10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________________

FORM 10-Q

___________________________________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019 

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-34962 

___________________________________________

ZOGENIX, INC.

(Exact Name of Registrant as Specified in its Charter)

____________________________________________ 

Delaware	20-5300780
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
5959 Horton Street, Suite 500  Emeryville, California	94608
(Address of Principal Executive Offices)	(Zip Code)

510-550-8300

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	ZGNX	The Nasdaq Global Market

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of April 30, 2019 was 42,446,220.

ZOGENIX, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2019 

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2019 and 2018	5
	Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2019 and 2018	7
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018	6
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
	Signatures	34

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Zogenix, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value)

	March 31, 2019		December 31, 2018
Assets:
Current assets:
Cash and cash equivalents	$	58,288	$	68,454
Marketable securities	422,407		445,733
Accounts receivable	15,500		—
Prepaid expenses	8,071		6,718
Other current assets	6,323		11,825
Total current assets	510,589		532,730
Property and equipment, net	10,632		2,870
Operating lease right-of-use assets	8,423		—
Intangible assets	102,500		102,500
Goodwill	6,234		6,234
Other noncurrent assets	2,154		3,997
Total assets	$	640,532	$	648,331
Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable	$	8,167	$	7,989
Accrued and other current liabilities	18,594		18,086
Deferred revenue, current	5,000		—
Current portion of operating lease liabilities	1,412		—
Current portion of contingent consideration	22,800		32,300
Total current liabilities	55,973		58,375
Deferred revenue, noncurrent	10,500		—
Operating lease liabilities, net of current portion	11,355		—
Contingent consideration, net of current portion	48,400		45,900
Deferred income taxes	17,425		17,425
Other long-term liabilities	—		3,830
Total liabilities	143,653		125,530
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.001 par value; 50,000 shares authorized; 42,446 and 41,925 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	42		42
Additional paid-in capital	1,227,620		1,218,710
Accumulated deficit	(731,156)		(695,954)
Accumulated other comprehensive income	373		3
Total stockholders’ equity	496,879		522,801
Total liabilities and stockholders’ equity	$	640,532	$	648,331

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2019		2018
Operating expenses:
Research and development	$	24,352	$	22,980
Selling, general and administrative	10,918		8,070
Change in fair value of contingent consideration	3,000		—
Total operating expenses	38,270		31,050
Loss from operations	(38,270)		(31,050)
Other income (expense):
Interest income	3,156		833
Other (expense) income, net	(88)		37
Total other income	3,068		870
Net loss	$	(35,202)	$	(30,180)
Net loss per share, basic and diluted	$	(0.83)	$	(0.87)
Weighted average common shares used in the calculation of basic and diluted net loss per common share	42,236		34,841

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2019		2018
Net loss	$	(35,202)	$	(30,180)
Other comprehensive income:
Change in unrealized gains on marketable securities	370		—
Comprehensive loss	$	(34,832)	$	(30,180)

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

(in thousands)

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
December 31, 2018	42,078	$	42	$	1,218,710	$	3	$	(695,954)	$	522,801
Net loss	—	—		—		—		(35,202)		(35,202)
Other comprehensive income	—	—		—		370		—		370
Issuance of common stock under employee equity plans	380	—		5,293		—		—		5,293
Shares repurchased for tax withholdings related to net share settlement of employee equity awards	(12)	—		(606)		—		—		(606)
Stock-based compensation	—	—		4,223		—		—		4,223
March 31, 2019	42,446	$	42	$	1,227,620	$	373	$	(731,156)	$	496,879

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
December 31, 2017	34,808	$	35	$	873,526	$	—	$	(572,040)	$	301,521
Net loss	—	—		—		—		(30,180)		(30,180)
Issuance of common stock under employee equity plans	198	—		1,930		—		—		1,930
Shares repurchased for tax withholdings related to net share settlement of employee equity awards	(33)	—		(1,411)		—		—		(1,411)
Stock-based compensation	—	—		1,912		—		—		1,912
March 31, 2018	34,973	$	35	$	875,957	$	—	$	(602,220)	$	273,772

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2019		2018
Cash flow from operating activities:
Net loss	$	(35,202)	$	(30,180)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	4,223		1,912
Depreciation and amortization	191		23
Net accretion and amortization of investments in marketable securities	(1,703)		—
Change in fair value of common stock warrant liabilities	303		(17)
Change in fair value of contingent consideration	3,000		—
Changes in operating assets and liabilities:
Accounts receivable	(15,500)		—
Prepaid expenses and other current assets	5,270		166
Other assets	(6,580)		2,422
Accounts payable, accrued and other liabilities	(7,096)		891
Operating lease liability	12,767		—
Deferred revenue	15,500		—
Net cash used in operating activities	(24,827)		(24,783)
Cash flows from investing activities:
Purchases of marketable securities	(145,826)		—
Proceeds from maturities of marketable securities	171,225		—
Purchases of property and equipment	(4,535)		(65)
Net cash provided by (used in) investing activities	20,864		(65)
Cash flows from financing activities:
Payment of contingent consideration	(10,000)		—
Proceeds from issuance of common stock under equity incentive plans	4,379		3,590
Taxes paid related to net share settlement of equity awards	(582)		(292)
Net cash (used in) provided by financing activities	(6,203)		3,298
Net decrease in cash and cash equivalents	(10,166)		(21,550)
Cash and cash equivalents, beginning of the period	68,454		293,503
Cash and cash equivalents, end of the period	$	58,288	$	271,953
Noncash financing activities:
Purchases of property and equipment in accounts payable and accrued liabilities	$	5,067	$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

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Zogenix, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Organization and Basis of Presentation

Zogenix, Inc. and subsidiaries (the Company, we, us or our) is a global pharmaceutical company committed to developing and commercializing transformative therapies to improve the lives of patients and their families living with rare diseases. Our primary area of therapeutic focus is rare, or “orphan” childhood-onset epilepsy disorders. Our lead product candidate, Fintepla (ZX008, fenfluramine) is currently being developed for the treatment of seizures associated with Dravet syndrome and Lennox-Gastaut syndrome. We operate in one business segment—the research, development and commercialization of pharmaceutical products and our headquarters are located in Emeryville, California.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Zogenix, Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Certain reclassifications have been made to the prior period amounts to conform to the current year presentation. The results of operations for any interim period are not necessarily indicative of results of operations for any future period. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2019.

Certain prior period amounts within the accompanying unaudited consolidated financial statements have been reclassified to conform to current period presentation. These reclassifications did not affect our financial position, net loss, comprehensive loss, or cash flows as of and for the periods presented.

Future Funding Requirements

Excluding gains from two discrete business divestitures, we have incurred significant net losses and negative cash flows from operating activities resulting in an accumulated deficit of $731.2 million as of March 31, 2019. We expect to continue to incur significant operating losses and negative cash flows from operations as we continue to advance our product candidates through development and commercialization. Additionally, pursuant to our acquisition of Brabant Pharma Limited (Brabant) in 2014 to obtain worldwide development and commercialization rights to Fintepla, we are required to make additional payments to the former owners of Brabant in the event we achieve certain regulatory and sales milestones with Fintepla (See Note 5). Historically, we have relied primarily on the proceeds from equity offerings to finance our operations. Until such time, if ever, we can generate a sufficient amount of revenue to finance our cash requirements, we may need to continue to rely on additional financing to achieve our business objectives. However, if such financing is not available at adequate levels when needed, we may be required to significantly delay, scale back or discontinue one or more of the product development programs or commercialization efforts or other aspects of our business plans, and our operating results and financial condition would be adversely affected.

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

We analyze our collaboration agreements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, we consider whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer

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relationship and, therefore, within the scope of the revenue with contracts with customer guidance. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Revenue from transactions with collaboration participants is presented apart from revenue with contracts with customers in our condensed consolidated statement of operations.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Unconditional rights to receive consideration in advance of performance are recorded as receivables and deferred revenue in the condensed consolidated balance sheets when we have a contractual right to bill and receive the payment, performance is expected to commence shortly and there is less than a year between billing and performance. Amounts recognized for satisfied performance obligations prior to the right to payment becoming unconditional are recorded as contract assets in the condensed consolidated balance sheets. If we expect to have an unconditional right to receive consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

For arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers guidance, we perform the following steps to determine the appropriate amount of revenue to be recognized as we fulfill our obligations: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

At contract inception, we assess the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

We consider the terms of the contract and our customary business practices to determine the transaction price. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative stand-alone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, we use our best estimate of the selling price for the deliverable.

Revenue is recognized when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service, is considered to be as the services are received and used. We recognize revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the good or service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.

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Significant Accounting Policies

Our other significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K. As a result of entering into a collaborative arrangement in March 2019 and the adoption of the new lease accounting standard, we have updated our revenue recognition and lease accounting policies as detailed below. There were no other changes to our significant accounting policies from those disclosed in our 2018 Annual Report on Form 10-K. See Notes 3 and 7 for additional details related to our collaborative arrangement and the adoption of the new lease accounting standard, respectively.

Recently Adopted Accounting Pronouncements

ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 makes targeted improvements for collaborative arrangements by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaboration arrangement participant is a customer, (2) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer and (3) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers.

On January 1, 2019, we early adopted this new standard and its applicability has been considered in the accounting for our collaborative arrangement with Nippon Shinyaku Co., Ltd. (See Note 3).

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Topic 842 establishes a right-of-use asset model that requires all lessees to recognize ROU assets and liabilities for leases with a duration greater than one year on the balance sheet as well as provide disclosures with respect to certain qualitative and quantitative information regarding the amount, timing and uncertainty of cash flows arising from leases.

On January 1, 2019, we adopted Topic 842 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance. Consequently, prior period financial information and related disclosures have not been adjusted and will continue to be presented in accordance with the previous lease standard. In addition, we elected the package of transition provisions available for existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct lease costs for existing leases. We did not elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of our leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.

The adoption of Topic 842 did not have a material impact on our condensed consolidated statements of operations and cash flows. The impact on the accompanying condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):

	December 31, 2018		Adjustments Due to the Adoption of Topic 842		January 1, 2019
Assets
Operating lease right-of-use assets	$	—	$	8,641	$	8,641
Liabilities
Other accrued liabilities	1,845		(363)		$	1,482
Current portion of operating lease liabilities	—		1,058		1,058
Operating lease liabilities, net of current portion	—		11,776		11,776
Other long-term liabilities	3,830		(3,830)		—
Total	5,675		8,641		14,316

Upon adoption on January 1, 2019, we recorded operating lease ROU assets and lease liabilities of $8.6 million and $12.8 million, respectively, with the difference between ROU assets and lease liabilities attributed to the reclassifications of deferred rent and lease incentive obligations, a cease-use liability and initial direct leasing costs as a component of ROU assets. 

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Prior to January 1, 2019, we recognized related rent expense on a straight-line basis over the term of the lease. Incentives granted under our operating lease, including allowances for leasehold improvements and rent holidays, were recognized as reductions to rent expense on a straight-line basis over the term of the lease. Deferred rent consisted of the difference between rent expense recognized on a straight-line basis and cash rent payments. Subsequent to the adoption of Accounting Standards Update (ASU) 2016-02 and related amendments (collectively, Topic 842) on January 1, 2019, we determine whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease at lease commencement. All of our leases are classified as operating leases. Leases with a term greater than one year are included in operating lease right-of-use assets (ROU asset), current portion of lease liabilities, and lease liabilities, net of current portion in our condensed consolidated balance sheet at March 31, 2019. If a lease contains an option to renew, the renewal option is included in the calculation of lease liabilities if we are reasonably certain at lease commencement the renewal option will be exercised. Lease liabilities and their corresponding ROU assets are measured at the present value of the remaining lease payments, discounted at an appropriate incremental borrowing rate at lease commencement, or as of January 1, 2019, for our existing leases. Management uses judgment to estimate the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as initial direct lease costs, lease incentives, scheduled rent escalations and impairment charges if we determine the ROU asset is impaired. Operating lease expense is recognized on a straight-line basis over the lease term.

