Financing Costs	153	155
Amortization of debt discount	1,022	1,035
Interest Costs Capitalized	(270)	(161)
Interest Expense, Debt	$ 1,868	$ 1,996
Debt Instrument, Interest Rate During Period	7.22%	7.19%

FINANCIAL INSTRUMENTS (Details)

FINANCIAL INSTRUMENTS (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions		Jan. 23, 2013	Mar. 31, 2016
Fair Value Measurements
Closing sale price (in dollars per share)			$ 52.98
Debt Instrument, Convertible, Conversion Premium, Shares			2.5
Estimated conversion value			$ 134,500
Level 1
Fair Value Measurements
Convertible senior notes	[1]		0
Level 2
Fair Value Measurements
Convertible senior notes	[1]		262,551
Level 3
Fair Value Measurements
Convertible senior notes	[1]		0
Carrying Value
Fair Value Measurements
Convertible senior notes	[1]		$ 105,215
Notes
Fair Value Measurements
Initial conversion price of notes into common stock (in dollars per share)		$ 24.82
Maximum
Fair Value Measurements
Debt Instrument, Convertible, Conversion Premium, Shares		4.8
[1]	The fair value of the Notes was based on the closing price of the Company’s common stock of $52.98 per share at March 31, 2016 compared to a conversion price of $24.82 per share which, if converted, would result in an approximate conversion premium of 2.5 million shares or $134.5 million of cash. The maximum conversion premium that can be due on the Notes is 4.8 million shares, which assumes no increases in the conversion rate for certain corporate events.

FINANCIAL INSTRUMENTS (Details

FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fair Value Measurements
Cost	$ 128,413	$ 115,495
Gross Unrealized Gains	92	33
Gross Unrealized Losses	(43)	(85)
Level 2
Fair Value Measurements
Fair Value	128,462	115,443
Short-term Investments
Fair Value Measurements
Cost	114,912	101,994
Gross Unrealized Gains	92	33
Gross Unrealized Losses	(12)	(46)
Short-term Investments | Level 2
Fair Value Measurements
Fair Value	114,992	101,981
Short-term Investments | Asset-backed securities
Fair Value Measurements
Cost	26,164	27,484
Gross Unrealized Gains	6	0
Gross Unrealized Losses	(4)	(15)
Short-term Investments | Asset-backed securities | Level 2
Fair Value Measurements
Fair Value	26,166	27,469
Short-term Investments | Commercial paper
Fair Value Measurements
Cost	36,650	35,191
Gross Unrealized Gains	64	31
Gross Unrealized Losses	0	0
Short-term Investments | Commercial paper | Level 2
Fair Value Measurements
Fair Value	36,714	35,222
Short-term Investments | Corporate bonds
Fair Value Measurements
Cost	52,098	39,319
Gross Unrealized Gains	22	2
Gross Unrealized Losses	(8)	(31)
Short-term Investments | Corporate bonds | Level 2
Fair Value Measurements
Fair Value	52,112	39,290
Long-Term Investments | Corporate bonds
Fair Value Measurements
Cost	13,501	13,501
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(31)	(39)
Long-Term Investments | Corporate bonds | Level 2
Fair Value Measurements
Fair Value	$ 13,470	$ 13,462

FINANCIAL INSTRUMENTS (Detail43

FINANCIAL INSTRUMENTS (Details 3)	3 Months Ended	12 Months Ended
	Mar. 31, 2016USD ($)customer	Dec. 31, 2015USD ($)customer
Credit Risk
Number of major customers | customer	3	3
Amount of allowance for doubtful accounts | $	$ 0	$ 0
Accounts receivable | Credit risk | Major customer one
Credit Risk
Concentration risk (as a percent)	30.00%	34.00%
Accounts receivable | Credit risk | Major customer two
Credit Risk
Concentration risk (as a percent)	30.00%	28.00%
Accounts receivable | Credit risk | Major customer three
Credit Risk
Concentration risk (as a percent)	28.00%	27.00%

STOCK PLANS (Details)