We elected the post-transition practical expedient to not separate lease components from non-lease components for all existing lease classes. We also elected a policy of not recording leases on our condensed balance sheets when a lease has a term of one year or less.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. Additionally, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, a summary of changes in each caption of stockholders’ equity presented in the consolidated balance sheets must be provided in a note or separate statement. The final rule regarding stockholders’ equity was effective in the fourth quarter of 2018. The SEC provided relief on the effective date until the first quarter of 2019, and we have provided this disclosure beginning with this Quarterly Form 10-Q.

Recent Accounting Pronouncements Not Yet Effective

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires that certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the net receivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. This standard update is effective for us on January 1, 2020 with early adoption permitted. We expect to adopt this ASU on January 1, 2020 and are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the timing and effect that the updated standard will have on our consolidated financial statements and related disclosures.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted for any removed or modified disclosures. We are currently

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evaluating the timing and effect that the updated standard will have on our consolidated financial statements and related disclosures.

Note 3 – Collaborative Arrangement

In March 2019, we entered into an agreement (Shinyaku Agreement) with Nippon Shinyaku Co., Ltd. (Shinyaku) for the exclusive distribution of Fintepla for the treatment of Dravet syndrome and LGS. As part of the Shinyaku Agreement, we are responsible for completing the global clinical development and all regulatory approval activities for Fintepla to support the submission of new drug applications in Japan for Dravet syndrome and LGS. Shinyaku will be responsible for the commercialization activities including the promotion, marketing, sale and distribution of Fintepla in Japan. Upon regulatory approval of Fintepla in Japan, Shinyaku will also act as our exclusive distributor for commercial shipment and distribution of Fintepla in Japan. If we pursue a global development of Fintepla for indications other than Dravet syndrome or LGS, Shinyaku has the option to participate in the development for such indications in Japan, subject to cost sharing requirements pursuant to the agreement. Activities under the Shinyaku Agreement will be governed by a joint steering committee (JSC) consisting of three representatives from each party to the agreement. All decisions of the JSC are to be made by a unanimous vote with tie-breaking rights provided to each party for certain matters related to development, regulatory approval and commercialization.

Shinyaku has agreed to support development and regulatory approval of Fintepla in Japan and obtain distribution exclusivity through the payment of $20.0 million, of which $15.5 million was due shortly after the execution of the agreement with the remainder payable over the next two years. We and Shinyaku have agreed to proportionally share the Japan specific development costs that may arise outside of the initial development plan and any post-approval clinical study costs in Japan. In addition, we can earn up to $66.0 million from Shinyaku for the achievement of certain regulatory milestones related to the treatment of Dravet syndrome and the treatment of LGS.

After regulatory approval of Fintepla in Japan has been obtained, we have agreed to supply Shinyaku with Fintepla upon receipt of purchase orders at our actual manufacturing cost plus a fixed transfer price mark-up, a fixed percentage of Shinyaku's net sales of Fintepla in Japan for such fiscal year, and a net price mark-up based on a percent of the applicable aggregate sales of Fintepla by Shinyaku for such fiscal year. The net price mark-up percentage increases with Shinyaku’s sales of Fintepla annual net sales in Japan and ranges between mid-twenties and is capped at a low thirties of the aggregate annual net sales for an applicable fiscal year.

In addition, we can earn up to an additional $42.5 million tied to the achievement of certain net sales milestones by Shinyaku through the term of the agreement.

The Shinyaku Agreement expires in September of 2045, unless earlier terminated by either party for a change in control, a material breach, bankruptcy, dissolution, or winding up of such other party. The Shinyaku Agreement may be also terminated by either party: (1) with one year prior written notice to the other party on or after the date of the first commercial sale of a competing generic version of the Fintepla in Japan, (2) if, prior to the launch of the Fintepla in Japan, a party has a good faith concern, based on credible evidence, that such launch is not likely to be possible with commercially reasonable efforts, or (3) if a party believes Fintepla poses a substantial safety concern. We may also terminate the agreement following the second anniversary of the first commercial sale of the Fintepla in Japan if Shinyaku has failed to achieve or maintain certain diligence obligations under the Shinyaku Agreement. Shinyaku may also terminate the agreement if, prior to the launch of the Fintepla in Japan, Shinyaku has a good faith concern that Fintepla will not be commercially viable in the Japan.

As of March 31, 2019, no performance for any of the units of account under this agreement had occurred. Of the $20.0 million, we have recorded our unconditional right to receive $15.5 million in advance of performance in accounts receivable with a corresponding amount in deferred revenue in the condensed consolidated balance sheet and the remaining $4.5 million will be billed in accordance with the terms of the agreement. We have classified $5.0 million of the deferred revenue as current. The remaining consideration related to this agreement was fully constrained at March 31, 2019.

Note 4 – Cash, Cash Equivalents and Marketable Securities

The following table summarizes the amortized cost and the estimated fair value of our cash, cash equivalents and marketable securities as of March 31, 2019 and December 31, 2018 (in thousands):

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	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2019
Current assets:
Cash	$	11,353	$	—	$	—	$	11,353
Cash equivalents:
Commercial paper	15,945		—		—		15,945
Money market funds	21,005		—		—		21,005
U.S. Treasuries	9,985		—		—		9,985
Total cash equivalents	46,935		—		—		46,935
Total cash and cash equivalents	58,288		—		—		58,288
Marketable securities:
Commercial paper	176,705		—		—		176,705
Corporate debt securities	83,904		231		(19)		84,116
Certificate of deposits	48,744		—		—		48,744
U.S. Treasuries	112,681		161		—		112,842
Total marketable securities	422,034		392		(19)		422,407
Total cash, cash equivalents and marketable securities	$	480,322	$	392	$	(19)	$	480,695

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2018
Current assets:
Cash and cash equivalents:
Cash	$	5,222	$	—	$	—	$	5,222
Money market funds	63,232		—		—		63,232
Total cash and cash equivalents	68,454		—		—		68,454
Marketable securities:
Commercial paper	152,940		—		—		152,940
Corporate debt securities	60,622		58		(75)		60,605
Certificate of deposits	128,647		—		—		128,647
U.S. Treasury securities	103,521		31		(11)		103,541
Total marketable securities	445,730		89		(86)		445,733
Total cash, cash equivalents and marketable securities	$	514,184	$	89	$	(86)	$	514,187

The following table summarizes the cost and fair value of marketable securities based on stated effective maturities as of March 31, 2019 (in thousands):

	Amortized Cost		Fair Value
Due within one year	$	356,954	$	357,120
Due between one and two years	65,080		65,287
Total	$	422,034	$	422,407

There have been no significant realized gains or losses on available-for-sale securities for the periods presented. As of March 31, 2019, available-for-sale debt securities that were in a continuous loss position but were not deemed to be other than temporarily impaired were not material.

See Note 5 for further information regarding the fair value of our financial instruments.

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Note 5 – Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy has been established under GAAP for disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: 

Level 1:	Observable inputs such as quoted prices in active markets;
Level 2:	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Our financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, other current assets, accounts payable and accrued liabilities, contingent consideration liabilities and our outstanding common stock warrant liabilities. Certain cash equivalents, marketable securities, contingent consideration liabilities and common stock warrant liabilities are reported at their respective fair values on our condensed consolidated balance sheets. The remaining financial instruments are carried at cost which approximates their respective fair values because of the short-term nature of these financial instruments. 

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 (in thousands):

	Level 1		Level 2		Level 3		Total
March 31, 2019
Assets:
Cash equivalents:
Commercial paper	$	—	$	15,945	$	—	$	15,945
Money market funds	21,005		—		—		21,005
U.S. Treasury securities	—		9,985		—		9,985
Marketable securities:
Commercial paper	—		176,705		—		176,705
Corporate debt securities	—		84,116		—		84,116
Certificate of deposits	—		48,744		—		48,744
U.S. Treasury securities	—		112,842		—		112,842
Total assets(1)	$	21,005	$	448,337	$	—	$	469,342
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	646	$	646
Contingent consideration liabilities(3)	—		—		71,200		71,200
Total liabilities	$	—	$	—	$	71,846	$	71,846

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	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Cash equivalents:
Money market funds	$	63,232	$	—	$	—	$	63,232
Marketable securities:
Commercial paper	—		152,940		—		152,940
Corporate debt securities	—		60,605		—		60,605
Certificate of deposits	—		128,647		—		128,647
U.S. Treasury securities	—		103,541		—		103,541
Total assets(1)	$	63,232	$	445,733	$	—	$	508,965
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	343	$	343
Contingent consideration liabilities(3)	—		—		78,200		78,200
Total liabilities	$	—	$	—	$	78,543	$	78,543

(1) Fair value is determined by taking into consideration valuations obtained from third-party pricing services. The third-party pricing services utilize industry standard valuation models, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. We estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2018 and March 31, 2019, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of our common stock at an exercise price of $72.00 per share and expires in July 2021.

(3) In connection with a prior acquisition in 2014, we may be required to pay future contingent consideration upon the achievement of specified development, regulatory approval or sales-based milestone events. We estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted interest rates. Subsequent to the acquisition date, at each reporting period prior to settlement, we revalue these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time and risk-adjusted interest rates. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on our results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The acquisition provides for aggregate contingent consideration of up to $95.0 million, of which $10.0 million was paid in March 2019. As of March 31, 2019, the estimated fair value of our contingent consideration liabilities was $71.2 million, of which $22.8 million has been classified as current liabilities. The classification was based upon our reasonable expectation as to the timing of settlement of certain specified milestones.

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The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2019 and 2018 (in thousands):

	December 31, 2018		Change in Fair Value		Settlements		March 31, 2019
Contingent consideration liabilities	$	78,200	$	3,000	$	(10,000)	$	71,200
Common stock warrant liabilities	343		303		—		646

	December 31, 2017		Change in Fair Value		Settlements		March 31, 2018
Contingent consideration liabilities	$	76,900	$	—	$	—	$	76,900
Common stock warrant liabilities	512		(17)		—		495

The changes in fair value of the liabilities shown in the table above are recorded through change in fair value of contingent consideration liabilities within operating expense and the change in fair value of common stock warrant liabilities within other income (expense) in the condensed consolidated statements of operations.

There were no transfers between levels during the periods presented. See Note 4 for further information regarding the amortized cost of our financial instruments.

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Note 6 – Accrued and Other Current Liabilities

The following table provides details of accrued and other current liabilities (in thousands):

	March 31, 2019		December 31, 2018
Accrued clinical trial expenses	$	10,120	$	10,621
Accrued compensation	3,735		5,277
Other accrued liabilities	4,093		1,845
Common stock warrant liabilities	646		343
Total accrued and other current liabilities	$	18,594	$	18,086

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Note 7 – Leases

We have two noncancellable operating leases consisting of administrative and research and development office space for our Emeryville, California headquarters and former headquarters in San Diego, California that expire in May 2027 and March 2020, respectively. Our Emeryville lease includes a renewal option for an additional five years, which were not included in our determination of the lease term under the legacy lease standard as renewal was not reasonably assured at the inception of the lease. As a result, we have not considered the optional period in determining our ROU assets and lease liabilities. Our former headquarters has been subleased to an unrelated third party for the remainder of our original lease term. As of March 31, 2019, we do not have any material finance leases or service contracts with lease arrangements. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. 

The components of lease costs, which were included in our condensed consolidated statements of operations, were as follows (in thousands): 

	Three Months Ended March 31, 2019
Lease costs
Operating lease cost	$	499
Short-term lease cost(1)	328
Sublease income	(145)
Total	$	682
(1) Short-term lease cost included $0.2 million related to a short-term lease that expired in March 2019.
Supplemental information related to operating leases
Cash paid for amounts included in the measurement of lease liabilities for operating leases	$	252
Weighted-average remaining lease term	7.6 years
Weighted-average incremental borrowing rate	6.0		%

Maturities of operating lease liabilities as of March 31, 2019 and lease commitments under noncancellable operating leases as of December 31, 2018 were as follows (in thousands):

	March 31, 2019		December 31, 2018
2019 (remaining 9 months and 12 months, respectively)	$	1,525	$	1,777
2020	1,788		1,788
2021	1,839		1,839
2022	1,894		1,894
2023	1,951		1,951
Thereafter	7,111		7,296
Total lease payments	16,108		$	16,545
Less imputed interest	(3,341)
Total operating lease liabilities	$	12,767

	As of March 31, 2019
Current portion of operating lease liabilities	$	1,412
Operating lease liabilities, net of current portion	11,355
Total lease liabilities	$	12,767

Note 8 – Stock-Based Compensation

We have issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K.

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Under our 2010 Equity Incentive Award Plan, which was amended in June 2012 (2010 Plan), the aggregate number of shares of our common stock that may be issued as stock-based awards may not exceed 7,500,000 shares. At December 31, 2018, 1,550,351 shares were available for grant under the 2010 Plan. Pursuant to its evergreen provision, the number of shares reserved for issuance under the 2010 Plan automatically increases on January 1 of each year, commencing on January 1, 2013, and on each January 1 through and including January 1, 2020, in an amount equal to 4% of the total number of shares of common stock outstanding on December 31 of the preceding year, or a lesser number of shares as determined by our board of directors. On January 1, 2019, the increase in shares reserved for issuance pursuant to the evergreen provision was limited to 589,619 shares as the 2010 Plan’s maximum 7,500,000 shares reserved for issuance was reached. As of March 31, 2019, 1,298,107 shares were available for grant under the 2010 Plan.

In 2013, our board of directors adopted the Inducement Plan, which allows us to grant equity awards only to new employees as an inducement material to join us. Effective March 27, 2019, our board of directors approved an increase to the share reserve under the Inducement Plan by 100,000 shares resulting in the aggregate number of shares of our common stock that may be issued as stock-based awards to 737,500 shares. As of March 31, 2019, there were 124,925 shares available for grant under the Inducement Plan.

Stock Options

The following is a summary of stock option activity for the three months ended March 31, 2019 (in thousands, except per share data):

	Shares	Weighted- Average Exercise Price per Share
Outstanding at December 31, 2018	3,744	$	20.69
Granted	770	51.86
Exercised	(349)	15.17
Canceled	(10)	29.94
Outstanding at March 31, 2019	4,155	$	26.91

Restricted Stock Units

The following is a summary of restricted stock unit activity for the three months ended March 31, 2019 (in thousands, except per share data):

	Shares	Weighted- Average Fair Value per Share at Grant Date
Outstanding at December 31, 2018	289	$	25.56
Granted	167	52.66
Vested	(31)	42.65
Canceled	(7)	18.81
Outstanding at March 31, 2019	418	$	35.27

Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2019		2018
Research and development	$	1,435	$	681
Selling, general and administrative	2,788		1,231
Total	$	4,223	$	1,912

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Note 9 – Net Loss Per Share

Basic net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares outstanding for the period. Diluted net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period if the effect is dilutive. The Company’s potentially dilutive shares of common stock include outstanding stock options, restricted stock units and warrants to purchase common stock.

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2019		2018
Numerator:
Net loss from continuing operations	$	(35,202)	$	(30,180)
Denominator:
Shares used in per share calculation	42,236		34,841
Net loss from continuing operations per share, basic and diluted	$	(0.83)	$	(0.87)

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss from continuing operations per share for the periods presented because including them would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2019	2018
Shares subject to outstanding common stock options	3,716	3,478
Shares subject to outstanding restricted stock units	295	266
Shares subject to outstanding warrants to purchase common stock	28	38
Total	4,039	3,782

Note 10 – United Kingdom (U.K.) Research and Development Incentives

We carry out extensive research and development activities that benefit from the U.K.’s small and medium-sized enterprise (SME) research and development tax credit regime, whereby we may either receive an enhanced U.K. tax deduction on our eligible research and development activities or, when an SME entity is in a net operating loss position, elect to surrender net operating losses that arise from its eligible research and development activities in exchange for a cash payment from the U.K. tax authorities. These refundable cash credits, which may be received without regard to actual tax liability, are not subject to accounting for income taxes and have been recorded as a component of other income.

In December 2018, we filed a claim as an SME for a $7.1 million refundable cash credit for its 2016 tax year, which was received in February 2019.We recorded this amount as a component of other income for the year-ended December 31, 2018. As of the date hereof, we have not filed claims for any refundable cash credit for its 2017 or 2018 tax years, nor has it recorded any balances related to claims for these years or for the 2019 tax year, as collectability is deemed not probable or reasonably assured.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements include, but are not limited to, statements about:

•the progress and timing of clinical trials of our lead product candidate Fintepla;

•the safety and efficacy of our product candidates;

•the timing of submissions to, and decisions made by the U.S. Food and Drug Administration (FDA) and other regulatory agencies, including foreign regulatory agencies, with regards to the demonstration of the safety and efficacy of our product candidates and adequacy of the manufacturing processes related to our product candidates to the satisfaction of the FDA and such other regulatory agencies;

•our plans to meet with and work with the FDA to help us clarify and respond to the issues identified in the RTF letter;

•our ability to obtain, maintain and successfully enforce adequate patent and other intellectual property or regulatory exclusivity protection of our product candidates and the ability to operate our business without infringing the intellectual property rights of others;

•the goals of our development activities and estimates of the potential markets for our product candidates, and our ability to compete within those markets;

•our ability to obtain and maintain adequate levels of coverage and reimbursement from third-party payors for any of our product candidates that may be approved for sale, the extent of such coverage and reimbursement and the willingness of third-party payors to pay for our products versus less expensive therapies; 

•the impact of healthcare reform laws; and

•projected cash needs and our expected future revenues, operations and expenditures.

The forward-looking statements are contained principally in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. We discuss many of these risks, uncertainties and other factors in this Quarterly Report on Form 10-Q in greater detail under the heading “Item 1A – Risk Factors.”

Given these risks, uncertainties and other factors, we urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. For all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to revise or update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Fintepla^® and Zogenix™ are our trademarks. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owner.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Zogenix,” “we,” “us” and “our” refer to Zogenix, Inc., a Delaware corporation, and its consolidated subsidiaries.

The condensed consolidated financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our 2018 Annual Report on Form 10-K.

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Overview

We are a pharmaceutical company developing and commercializing transformative central nervous system (CNS) therapies for people living with serious and life-threatening rare CNS disorders and medical conditions. We are currently focused on developing and commercializing CNS therapies to address rare, or “orphan” childhood-onset epilepsy disorders.

We currently own and control worldwide development and commercialization rights to Fintepla, our lead product candidate. Fintepla is low-dose fenfluramine under development for the treatment of seizures associated with two rare and catastrophic forms of childhood-onset epilepsy: Dravet syndrome and Lennox-Gastaut syndrome (LGS).

Key Development Programs

Fintepla (ZX008; Low-Dose Fenfluramine) for Patients with Dravet Syndrome

Dravet syndrome is a rare form of pediatric-onset epilepsy with life threatening consequences for patients and for which current treatment options are very limited. Fintepla has received orphan drug designation in the United States and the European Union (EU) for the treatment of Dravet syndrome. In addition, Fintepla for the treatment of Dravet syndrome received Fast Track designation from the U.S. Food and Drug Administration (FDA) in January 2016. In September 2016, we initiated Part 1 of Study 1504, a two-part, double blind, randomized, two arm pivotal Phase 3 clinical trial of Fintepla in Dravet syndrome patients who are taking stiripentol with valproate and/or clobazam as part of their baseline standard care. Part 1 investigated the pharmacokinetic profile and safety of Fintepla when co-administered with the stiripentol regimen (stiripentol with valproate and/or clobazam). Based on the results of the pharmacokinetic and safety portion of the trial, in February 2017 we initiated the safety and efficacy portion of Study 1504 utilizing a dose of Fintepla 0.5mg/kg/day (20mg/day maximum). Study 1504, a two-arm study, compared Fintepla versus placebo across the titration and 12-week maintenance periods at multiple sites located the Netherlands, United States, Canada, Germany, the United Kingdom and Spain. In January 2018, we announced patient enrollment was complete at 87 patients, with 43 patients randomized into the Fintepla-arm and 44 patients randomized to the placebo arm.

In July 2018, we reported positive top-line results from Cohort 2 of Study 1504. The study results, which are consistent with those reported in Study 1, successfully met the primary objective of demonstrating that Fintepla, at a dose of 0.5 mg/kg/day, when co-administered with stiripentol regimen (stiripentol with valproate and/or clobazam), was superior to placebo as adjunctive therapy in the treatment of Dravet syndrome in children and young adults based on change in the frequency of convulsive seizures between the 6-week baseline observation period and the 15-week treatment period (p<0.001). In the trial, Fintepla at a dose of 0.5 mg/kg/day also demonstrated statistically significant improvements versus placebo in all key secondary measures, the proportion of patients with clinically meaningful reductions in seizure frequency (50% or greater) and longest seizure-free interval. Fintepla was generally well-tolerated in this study, with the adverse events consistent with those observed in Study 1 and the known safety profile of fenfluramine without any signs or symptoms of valvular heart disease (valvulopathy) or pulmonary hypertension.

Upon completion of our Fintepla Phase 3 trials, eligible patients were permitted to enroll in an ongoing OLE trial to study the long-term safety and effectiveness of Fintepla (Study 1503). In December 2018, we presented interim data from Study 1503 regarding the effectiveness and overall safety of Fintepla observed in the study, including the long-term cardiovascular assessments and findings at the 72nd Annual Meeting of the AES. A total of 232 patients from Study 1503 were included in the interim analysis of the OLE trial. As of March 13, 2018, the interim cutoff date, the median duration of treatment with Fintepla was 256 days and the range was 58-634 days (equivalent to 161 patient-years of exposure to Fintepla). In this interim analysis population of 232 patients, a total of 22 (9.5%) patients had discontinued treatment for the following reasons: lack of efficacy (16), subject withdrawal (2), adverse event (1), SUDEP (1), physician decision (1), and withdrawal by caregiver (1). Approximately 90% of patients remained in the study at the time of the interim analysis. The median percent reduction in monthly convulsive seizure frequency over the entire OLE treatment period was 66.8% (compared with baseline frequency established in the core Phase 3 studies). Over the same period, 64.4% of children and young adults showed a >50% reduction in convulsive seizure frequency and 41.2% showed a >75% reduction.

The occurrence of adverse events was consistent with the Phase 3 placebo-controlled studies. The most common adverse events occurring in more than 10% of children and young adults were pyrexia (22%), nasopharyngitis (20%), decreased appetite (16%), influenza (12%), diarrhea (11%), and upper respiratory tract infection (10%). A total of 13.4% of children lost >7% body weight at some point during the trial; in 42% of those children weight loss abated during the period covered by the interim analysis. Over the course of the OLE treatment period included in the interim analysis, one patient died from SUDEP that was deemed unrelated to Fintepla. A total of 703 color doppler echocardiograms were performed to assess cardiovascular health at baseline, week 4 or 6, and then every 3 months during the OLE trial. No patient developed valvular heart disease (valvulopathy) or pulmonary arterial hypertension at any time after daily treatment with Fintepla. 

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In February 2019, we completed our rolling submission of a New Drug Application (NDA) with the FDA and submitted a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for Fintepla for the treatment of seizures associated with Dravet syndrome. The EMA has accepted the MAA and initiated its review and we anticipate an approvability decision could be reached by the EMA in the first quarter of 2020. On April 8, 2019, we received a Refusal to File (RTF) letter from the FDA regarding our NDA for Fintepla for the treatment of seizures associated with Dravet syndrome. Upon its preliminary review, the FDA determined that the NDA submitted in February 2019 was not sufficiently complete to permit a substantive review. In the RTF letter, the FDA cited two reasons for the RTF decision: first, certain non-clinical studies were not submitted to allow assessment of the chronic administration of fenfluramine; and, second, the application contained an incorrect version of a clinical dataset, which prevented the completion of the review process that is necessary to support the filing of the NDA. The FDA has not requested or recommended additional clinical efficacy or safety studies. We expect to have a Type A meeting with the FDA by early June to help us clarify and respond to the identified issues.