STOCK PLANS (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Share-Based Compensation
Stock-based compensation expense	$ 8,490	$ 7,517
Compensation expense from stock options, employees	6,856	6,309
Compensation expense from stock options, non-employee awards	274	997
Restricted Stock or Unit Expense	1,085	0
Compensation expense from employee stock purchase plan	275	211
Stock-based compensation	$ 8,490	7,517
Shares issued under employee stock purchase plan (shares)	0
Cost of goods sold
Share-Based Compensation
Stock-based compensation expense	$ 1,549	1,103
Research and development
Share-Based Compensation
Stock-based compensation expense	893	1,510
Selling, general and administrative
Share-Based Compensation
Stock-based compensation expense	$ 6,048	$ 4,904

STOCK PLANS (Details 2)

STOCK PLANS (Details 2) - $ / shares	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Stock Incentive Plans
Shares issued under employee stock purchase plan (shares)	0
Employee Stock Option
Stock Incentive Plans
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	4,187,532	4,645,722
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 44.03
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	41,250
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 61.70
Shares issued under employee stock purchase plan (shares)	254,170
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price	$ 11.97
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	216,515
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	$ 71.22
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period	28,755
Share-based Compensation Arrangements by Share-based Payment Award, Options, Expirations in Period, Weighted Average Exercise Price	$ 79.53
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	4,187,532
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 44.51

STOCK PLANS (Details 3)

STOCK PLANS (Details 3) - Restricted Stock Units (RSUs)	3 Months Ended
	Mar. 31, 2016$ / sharesshares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Unvested at December 31, 2014 (shares) | shares	216,198
Granted (shares) | shares	1,150
Vested (shares) | shares	(938)
Forfeited (shares) | shares	(17,838)
Unvested at June 30, 2015 (shares) | shares	198,572
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Unvested at December 31, 2014 (usd per share) | $ / shares	$ 78.59
Granted (usd per share) | $ / shares	63.84
Vested (usd per share) | $ / shares	79.43
Forfeited (usd per share) | $ / shares	79.43
Unvested at June 30, 2015 (usd per share) | $ / shares	$ 78.34

STOCKHOLDERS' EQUITY (Details)

STOCKHOLDERS' EQUITY (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balances at beginning of period	$ (52)
Balance at end of period	49
Accumulated Net Unrealized Investment Gain (Loss)
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balances at beginning of period	(52)	$ (80)
Other comprehensive loss before reclassifications	101	52
Amounts reclassified from accumulated other comprehensive income (loss)	0	0
Balance at end of period	$ 49	$ (28)

NET INCOME (LOSS) PER SHARE (De

NET INCOME (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator for basic and diluted loss per share
Net income (loss)	$ (3,854)	$ 1,260
Denominator
Weighted Average Number of Shares Outstanding, Basic (shares)	37,020	36,235
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities	0	1,885
Incremental Common Shares Attributable to Dilutive Effect of Conversion of Debt Securities	0	3,652
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants	0	6
Incremental Common Shares Attributable to Dilutive Effect of Equity Unit Purchase Agreements	0	1
Weighted Average Number of Shares Outstanding, Diluted (shares)	37,020	41,779
Basic and diluted net income (loss) per share of common stock	$ (0.10)	$ 0.03

NET INCOME (LOSS) PER SHARE (49

NET INCOME (LOSS) PER SHARE (Details 2) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
EARNINGS PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	7,304	1,323
Employee Stock Option
EARNINGS PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,324	1,323
Restricted Stock Units (RSUs)
EARNINGS PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	205	0
Conversion premium on the Notes
EARNINGS PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,749	0
Warrants
EARNINGS PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3	0
Employee Stock
EARNINGS PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	23	0

TAXES (Details)

TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Income (Loss) from Continuing Operations before Income Taxes, Domestic	$ (3,499)	$ 1,886
Income (Loss) from Continuing Operations before Income Taxes, Foreign	(323)	(574)
Income (Loss) from Continuing Operations before Income Taxes, Total	(3,822)	1,312
Income Tax Provision	$ 100	$ 100

COMMITMENTS AND CONTINGENCIES51

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Mar. 31, 2016USD ($)
Future minimum lease payments
2016 (remaining nine months)	$ 5,749
2,017	7,878
2,018	8,081
2,019	8,303
2,020	6,420
2021 through 2028	8,731
Total	$ 45,162