Fintepla for Patients with LGS

LGS is another rare, refractory, debilitating pediatric-onset epilepsy with life threatening consequences for patients and for which current treatment options are limited and suboptimal. Beginning in first quarter of 2016, we funded an open-label, dose-finding, investigator-initiated study of the effectiveness and tolerability of Fintepla as an adjunctive therapy in patients with LGS. In December 2016, we presented initial data from an interim analysis of the first 13 patients to have completed at least 12 weeks of this Phase 2 clinical trial at the 70th Annual Meeting of the AES. In this interim analysis, Fintepla was observed to provide clinically meaningful improvement in major motor seizure frequency in patients with severe refractory LGS, with 7 out of 13 patients (54%) achieving at least a 50% reduction in the number of major motor seizures, at doses below the 0.8 mg/kg/day maximum allowed dose. In addition, Fintepla was generally well tolerated without any observed signs or symptoms of valvulopathy or pulmonary hypertension. We believe these data indicate that Fintepla has the potential to be a safe and effective adjunctive treatment of major motor seizures for patients with LGS. Based on the strength of the LGS data generated, in the first quarter of 2017, we submitted an Investigational New Drug Application (IND) to the FDA to initiate a Phase 3 program of Fintepla in LGS. Our IND for Fintepla as a potential treatment for LGS became effective in April 2017. In the first half of 2017, Fintepla received orphan drug designation for the treatment of LGS from the FDA in the United States and the EMA in the EU. In November 2017, we announced the initiation of our multicenter global Phase 3 clinical trial of Fintepla as an adjunctive treatment for seizures in patients with LGS (Study 1601). We remain on track to complete patient enrollment for Study 1601 in the second half of 2019 and expect top-line data from this study will be available in the first quarter of 2020.

Collaborative Arrangement with Nippon Shinyaku

In March 2019, we entered into an agreement (Shinyaku Agreement) with Nippon Shinyaku Co., Ltd. (Shinyaku) for the exclusive distribution of Fintepla for the treatment of Dravet syndrome and LGS. As part of the Shinyaku Agreement, we are responsible for completing the global clinical development and all regulatory approval activities for Fintepla to support the submission of new drug applications in Japan for Dravet syndrome and LGS. Shinyaku will be responsible for the commercialization activities including the promotion, marketing, sale and distribution of Fintepla in Japan. Upon regulatory approval of Fintepla in Japan, Shinyaku will also act as our exclusive distributor for commercial shipment and distribution of Fintepla in Japan. If we pursue a global development of Fintepla for indications other than Dravet syndrome or LGS, Shinyaku has the option to participate in the development for such indications in Japan, subject to cost sharing requirements pursuant to the agreement. Activities under the Shinyaku Agreement will be governed by a joint steering committee (JSC) consisting of three representatives from each party to the agreement. All decisions of the JSC are to be made by a unanimous vote with tie-breaking rights provided to each party for certain matters related to development, regulatory approval and commercialization.

Shinyaku has agreed to support development and regulatory approval of Fintepla in Japan and obtain distribution exclusivity through the payment of $20.0 million, of which $15.5 million was due shortly after the execution of the agreement with the remainder payable over the next two years. We and Shinyaku have agreed to proportionally share the Japan specific development costs that may arise outside of the initial development plan and any post-approval clinical study costs in Japan. In addition, we can earn up to $66.0 million from Shinyaku for the achievement of certain regulatory milestones related to the treatment of Dravet syndrome and the treatment of LGS.

After regulatory approval of Fintepla in Japan has been obtained, we have agreed to supply Shinyaku with Fintepla upon receipt of purchase orders at our actual manufacturing cost plus a fixed transfer price mark-up, a fixed percentage of Shinyaku's net sales of Fintepla in Japan for such fiscal year, and a net price mark-up based on a percent of the applicable aggregate sales of Fintepla by Shinyaku for such fiscal year. The net price mark-up percentage increases with Shinyaku’s sales of Fintepla annual net sales in Japan and ranges between mid-twenties and is capped at a low thirties of the aggregate annual net sales for an applicable fiscal year.

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In addition, we can earn up to an additional $42.5 million tied to the achievement of certain net sales milestones by Shinyaku through the term of the agreement.

The Shinyaku Agreement expires in September of 2045, unless earlier terminated by either party for a change in control, a material breach, bankruptcy, dissolution, or winding up of such other party. The Shinyaku Agreement may be also terminated by either party: (1) with one year prior written notice to the other party on or after the date of the first commercial sale of a competing generic version of the Fintepla in Japan, (2) if, prior to the launch of the Fintepla in Japan, a party has a good faith concern, based on credible evidence, that such launch is not likely to be possible with commercially reasonable efforts, or (3) if a party believes Fintepla poses a substantial safety concern. We may also terminate the agreement following the second anniversary of the first commercial sale of the Fintepla in Japan if Shinyaku has failed to achieve or maintain certain diligence obligations under the Shinyaku Agreement. Shinyaku may also terminate the agreement if, prior to the launch of the Fintepla in Japan, Shinyaku has a good faith concern that Fintepla will not be commercially viable in the Japan.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in conformity with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. 

We consider an accounting estimate to be critical if: 1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and 2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. Our critical accounting policies and estimates are described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2018 Annual Report on Form 10-K. As a result of entering into a collaborative arrangement in March 2019 and the adoption of the new lease accounting standard, we have updated our revenue recognition and lease accounting policies as detailed below. There were no other significant changes to our critical accounting policies during the three months ended March 31, 2019, as compared to the critical accounting policies and estimates disclosed in our 2018 Annual Report on Form 10-K.

Revenue Recognition

We analyze our collaboration agreements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, we consider whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of the revenue with contracts with customer guidance. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Revenue from transactions with collaboration participants is presented apart from revenue with contracts with customers in our condensed consolidated statement of operations.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Unconditional rights to receive consideration in advance of performance are recorded as receivables and deferred revenue in the condensed consolidated balance sheets when we have a contractual right to bill and receive the payment, performance is expected to commence shortly and there is less than a year between billing and performance. Amounts recognized for satisfied performance obligations prior to the right to payment becoming unconditional are recorded as contract assets in the condensed consolidated balance sheets. If we expect to have an unconditional right to receive consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

For arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers guidance, we perform the following steps to determine the appropriate amount of revenue to be recognized as we fulfill our obligations: (i) identification of the promised goods or services in the contract; (ii) determination of whether the

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promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

At contract inception, we assess the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

We consider the terms of the contract and our customary business practices to determine the transaction price. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative stand-alone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, we use our best estimate of the selling price for the deliverable.

Revenue is recognized when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service, is considered to be as the services are received and used. We recognize revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the good or service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.

Leases

Prior to January 1, 2019, we recognized related rent expense on a straight-line basis over the term of the lease. Incentives granted under our operating lease, including allowances for leasehold improvements and rent holidays, were recognized as reductions to rent expense on a straight-line basis over the term of the lease. Deferred rent consisted of the difference between rent expense recognized on a straight-line basis and cash rent payments. Subsequent to the adoption of Accounting Standards Update (ASU) 2016-02 and related amendments (collectively, Topic 842) on January 1, 2019, we determine whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease at lease commencement. All of our leases are classified as operating leases. Leases with a term greater than one year are included in operating lease right-of-use assets (ROU asset), current portion of lease liabilities, and lease liabilities, net of current portion in our condensed consolidated balance sheet at March 31, 2019. If a lease contains an option to renew, the renewal option is included in the calculation of lease liabilities if we are reasonably certain at lease commencement the renewal option will be exercised. Lease liabilities and their corresponding ROU assets are measured at the present value of the remaining lease payments, discounted at an appropriate incremental borrowing rate at lease commencement, or as of January 1, 2019, for our existing leases. Management uses judgment to estimate the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as initial direct lease costs, lease incentives, scheduled rent escalations and impairment charges if we determine the ROU asset is impaired. Operating lease expense is recognized on a straight-line basis over the lease term.

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We elected the post-transition practical expedient to not separate lease components from non-lease components for all existing lease classes. We also elected a policy of not recording leases on our condensed balance sheets when a lease has a term of one year or less.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements that are of significance or potential significance to us, see Note 2 “Summary of Significant Accounting Policies” in the notes to condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Comparison of Three Months Ended March 31, 2019 and 2018

Research and Development Expenses

	Three Months Ended March 31,
(in thousands)	2019		2018		Change
Research and development	$	24,352	$	22,980	$	1,372

Research and development expenses consist of expenses incurred in developing, testing and seeking marketing approval of our product candidates, including: license and milestone payments; payments made to third-party clinical research organizations (CROs) and investigational sites, which conduct our clinical trials on our behalf, and consultants; expenses associated with regulatory submissions, pre-clinical development and clinical trials; payments to third-party manufacturers, which produce our active pharmaceutical ingredient and finished product; personnel related expenses, such as salaries, benefits, travel and other related expenses, including stock-based compensation; and facility, maintenance, depreciation and other related expenses.

We utilize contract manufacturing organizations, CROs, contract laboratories and independent contractors to produce product candidate material and for the conduct of our pre-clinical studies and clinical trials. We track third-party costs by program. We recognize the expenses associated with the services provided by CROs based on estimated progress toward completion at the end of each reporting period. We coordinate clinical trials through a number of contracted investigational sites and recognize the associated expense based on a number of factors, including actual and estimated subject enrollment and visits, direct pass-through costs and other clinical site fees. The table below sets forth information regarding our research and development costs for our major development programs.

	Three Months Ended March 31,
(in thousands)	2019		2018		Change
Fintepla for Dravet syndrome	$	9,620	$	13,864	$	(4,244)
Fintepla for LGS	6,003		2,704		3,299
Other(1)	8,729		6,412		2,317
Total	$	24,352	$	22,980	$	1,372

(1) Other research and development expenses include employee and infrastructure resources that are not tracked on a program-by-program basis, as well as pre-clinical development costs incurred for other product candidates.

In October 2014, we acquired worldwide development and commercialization rights to Fintepla through a business acquisition and have since incurred significant expenditures related to conducting clinical trials of Fintepla. Research and development expenses related to Fintepla for Dravet syndrome decreased for the three months ended March 31, 2019 compared to the same period in 2018 primarily due to wind-down of clinical activities within Study 1 and 1504. R&D spend related to Fintepla for LGS increased by $3.3 million year-over-year reflecting the progression and expansion of our clinical trial activities within Study 1601, which was initiated in November 2017. Other research and development expenses increased by $2.3 million for the three months ended March 31, 2019 compared to the same period in 2018. The increase was primarily attributable to personnel-related costs from headcount additions.

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Selling, General and Administrative Expenses

	Three Months Ended March 31,
(in thousands)	2019		2018		Change
Selling	$	3,915	$	2,445	$	1,470
General and administrative	7,003		5,625		1,378
Total selling, general and administrative	$	10,918	$	8,070	$	2,848

Selling expense consists primarily of salaries and benefits of sales and marketing management and market research expenses for product candidates that are in development. General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, accounting, business development and internal support functions. In addition, general and administrative expenses include professional fees for legal, consulting and accounting services.

Selling expense increased by $1.5 million for the three months ended March 31, 2019 compared to the same period in 2018 and was primarily attributable to increased personnel-related costs as a result of headcount additions in preparation for the potential approval and commercialization of Fintepla for Dravet syndrome.

General and administrative expense increased by $1.4 million for the three months ended March 31, 2019 compared to the same period in 2018 and was primarily attributable to personnel-related costs.

Change in Fair Value of Contingent Consideration

	Three Months Ended March 31,
(in thousands)	2019		2018
Change in fair value of contingent consideration	$	3,000	$	—

The contingent consideration liability relates to milestone payments under an existing agreement in connection with our prior acquisition of Fintepla. At each reporting period, the estimated fair value of the liability is determined by applying the income approach which utilizes variable inputs, such as the probability of success for achieving regulatory/commercial milestones, anticipated future cash flows, risk-free adjusted discount rates, and nonperformance risk. Any change in the fair value is recorded as contingent consideration (income) expense.

For the three months ended March 31, 2019, the estimated fair value of our remaining contingent consideration liabilities, net of a development milestone payment of $10.0 million made during the period, increased by $3.0 million. The increase was due to the inclusion of sales in Japan in our forecast associated with the execution of the Shinyaku Agreement, which accelerated the estimated timing of when certain sales milestones will be reached, and a market driven decrease in the discount rate.

Other Income (Expense)

	Three Months Ended March 31,
(in thousands)	2019		2018
Other income (expense):
Interest income	$	3,156	$	833
Other income, net	(88)		37
Total other income	$	3,068	$	870

Total other income for the three months ended March 31, 2019 increased by $2.2 million compared to the same period in 2018. The increase was attributable to interest income earned from higher average cash and investment balances.

Liquidity and Capital Resources

Excluding gains from two discrete business divestitures, we have incurred significant net losses and negative cash flows from operating activities since inception. We had an accumulated deficit of $731.2 million at March 31, 2019. We expect to continue to incur significant operating losses and negative cash flows from operations to advance our product candidates through development and commercialization. Additionally, upon acceptance of our regulatory submission for Fintepla by the FDA and regulatory approval of Fintepla by the FDA or EMA, if at all, we will owe milestone payments under an existing agreement in connection with our prior acquisition of Fintepla. As of March 31, 2019, we have a single contract with a customer related to research, development and commercialization activities for Fintepla in Japan. We do not know when, or if,

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we will generate any revenue from product sales and do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize Fintepla. To date, the Company has relied primarily on the proceeds from equity offerings to finance its operations.

As of March 31, 2019, our cash, cash equivalents and marketable securities totaled $480.7 million. Our principal uses of cash are research and development expenses, selling, general and administrative expenses and other working capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

•the rate of progress and cost of our clinical trials and other product development programs for Fintepla and our other product candidates and any other product candidates that we may develop, in-license or acquire;

•the timing of regulatory approval for any of our other product candidates and the commercial success of any approved products;

•the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with Fintepla and any of our other product candidates;

•the costs of establishing or outsourcing sales, marketing and distribution capabilities, should we elect to do so;

•the costs, terms and timing of completion of outsourced commercial manufacturing supply arrangements for any product candidate; and

•the effect of competing technological and market developments.

Until we can generate a sufficient amount of revenue to finance our cash requirements, if ever, we may need to continue to rely on additional financing to achieve our business objectives. However, we may not be able to secure such financing in a timely manner or on favorable terms, if at all. If future funds are raised through issuance of equity or debt securities, these securities may have rights, preferences and privileges senior to those of our existing stockholders. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. Without additional funds at the time we need such funding, we may be forced to delay, scale back or eliminate some of our research and development activities, or other operations and potentially delay product development in an effort to provide sufficient funds to continue its operations. If any of these events occurs, our ability to achieve the development and commercialization goals could be adversely affected.

The following table presents selected information from our statements of cash flows (in thousands):

	Three Months Ended March 31,
	2019		2018
Cash and cash equivalents, beginning of the period	$	68,454	$	293,503
Net cash used in operating activities	(24,827)		(24,783)
Net cash provided by (used in) investing activities	20,864		(65)
Net cash (used in) provided by financing activities	(6,203)		3,298
Net decrease in cash and cash equivalents	(10,166)		(21,550)
Cash and cash equivalents, end of the period	$	58,288	$	271,953

Operating Activities 

For the three months ended March 31, 2019, net cash used in operating activities of $24.8 million was primarily attributable to a net loss of $35.2 million, plus the net effect of non-cash items of $6.0 million, primarily from stock-based compensation and changes in the estimated fair value of contingent consideration, and a net cash inflow from changes in operating assets and liabilities of $4.4 million. Cash inflows from changes in operating assets and liabilities was primarily attributable to the timing of payments for prepaid and accrued clinical trial costs and accrued expenses related to the build-out of our new headquarters.

For the three months ended March 31, 2018, net cash used in operating activities consisted of a net loss of $30.2 million, offset by non-cash charges of $1.9 million and a net cash inflow from changes in operating assets and liabilities of $3.5 million.

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Investing Activities

For the three months ended March 31, 2019, net cash provided by investing activities of $20.9 million was attributable to maturities of marketable securities. These cash inflows were offset by purchases of marketable securities and property and equipment, the majority of which relates to the build-out of our new headquarters, which we began to occupy in early March 2019.

For the three months ended March 31, 2018, net cash used in investing activities was attributable to purchases of property and equipment.

Financing Activities

For the three months ended March 31, 2019, net cash used in financing activities of $6.2 million consisted of a $10.0 million payment of contingent consideration related to a prior acquisition and cash used to remit withholding taxes of $0.6 million related to the vesting of restricted stock units that were net share-settled by us to cover the required withholding tax. These cash outflows were offset by $4.4 million of proceeds from common stock issuances pursuant to our equity incentive plans.

For the three months ended March 31, 2018, net cash provided by financing activities was attributable to $3.6 million of proceeds from common stock issuance pursuant to our equity incentive plans offset by $0.3 million of payments to remit withholding taxes related to the vesting of restricted stock units that were net share-settled to cover the required withholding tax.

Contractual Obligations

There were no material changes outside the ordinary course of our business during the three months ended March 31, 2019 to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2018 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

As of March 31, 2019, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2018 Annual Report on Form 10-K. Our exposures to market risk have not changed materially since December 31, 2018.

Item 4. Controls and Procedures

Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2019 at the reasonable assurance level.

Changes in Disclosure Controls and Procedures

There were no changes in our internal control over financial reporting during the three months ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material updates to the legal proceedings as set forth in “Item 3. Legal Proceedings” in our 2018 Annual Report on Form 10-K other than as set forth below:

On April 12, 2019, a plaintiff stockholder filed a class action lawsuit against us and certain of our executive officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act in the United States District Court for the Northern District of California captioned Lake v. Zogenix, Case No. 3:19-cv-01975-RS. The plaintiff seeks to represent a class of investors who purchased our stock between February 6, 2019 and April 8, 2019, and alleges that certain statements made during this period regarding the prospects for our New Drug Application for Fintepla were false or misleading. The plaintiff seeks damages, interest, costs, attorneys’ fees, and other unspecified equitable relief. We and our executive officers believe the claims alleged in the complaint are without merit and intend to vigorously defend against them.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A of our 2018 Annual Report on Form 10-K, other than as set forth below.

Our success depends substantially on our only product candidate in development, Fintepla. We cannot be certain that Fintepla or our product candidates will receive regulatory approval or be successfully commercialized.

We have only one product candidate in clinical development, Fintepla, and our business depends substantially on its successful development and commercialization. We currently have no drug products approved for sale, and we may not be able to develop marketable drug products in the future. Fintepla and our product candidates will require additional clinical and pre-clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenues from product sales. The research, testing, manufacturing, labeling, approval, sale, marketing, distribution and promotion of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, whose regulations differ from country to country.

We are not permitted to market our product candidates in the United States until we receive approval of a NDA from the FDA, or in any foreign countries until we receive the requisite approval from the regulatory authorities of such countries, and we may never receive such regulatory approvals. In February 2019, we completed our rolling submission of a NDA with the FDA and submitted a MAA to the EMA for Fintepla for the treatment of seizures associated with Dravet syndrome. The EMA has accepted the MAA and initiated its review. However, on April 5, 2019, we received a RTF letter from the FDA regarding our NDA for Fintepla for the treatment of seizures associated with Dravet syndrome. The RTF letter provided the FDA’s determination that the NDA, as submitted on February 5, 2019, was not sufficiently complete to permit a substantive review of the NDA. In the RTF letter, the FDA cited two reasons for the RTF decision: first, certain non-clinical studies were not submitted to allow assessment of the chronic administration of fenfluramine; and, second, the application contained an incorrect version of a clinical dataset, which prevented the completion of the review process that is necessary to support the filing of the NDA. The FDA did not request or recommend in the RTF letter that we conduct any additional clinical efficacy or safety studies; however the FDA may determine later to require us to conduct additional non-clinical or clinical studies or may otherwise impose other requirements to be completed before or after approval of the NDA. We plan to meet and work with the FDA to help us clarify and respond to the identified issues. However, we cannot provide any assurance that we be able to adequately address the issues raised to FDA’s satisfaction or that the FDA will accept the resubmitted Fintepla NDA for filing, or that the FDA will ultimately approve our NDA following a substantive review. In addition, the RTF letter could cause potential delays by the EMA on an approvability decision, or otherwise negatively affect such decision. Obtaining regulatory approval for a product candidate is a lengthy, expensive and uncertain process, and may not be successful. Any failure to obtain regulatory approval of Fintepla or our product candidates, or failure to obtain such approval for all of the indications and labeling claims we deem desirable, would limit our ability to generate future revenues, would potentially harm the development prospects of Fintepla and would have a material and adverse impact on our business.

Even if we successfully obtain regulatory approvals to market our product candidates, our revenues will be dependent, in part, on our ability to commercialize such products as well as the size of the markets in the territories for which we gain regulatory approval. If the markets for our product candidates are not as significant as we estimate, our business and prospects will be harmed.

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Our operating results may fluctuate significantly, which makes our future operating results difficult to predict.

Our quarterly and annual operating results may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. From time to time, in addition to the existing agreement with Nippon Shinyaku Co., Ltd., we may enter into collaborative arrangements with other companies that include development funding and significant upfront and milestone payments and/or royalties, which may become an important source of our revenue. Accordingly, our revenue may depend on development funding and the achievement of development and clinical milestones under current and any potential future collaborative arrangements and sales of our products, if approved. These upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one period to the next. As a result, any period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one period should not be relied upon as an indication of future performance.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX 

Exhibit Number	Description
3.1(1)	Fifth Amended and Restated Certificate of Incorporation of the Registrant
3.2(4)	Certificate of Amendment of Fifth Amended and Restated Certificate of Incorporation of the Registrant
3.3(5)	Certificate of Amendment of Fifth Amended and Restated Certificate of Incorporation of the Registrant
3.4(1)	Amended and Restated Bylaws of the Registrant
4.1(2)	Form of the Registrant’s Common Stock Certificate
4.5(3)	Warrant dated July 18, 2011 issued by the Registrant to Healthcare Royalty Partners (formerly Cowen Healthcare Royalty Partners II, L.P.)
10.1†	Manufacturing and Supply Agreement dated January 31, 2019 by and between Zogenix International Limited and Aptuit (Oxford) Limited
10.2†	Distributorship Agreement dated March 18, 2019 by and between the Registrant and Nippon Shinyaku Company, Ltd.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. §1350, as adopted)
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

1.Filed with Amendment No. 2 to the Registrant’s Registration Statement on Form S-1 on October 27, 2010.

2.Filed with Amendment No. 3 to the Registrant’s Registration Statement on Form S-1 on November 4, 2010.

3.Filed with the Registrant’s Quarterly Report on Form 10-Q on August 12, 2011.

4.Filed with the Registrant’s Quarterly Report on Form 10-Q on November 8, 2012.

5.Filed with the Registrant’s Quarterly Report on Form 10-Q on August 10, 2015.

†Portions of this exhibit have been omitted for confidentiality purposes.

*These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not subject to the liability of that section. These certifications are not to be incorporated by reference into any filing of Zogenix, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

			ZOGENIX, INC.
Date:	May 9, 2019	By:	/s/ Stephen J. Farr
			President and Chief Executive Officer
			(Principal Executive Officer)
Date:	May 9, 2019	By:	/s/ Michael P. Smith
			Executive Vice President, Chief Financial Officer, Treasurer and Secretary
			(Principal Financial and Accounting Officer)

EX-10.1

Exhibit 10.1

CERTAIN INFORMATION (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

MASTER SUPPLY AGREEMENT

By and Between Aptuit (Oxford) Limited

And

Zogenix International Limited

This MASTER SUPPLY AGREEMENT(this “Agreement”) is made effective as of this 31st day of January 2019 (the “Effective Date”), by and between Zogenix International Limited, a wholly owned UK subsidiary of Zogenix Inc., located at Siena Court, Broadway, Maidenhead, Berkshire SL6 1NJ,United Kingdom (“Zogenix”) and Aptuit (Oxford) Limited, an Evotec company, incorporated in England and Wales, having an address at 111 Innovation Drive, Milton Park, Abingdon, Oxfordshire, OX14 4RZ, United Kingdom (“Supplier”) (each individually a “Party” and collectively the “Parties”).

WITNESSETH:

WHEREAS, Zogenix wishes to purchase certain active pharmaceuticals ingredients for human use; and

WHEREAS, Supplier has the experience and expertise necessary to perform the Manufacturing Services for, and supply the Drug Substance to, Zogenix; and

WHEREAS, Zogenix desires Supplier to perform the Manufacturing Services and to supply such Drug Substance to Zogenix; and Supplier desires to perform the Manufacturing Services and to sell such Drug Substance to Zogenix, all on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein, the Parties agree as follows:

1.DEFINITIONS

The following terms, whether used in the singular or plural, shall have the meaning assigned to them below for purposes of this Agreement:

1.1.“Affiliate” means any legal entity directly or indirectly controlled by, controlling or under common control with that party. For purposes of this definition, owning 50% or more of the stock, equity or property of such legal entity, or having the right to appoint 50% or more of the members or owner representatives of such legal entity, are examples of forms of control.

1.2.“Agreement” shall have the meaning set forth in the Preamble hereof.

1.3.“API or Drug Substance” means the active pharmaceutical ingredient to be manufactured by the Supplier in accordance with the Scope of Work.

1.4.“Applicable Laws” means all laws, statutes, rules, regulations, orders, judgments, injunctions and/or ordinances, including privacy laws such as HIPAA, the Data Protection Directive (Directive 95/46/EC), and when implemented the General Data Protection Regulation, environmental laws, U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, GDP, cGMP, EU GMP Directive (Directive 203/94) and the FD&C Act.

1.5.“Batch” (or “Lot”) means a specific quantity of material produced in a process or series of processes so that it is expected to be homogeneous within specified limits and is produced during the same cycle of Manufacture as defined by the applicable Batch record. The batch size can be defined either by a fixed quantity or by the amount produced in a fixed time interval.

1.6.“Batch Record” means the written procedures for production, process control and testing of the Drug Substance designed to assure that the Drug Substance has the identity, strength, quality, and purity they purport or are represented to possess and is used to ensure uniformity from Batch to Batch and compliance with cGMPs.

1.7.“Business Day” means a day other than a Saturday, Sunday or a day that is a statutory holiday in the United Kingdom, the United States or Supplier’s place of business.

1.8.“Certificate of Analysis” (or “COA”) means a document prepared by a testing laboratory or Supplier to document the testing performed on a material, the methods used, and test results.

1.9.“Certificate of Compliance” (or “COC”) means a document which, when executed, formally certifies material has been tested and inspected and meets required Specifications.

1.10.“Current Good Manufacturing Practice” (or “cGMP”) means those practices in the manufacture of pharmaceutical products that are recognized as the current good manufacturing practices by the FDA, MHRA or EMA in accordance with FDA, British or European regulations, guidelines, other administrative interpretations, and rulings in connection therewith, including but not limited to those regulations cited in ICH Q7, Eudralex Volume 4 (EU), Orange Guide (UK), and 21 C.F.R. parts 210 and 211, all as they may be amended from time to time.

1.11.“Confidential Information” of a Party means all confidential or proprietary information of such Party that is communicated in any way or form by the Disclosing Party or its Affiliates to the Receiving Party or its Affiliates, either prior to or after the Effective Date, and whether or not such information is identified as confidential at the time of disclosure, including but not limited to research and development data, information, reports, studies, validation methods and procedures, unpatented inventions, knowledge, trade secrets, technical or other data or information, or other materials, methods, procedures, processes, flow diagrams, materials, developments or technology, including all biological, chemical, pharmacological, toxicological, clinical, manufacturing, analytical, safety, quality assurance, quality control and other data, information, reports, studies, or any other information that a reasonable person would consider confidential or proprietary under the circumstances.

1.12.“Contract Year” means, for the first year, the period commencing on the Effective Date up to and including December 31 of the same calendar year, and for each

year thereafter, shall mean a calendar year beginning on January 1 and ending on December 31.

1.13.“DEA” means the Drug Enforcement Administration of the U.S. Department of Justice, or any successor entity.

1.14.“Effective Date” shall have the meaning set forth in the Preamble hereof.

1.15.“FD&C Act” means the United States Federal Food, Drug and Cosmetic Act, as amended.

1.16.“FDA” means the United States Food and Drug Administration, or any successor entity.

1.17.“First Approval” means receipt of the first approval from a Governmental Agency to market a product containing the Drug Substance for use in humans.

1.18.“Finished Product” means any finished pharmaceutical product in human dosage form that contains any Drug Substance finished to the extent specified in the Scope of Work.

1.19.“Forecast” shall have the meaning set forth in Section 4.1 hereof.

1.20.“Force Majeure Event” shall have the meaning set forth in Section 13hereof.

1.21.“Good Distribution Practice” (or “GDP”) means the minimum standards that a wholesale distributor must meet to ensure that the quality and integrity of medicines is maintained throughout the supply chain, as described in the “Guidelines of 19 March 2015 on principles of Good Distribution Practice of active substances for medicinal products for human use”.

1.22.“Governmental Agency” means any court, agency, authority, department, regulatory body or other instrumentality of any government or country or of any national, federal, state, provincial, regional, county, city or other political subdivision of any such government or any supranational organization of which any such country is a member, which has competent and binding authority to decide, mandate, regulate, enforce, or otherwise control the activities of the Parties contemplated by this Agreement, including, without limitation, the EMA, FDA and the DEA.

1.23.“Inability to Supply” shall have the meaning set forth in Section 4.6hereof.

1.24.“Initial Term” shall have the meaning set forth in Section 11.1 hereof.

1.25.“Laws” means all international, national, federal, state, provincial and local laws, statutes, codes, rules, regulations, ordinances, orders, decrees or other pronouncements of any governmental, administrative or judicial authority having the effect of law, including, without limitation, Environmental Laws.

1.26.“MAA” shall have the meaning set forth in Section 2.6 hereof.

1.27.“Manufacture” and “Manufacturing Services” means any steps, processes and activities including the manufacturing, quality control, quality assurance and stability testing, packaging and related services, as contemplated in this Agreement, required to produce the Drug Substance.

1.28.“Manufacturing Process” means any and all processes and activities (or any step in any process or activity) used or planned to be used by Supplier to Manufacture the Drug Substance, as evidenced in the Batch Records.

1.29.“Manufacturing Site” means the facility, owned and operated by Supplier that is located at 110-111 Innovation Drive, Milton Park, Abingdon, Oxfordshire, UK. OX14 4RZ, 117 Innovation Drive, Milton Park, Abingdon, Oxfordshire, UK. OX14 4RZ and 150 Brook Drive, Milton Park, Abingdon, Oxfordshire, UK OX14 4SD.

1.30.“NDA” shall have the meaning set forth in Section 2.6hereof.

1.31.“Price” means the price to be charged by Supplier for the Drug Substance Manufactured and supplied hereunder as delivered to Zogenix, which price shall include the cost of materials, Manufacturing, standard quality control and quality assurance costs, testing, documentation, packaging, shipping materials, transportation and taxes and which price is set forth in the Scope of Work.

1.32.“Purchase Order” means an order from Zogenix specifying a Purchase Order Delivery Date, Price and quantities of the Drug Substance to be Manufactured and delivered by Supplier, as indicated in the relevant Scope of Work signed by the Parties.

1.33.“Purchase Order Delivery Date” means the date agreed upon by the Parties in a firm Purchase Order that the quantities of Drug Substance specified in the applicable Purchase Order will be released to Zogenix and ready for immediate shipment.

1.34.“Quality/Technical Agreement” (or “QTA”) shall mean a separate agreement entered into by the Parties that defines quality assurance obligations and technical and regulatory matters associated with the provision of the Services. This will be Exhibit 2 to the Agreement.

1.35.“Raw Material” means, collectively, starting materials, reagents, and solvents intended for use in the production of intermediates or APIs (Drug Substance) in accordance with the Specifications.

1.36.“Scope of Work” means a document incorporated herein by reference upon its execution by both Parties that defines the scope of work for a particular engagement under this Agreement. The Scope of Work will specify type of work, costs and specific manufacturing requirements including: Price, Batch size and safety stock requirements, if any. This will Exhibit 1 to the Agreement.

1.37.“Services” shall mean Manufacturing Services Supplier performs for Zogenix as requested from time to time.

1.38.“Specifications” means the file, for each Drug Substance, containing information provided by Zogenix to Supplier and which contains documents relating to such Drug Substance, including, without limitation:

(a) Written specifications for the Drug Substance, including the list of tests, references to any analytical procedures and appropriate acceptance criteria which are numerical limits, ranges or other criteria for tests described in order to establish a set of criteria to which Drug Substance at any stage of Manufacture should conform to be considered acceptable for its intended use that are agreed upon by Zogenix and Supplier;

(b) Manufacturing and packaging process specifications;

(c)Shipping and storage requirements;

(d) All environmental, health and safety information relating to the DrugSubstanceincluding material date safety sheets; and

(e) Any other technical information necessary to carry out the contracted operations correctly in accordance with any legal requirements,

all as updated, amended and revised from time to time by the Parties in accordance with the terms of the Agreement.

1.39.“Third Party” shall mean any person or entity other than Zogenix, Supplier and their respective Affiliates.

The definitions in this Section 1 shall apply equally to both the singular and plural forms of the terms defined. As used in this Agreement, (i) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (ii) the words “hereof”, “herein”, “hereby” and derivatives or similar words refer to this entire Agreement; (iii) all references to Sections shall be deemed references to Sections of this Agreement and all references to Attachments shall be deemed references to Attachments to this Agreement, unless the context shall otherwise require; and (iv) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless otherwise specified.

2.MANUFACTURING SERVICES

2.1.Services. Supplier will perform the Services, as set forth in the Scope of Work, for, and ship the Drug Substance to, Zogenix, or nominated recipient, in accordance with this Agreement. For each new Scope of Work, the Supplier will submit a written proposal to Zogenix outlining the Services to be provided and the estimated costs for performing such Services. Upon approval of the proposal by Zogenix, the Parties will complete and execute a Scope of Work similar to the form attached hereto. Upon execution by both Parties, each Scope of Work shall be deemed to be incorporated

into this Agreement by Reference. Supplier will undertake the performance of the Services only upon full execution of a Scope of Work by Zogenix and Supplier. If there is a conflict between the terms of this Agreement and the terms of a Scope of Work, the terms of this Agreement will control.

2.2.Quality Control and Quality Assurance. The Parties shall enter into a separate QTA, in a format suitable to meet Applicable Law relating to the Manufacture, storage, transportation and release of Drug Substances. Upon execution by both Parties, the QTA shall deemed to be incorporated into this Agreement by Reference.

In the event of a conflict between this Agreement and the Quality/Technical Agreement, the Quality/Technical Agreement shall govern and control only with respect to the quality matters and this Agreement shall govern and control with respect to all other matters.

2.3.Process and Specification Changes. Supplier shall not make any changes to its process, raw materials, supply sources, Specifications, manufacturing locations or facilities used to make Drug Substance for Zogenix under this Agreement, including, without limitation, any such changes that may require Zogenix to provide notification to regulatory authorities, without the prior written consent of Zogenix.

2.4.Zogenix Requested Changes. Zogenix shall be entitled to request a change to the Specifications from time to time (which change is not the result of a requirement or mandate of a Governmental Agency) and Supplier shall make and implement all such changes in accordance with the Quality/Technical Agreement, Zogenix’s change control procedures, and a written implementation plan (including tasks, time and cost) agreed to by the Supply Committee. Zogenix shall retain the right and responsibility for final approval of the Specifications and any changes made thereto.

2.5.Changes Required by Applicable Law. If Supplier is required to change the Specifications in order to comply with Applicable Law, Supplier will promptly notify Zogenix of such changes and the cost of such changes. If Zogenix is unable to accept or unwilling to have such changes made, Zogenix will have the option of terminating this Agreement immediately upon notice to Supplier.

2.6.Technical Data. Supplier shall provide to Zogenix, without charge, all Drug Substance related data or available reports generated by Supplier, as needed and required for Zogenix’s New Drug Application (“NDA”) or Marketing Authorization Application (“MAA”) or other FDA, EMA or Governmental Agency requests and/or requirements, in each case relating to any Drug Substance.

2.7.Raw Materials. Supplier will purchase, test, and release all Raw Materials as required by the Specifications and as specified in the Scope of Work.

2.8.Packaging. Supplier will purchase packaging materials and package the Drug Substances as approved by Zogenix in a manner suitable for safe and lawful shipment.

2.9.Equipment. Supplier shall be solely responsible for the safe operation and maintenance of all equipment used to fulfill its obligations under this Agreement, and all associated employee training, regardless of whether the equipment is owned by Zogenix, Supplier, or a third party.

2.10.Shelf Life. Drug Substance shall be released to Zogenix no later than ninety (90) days from the start of Manufacturing unless mutually agreed by both Parties. Drug Substance released at greater than ninety (90) days from the start of Manufacturing, provided such late release is not due to negligence, breach of this Agreement or willful misconduct by Zogenix, shall be subject to either a pro rata discount or deemed unusable at the sole discretion of Zogenix, in which case Supplier will bear all costs and expenses. Supplier will not be liable to Zogenix nor be deemed to have breached this Agreement for errors, delays or other consequences to the extent arising solely from Zogenix’s failure to provide necessary documents, materials or information with regard to which Zogenix is responsible as agreed in writing and/or in a timely manner. Nor will Supplier be liable to Zogenix to the extent that Zogenix fails to otherwise reasonably cooperate in order for Supplier to perform its obligations, and any such failure by Zogenix will automatically extend any timelines affected by a time period that reasonably takes into account such failure in providing documents, materials, information or cooperation.

2.11.Validation Activities. Supplier shall prepare the documentation, protocols, and procedures. Supplier shall validate its pharmaceutical manufacturing processes, tests, and methods as well as associated facilities, equipment and systems, keep such processes, tests, methods, facilities, equipment, and systems current, and make results of validation and annual reviews of such processes, tests, methods, facilities, equipment, and systems available on site for audit or review by Zogenix in accordance with the Quality/Technical Agreement.

2.12.Compliance. Supplier shall comply with all Applicable Laws related to the Manufacture, use, possession, handling, transportation, sale or disposal of the Drug Substance.

2.13.Subcontractors. Supplier may not use subcontractors, including Affiliates, to perform any part of this Agreement without Zogenix’s prior written consent.

2.14.Records. Supplier will keep records of the Manufacture, testing, and shipping of the Drug Substance, and retain samples of the Drug Substance as are necessary to comply with Applicable Law, as well as to assist with resolving Drug Substance complaints and other similar investigations. Copies of the records and samples will be retained in accordance with the Quality/Technical Agreement and Applicable Law.

3.OVERSIGHT

3.1.Supply Committee. Promptly following the Effective Date, the Parties shall establish a supply committee which shall be comprised of [***] representatives from each of Zogenix and Supplier, representing technical, operations and quality

functions, having the appropriate credentials, knowledge and experience (the “SupplyCommittee”).

3.2.General Remit. The Supply Committee shall serve as the coordinating body for the Manufacture and supply of the Drug Substance under this Agreement. The Supply Committee shall also work to resolve any Dispute which arises between the Parties relating to the Manufacture and supply of the Drug Substance under this Agreement.

3.3.Meetings. The Supply Committee shall meet at least quarterly by telephone or in person. Meeting agendas shall include as appropriate information on (a) anticipated market demand and inventory positions and any material changes in either, (b) supply capability, including Raw Material inventories and availability, (c) any capacity concerns, unusual production situations, or prioritization issues including changes to delivery or sourcing, (e) any quality related issues, (f) and proposed amendments to Manufacturing Process or Specifications, and (g) any other matters which may impact or influences the Drug Substance supply chain.

3.4.Costs. Each Party shall be responsible for its own costs in respect of travel and accommodation expenses in attending such meetings.

3.5.Audit. Up to [***] Zogenix employees or Zogenix representatives (unless such representatives are a competitor of Supplier) may visit Supplier’s premises where the Services are being performed at reasonable times, on reasonable notice and with reasonable frequency during normal business hours to observe the progress of the Services, once per calendar year at no cost. Zogenix will reimburse Supplier for its time and expenses associated with any additional audit during such calendar year (audits of no more than [***] in duration with no more than [***] auditors) unless such audit is as a result of a Supplier breach of, or noncompliance with, or reveals that Supplier has breached, or is not in compliance with, this Agreement or any Applicable Law (For Cause Audit). Supplier agrees to address, in writing, within thirty (30) days of the conclusion of Zogenix’s audit of the facilities, any adverse findings made by Zogenix pursuant to the audit. The written report shall include an action plan for addressing the findings and a time line for the implementation of any corrective and preventative measures. Supplier shall permit, at the request of Zogenix, a follow-up inspection, at no cost to Zogenix, to ensure that all corrective and preventative measures have been implemented. For clarity reimbursement under the provision of this Section 3.5 excludes Supplier engagement covered under Section3.3 above or general access to Manufacturing Site in conjunction with the execution of the Services. Such access must be agreed to by the Parties, in advance, and in accordance with execution of remit in Section 3.2 and 3.3 above.

4.FORECASTS AND PURCHASE ORDERS, CAPACITY

4.1.Forecasts and Purchase Orders: Zogenix shall deliver to Supplier a good faith, written, non-binding forecast, of its expected commercial requirements of the Drug Substance at least [***] before anticipated receipt of a First Approval and then on or before the last working day of each calendar month during the Term, Zogenix shall provide to Supplier a rolling [***] forecast of its requirements for

the Drug Substance (“Forecast”), with the [***] of each such forecast constituting a binding commitment upon Zogenix to purchase such quantities as evidenced by Purchase Orders submitted in accordance with Section 4.1.1.

4.1.1.All firm orders for Drug Substance (the “Purchase Order”) shall specify: (i) the type of Drug Substance being ordered; (ii) the amount of such Drug Substance being ordered; and (iii) the Purchase Order Delivery Date. Each Purchase Order shall be deemed to be automatically accepted unless Supplier notifies Zogenix of its rejection of the same within three (3) Business Days of receipt. Once accepted by Supplier, Purchase Orders are firm and may not be cancelled or modified without the consent of the other Party. Supplier may reject a Purchase Order Delivery Date and offer another Purchase Order Delivery Date but the new Purchase Order Delivery Date cannot be more than seven (7) Business Days later or ten (10) Business Days earlier than original Purchase Order Delivery Date. If there is a new Zogenix accepted Purchase Order Delivery Date, the Forecast will be updated to reflect the new agreed upon date. For the avoidance of doubt, Supplier shall be obligated to accept any Purchase Order that complies with this Section 4.1.1, is consistent with the most recent Forecast, and does not exceed the Initial Capacity.

4.1.2.If there is a conflict between the terms of this Agreement and the terms of a Purchase Order, the terms of this Agreement will control.

4.2.Forecast not a Purchase Order. Notwithstanding anything to the contrary, in no event shall a Forecast be deemed a Purchase Order.

4.3.Minimum Annual Requirements. Zogenix agrees to order a minimum of 1 Batch per annum, while this Agreement is in effect, in order for Supplier to maintain and retain relevant manufacturing experience.

4.4.Purchase Quantities. Quantities actually delivered pursuant to a given Purchase Order may vary from the quantities reflected in such Purchase Order by up to ten percent (10%) and still be deemed to be in compliance with such Purchase Order; provided, that Zogenix shall only be invoiced and required to pay for the quantities of Drug Substance which Supplier actually delivers to Zogenix.

4.5.Adjustments to Forecasts and Purchase Orders. Any change to the accepted Purchase Order amount or Purchase Order Delivery Date cannot occur without both Parties agreeing to change in writing.

4.6.Delivery Terms and Purchase Order Delivery Date. Terms of delivery for the Drug Substance shall be EXW Supplier facility (ICC Incoterms® 2010). Absent specific instructions from Zogenix, Supplier will select the carrier and ship freight prepaid, with the cost thereof charged to Zogenix. Title and risk of loss and/or damage to the Drug Substance shall pass to Zogenix when the Drug Substance is ready to be loaded onto the agreed carrier, which is preceded by Zogenix written authorization to ship. Zogenix authorization to ship shall occur within five (5) Business Days of the later of Supplier’s release of the Drug Substance and supply of the documents specified in

Section 2.2. Drug Substance shall be properly prepared for safe and lawful shipment by Supplier and accompanied by appropriate transportation and other agreed upon documentation. Supplier shall make arrangements for shipping per the agreed upon carrier. No later than the day the Drug Substance is shipped, Supplier shall provide Zogenix with agreed upon logistic documents.

4.7.Inability to Supply. In the event that the Drug Substance is not delivered (i.e., released by Supplier and available for immediate shipment) within [***] after the specified Purchase Order Delivery Date, starting with [***] following the Purchase Order Delivery Date Supplier will be deemed to be in an “Inability to Supply” status. In the event of any Inability to Supply: (i) Supplier shall fulfill Purchase Orders with such quantities of conforming Drug Substance as are available; (ii) unless and until such Inability to Supply is remedied, Zogenix shall be relieved from its obligations under this Agreement to (A) purchase any quantities subject to any outstanding Purchase Orders or Forecast, (B) submit any further Purchase Orders, and (iii) Zogenix may terminate Agreement without penalty. Nothing in this Section 4.6 hall relieve Supplier of any obligation or liability under this Agreement.

4.8.Without limiting the foregoing, in the event of, and during the occurrence of, any Inability to Supply, if Zogenix elects to purchase any Drug Substance from a Third Party in order to replace the Drug Substance that Supplier could not deliver to Zogenix hereunder, then Supplier shall pay to Zogenix an amount equal to the product of: (a) the actual per unit cost for Drug Substance paid by Zogenix to such Third Party supplier less the applicable per unit cost for such Drug Substance Zogenix would have paid to Supplier hereunder; times (b) the number of units of Drug Substance actually purchased by Zogenix from such Third Party supplier. The remedies granted to Zogenix pursuant to this Section shall be in addition to, and not in lieu of, any other remedies available to Zogenix at law or in equity.

4.9.Capacity. The Supplier will provide sufficient organizational, financial, and personnel resources necessary to perform its obligation under this Agreement to ensure available capacity to Manufacture and deliver Drug Substance to Zogenix, at a minimum of the Forecast. If at any time during the term of this Agreement, the Zogenix Forecast exceeds Supplier’s then-current available capacity, then Supplier and Zogenix shall meet and discuss in good faith ways in which additional Supplier capacity may be secured to meet the Forecast. Provision of existing Manufacturing capacity shall be at the Supplier’s sole cost and expense.

4.10.Current available capacity. Subject to bookings of the relevant manufacturing operations of Supplier prior to receiving a Purchase Order from Zogenix, Supplier’s available capacity for Manufacturing of Drug Substance as of the Effective Date is [***] the (“Initial Capacity”). Supplier shall use commercially reasonable efforts to supply all amounts of Drug Substance ordered by Zogenix up to the Initial Capacity.

4.11.Alternate Suppliers. Nothing in this Agreement shall prevent, prohibit or restrict Zogenix from purchasing the Drug Substance from any Third Party provided that

during the Initial Term of this Agreement, Zogenix orders [***] of its total needs from the Supplier.

4.12.Exclusivity. Supplier shall not enter into any other agreements, including licensing, manufacturing or supply agreements, with any Third Parties in relation to the manufacture of any Drug Substance that is the same Drug Substance, route of synthesis and Manufacturing Process that is supplied by Supplier hereunder without the prior written consent of Client.

4.13.Adjustment of Price

The Price defined in 1.31 above may be adjusted as specified below.

4.13.1.The Price of the Drug Substance may be amended due to a process or specification change as provided for in Section 2 of this Agreement, only upon consent by Zogenix. For clarity, Price changes may include other aspect of the Services to be performed by Supplier resulting from changes to the scope of Services, the Specifications, assumptions, or requirements that arise during the performance of the Services, provided that such changes do not arise as a result of Supplier’s failure to either perform the Services in a commercially reasonable manner or otherwise act in good faith. Any such changes will be memorialized in a revision to the Scope of Work to be executed by both Parties. Unless a Change is required under sections, 2.3, 2.4, or 2.5 of the Agreement, Prices for the Drug Substance may be increased or decreased by an amount that the Parties shall reasonably agree to no more than each calendar year to reflect [***]. Pricing will be in effect as of the first Purchase Order issued in each Contract Year.

4.13.2.This pricing will be valid from the date of this Agreement until 31st December 2019, provided that the prices at which Supplier can purchase the Raw Materials change by [***] with regard to the prices agreed at the time of execution of this Agreement. Should the prices for the Key Raw Materials change by[***] with regard to the price agreed at the time of execution of this Agreement, the Supplier will provide detailed information on the pricing of such raw-materials to Zogenix. With Zogenix consent, the raw material part of the Price for the manufacture of the Drug Substance may change by such percentage. The Price for Purchase Orders submitted to the Supplier thereafter will change by the increase or decrease in the cost of the material.

4.13.3.After 31st of December 2019, Supplier may submit a notice of Price change to Zogenix on an annual basis for each new Contract Year. Such proposed Price change shall be submitted for review [***] prior to the end of the current Contract Year. Supplier will provide supporting detail with respect to any Price change, and upon consent from Zogenix, the Price for the Drug Substance, and the relevant Scope of Work will be adjusted on the following Purchase Order issued to the Supplier as follows:

The Price will be adjusted to reflect [***]. Where the prices for the Key Raw Materials change by [***] the Price in effect, the raw material part of the price for the Drug Substance may change by such percentage, and the non-raw material related part of the Price for the Drug Substance, directly related to provision of the Manufacturing Services will change by [***].

5.INVOICES, PAYMENT AND TAXES

5.1.Invoices. Supplier shall submit an invoice to Zogenix at [***] upon Zogenix acceptance of Supplier issued CoA, or dispatch of the Drug Substance. The invoices must be issued in line with the terms of the Value Added Tax Act 1994 and must be properly addressed to Zogenix International Limited at its UK business address.

5.2.Payment. Zogenix shall pay Supplier only for the Services requested by Zogenix and identified in the Scope of Work. If Supplier anticipates that a project shall exceed the costs identified in the Scope of Work, Supplier shall notify Zogenix, as soon as possible, of such additional costs. Zogenix must approve such additional costs in writing prior to Supplier incurring any such costs. Zogenix shall be obliged to pay only for the actual quantity of Drug Substance delivered at the Price stated in the applicable Scope of Work. Zogenix shall pay all undisputed amounts due within [***] from the date of receipt of the invoice by Zogenix. If Zogenix disputes all or any portion of an invoice, it shall be required to pay only the amount not in dispute, and in such event Zogenix shall notify Supplier of the amount and nature of the dispute, whereupon the Parties will use good faith efforts to reconcile the disputed amount as soon as practicable. All payments due to Supplier shall be made wire transfer for deposit to the bank account of Supplier at a designated bank in the country where the Supplier’s place of business is located. Supplier may assess a late payment fee of [***] per month (or the maximum amount allowed by law if less than [***] per month) for any undisputed payment owing and paid within thirty (30) days after the due date of such invoice.

5.3.Non-Payment of Undisputed Amounts. If Zogenix fails to pay undisputed invoices when due, in addition to its other rights under this Agreement, in law or under equity, Supplier will have the right, in its discretion, to cease all activities hereunder and withhold all data, information, reports, and material of any kind (but excluding Zogenix’s materials) until all outstanding and undisputed invoices have been paid in

full. It is understood that prior to ceasing all activities and withholding all data, information, reports and materials, Supplier will make all reasonable efforts to initiate good faith discussions with Zogenix with a view to resolving the payment issues otherwise.

5.4.Taxes. The Price does not include value added tax, or any other sales, use, gross receipts, excise, compensating, withholding, licenses, duties, charges or fees, if any, required to be paid by Supplier in respect of fees for Services. Where such value- added tax is properly chargeable by the Supplier, the amount of such tax, if any, will be added to the Price and shall be reflected in valid VAT invoices submitted to Zogenix by Supplier pursuant to this Agreement. Where Zogenix receives a valid VAT invoice, Zogenix shall pay the amount of such value-added tax indicated on the invoice to Supplier in accordance with the payment provisions of this Agreement. For the avoidance of doubt, where any Price is denominated in a currency other than Great British Pounds (GBP), any value-added tax must be shown on the invoice in GBP, along with any conversion rate used. Failure of the Supplier to issue a valid VAT invoice, including any failure to denominate any value-added tax charged in GBP, will render any such invoice invalid and any payment provision shall not commence unless and until Zogenix receives a valid VAT invoice. Notwithstanding the foregoing, taxes (and any penalties thereon) imposed on Supplier based on Supplier’s income (however denominated) will be the responsibility of Supplier.

6.INSPECTION AND ACCEPTANCE

6.1.Supplier shall test and analyze each lot of Drug Substance for compliance with the Specifications prior to the release and shipment thereof to Zogenix. Supplier will provide a Certificate of Analysis, Certificate of Compliance and executed Batch Records with each shipment of each Batch of Drug Substance signed by the responsible quality official of Supplier. The Certificate of Analysis and Certificate of Compliance must include the results (whether numerical or otherwise) for each test performed that verify that the Batch of Drug Substance is in compliance with the Specifications, as well as a statement that the subject lot was Manufactured in accordance with the Batch Records, any applicable regulatory approvals and Applicable Law.

6.2.Zogenix may test and inspect the Drug Substance after receipt and either accept or reject it. Drug Substance may be rejected if it does not comply with the Specifications or conform with any of the warranties provided by Supplier in this Agreement or the Quality/Technical Agreement, or is otherwise defective. Zogenix will be deemed to have accepted the Drug Substance, except as to latent defects which are not reasonably discoverable, if Zogenix fails to give notice of rejection within [***] after receipt by Zogenix of such Drug Substance. The written notice of rejection shall be given to Supplier and shall include identification of the lot number and description of the Specification non-compliance or other defect.

6.3.Following receipt of written notice of rejection of a particular lot of Drug Substance, Supplier shall, at Zogenix’s option, provide a credit, refund or replacement of Drug Substance to Zogenix, together with reimbursement for the cost of all Raw Materials

incorporated in the rejected Drug Substance and Zogenix’s costs of shipping, insurance premiums, duties, taxes, and other reasonable out-of-pocket costs directly incurred in connection with the transportation and return or destruction of the rejected Drug Substance; provided, however, that if Supplier does not agree with Zogenix’s claim of noncompliance with the Specifications or other defect, then the Parties shall designate a mutually acceptable Third Party laboratory to make a determination on such matter from a sample obtained from the allegedly non-compliant or defective lot shipped to Zogenix. The decision of the Third Party laboratory shall be binding on all Parties hereto and all expenses related to such Third Party investigation shall be borne by the Party found to have been mistaken. Should such Third Party laboratory confirm Zogenix’s claim of Drug Substance noncompliance, Supplier shall, at Zogenix’s request, promptly provide Zogenix with a credit, refund or prompt replacement of Drug Substance to Zogenix, together with reimbursement for including the cost of all Raw Materials incorporated in the rejected Drug Substance and Zogenix’s costs of shipping, insurance premiums, duties, taxes, and other reasonable out-of-pocket costs directly incurred in connection with the transportation and return or destruction of the rejected Drug Substance.

6.4.Zogenix shall return any rejected Drug Substance to Supplier at Supplier’s expense to an address that Supplier may designate within ten (10) days of Supplier receiving written notice of rejection; provided, however, that if Supplier does not agree with Zogenix’s claim of noncompliance with the Specifications or other defect, Zogenix shall not be obligated to return the rejected Drug Substance to Supplier until ten (10) days after a final determination is made by a Third Party laboratory that such Drug Substance does not comply with the Specifications or is otherwise defective as provided in Section 6.3 above. All freight, insurance and other costs of such shipment along with any risk of loss shall be borne by Supplier.

7.RECALLS

7.1.Control of Recall. All recalls of any Finished Product, and EMA and FDA contacts relating to any such recalls shall be the responsibility of, and under the control of, Zogenix. Zogenix shall notify the EMA, FDA, DEA, and any foreign regulatory agencies of any recall, and shall be responsible for coordinating all necessary activities regarding the action taken. In the event that either Party has reason to believe that any Finished Products should be recalled or withdrawn from distribution, such Party shall promptly inform the other in writing prior to taking any such action. Zogenix shall have the responsibility for making the final decision regarding any recall, withdrawal or field correction relating to any Finished Product.

7.2.Supplier Fault. If any Finished Product is recalled as a result of Supplier’s failure to supply Drug Substance in accordance with this Agreement and/or the Quality/Technical Agreement, then Supplier shall reimburse Zogenix for all documented out-of-pocket expenses incurred by Zogenix as a result of such recall. Zogenix shall give Supplier prompt written notice of any Finished Product recalls that Zogenix believes were caused or may have been caused by such failure by Supplier.

7.3.Sharing of Recall Expenses. If each Party contributes to the cause for a recall, the expenses actually incurred as a result of such recall will be shared in proportion to each Party’s responsibility.

8.INTELLECTUAL PROPERTY

8.1.Zogenix Property.

8.1.1.All materials, inventions, know-how, methodologies, trademarks, Specifications, information, data, writings and other property in any form whatsoever, which is provided or otherwise made available to Supplier by or on behalf of Zogenix, whether or not it is used by Supplier with respect to the performance of its obligations hereunder, and which was owned or Controlled by Zogenix prior to being provided or made available to Supplier, shall remain the property of Zogenix (the “Zogenix Property”). Without limiting the foregoing, Zogenix shall retain all rights, title and interest in and to such Zogenix Property, including without limitation all patents, copyrights, trademarks, trade secrets and other intellectual property and proprietary rights and any ideas, concepts, designs, inventions and expressions embodied in or appurtenant to such Zogenix Property. Zogenix hereby grants to Supplier a non-transferable, non-exclusive license to use any Zogenix Property supplied to Supplier hereunder solely to the extent and for the duration necessary to enable Supplier to perform its obligations hereunder. Supplier shall not acquire any other right, title or interest in or to the Zogenix Property as a result of its performance hereunder. “Controlled” means, with respect to any material, item of information or intellectual property right, the possession, whether by ownership or license, of the right to grant a license or other right with respect thereto without violating the contractual or intellectual property rights of any third party.

8.1.2.Any improvements or modifications to Zogenix Property (“Improvements”), and any creative ideas, proprietary information, developments, or inventions developed, conceived, created, authored or reduced to practice by or on behalf of Supplier, either alone or in concert with Zogenix or any third parties, during the Term and related to the activities carried out in the performance of this Agreement (“Developments”) shall be the exclusive property of Zogenix, and Zogenix shall own all rights, title and interest in and to such Improvements and Developments. Such ownership shall inure to the benefit of Zogenix from the date of the conception, creation, reduction to practice or fixation in a tangible medium of expression of the Improvements or Developments, as the case may be. All copyrightable aspects of such Improvements and Developments shall be considered “Work Made For Hire” as defined in §101 of the 1976 Copyright Act (as amended), and all rights, title and interest in and to such Improvements and Developments hereby is and shall be transferred to and vested in Zogenix without any additional compensation to Supplier or its personnel. In the event that any Improvements or Developments do not qualify to be Work Made For Hire, Supplier hereby irrevocably transfers, assigns and conveys, and shall cause

its personnel to irrevocably transfer, assign and convey, all rights, title and interest in and to such Improvements or Developments to Zogenix, at no cost to Zogenix, free and clear of any liens and encumbrances, and Supplier agrees to execute, and shall cause its personnel to execute, all documents necessary, in Zogenix’s discretion, to do so. All such assignments shall include, but are not limited to, those relating to existing or prospective copyrights, patent rights and all other intellectual property rights in any country. Supplier also agrees that it shall, and shall cause its personnel to, promptly notify Zogenix of any intellectual property developed or otherwise included as Improvements or Developments, and to provide reasonable assistance, at Zogenix’s expense, in the procurement or enforcement of any such intellectual property.

8.2.Supplier Property. All materials, inventions, know-how, methodologies, trademarks, information, data, writings and other property, in any form whatsoever, which is provided to Zogenix by or on behalf of Supplier, or which was used by Supplier with respect to the performance of its obligations hereunder, and which was owned or Controlled by Supplier prior to its performance hereunder, shall remain the property of Supplier (the “Supplier Property”). For avoidance of doubt, Supplier Property excludes any Zogenix Property, Improvements and Developments. Zogenix shall acquire no right, title or interest in Supplier Property as a result of Supplier’s or Zogenix’s performance hereunder. In producing Improvements and Developments, Supplier shall not incorporate into such Improvements and Developments any Supplier Property or other materials in which Supplier or any third party has pre- existing proprietary rights (collectively, “Pre-Existing Materials”), except such Pre- Existing Materials as may be approved in advance by Zogenix in writing. Any such Pre-Existing Materials incorporated into the Improvements and Developments but not approved in advance by Zogenix in writing shall be deemed Improvements and Developments. With respect to Pre-Existing Materials incorporated into Improvements and Developments, Supplier hereby grants to Zogenix, in the case of Supplier’s Pre-Existing Materials, or shall obtain for Zogenix, in the case of third party Pre-Existing Materials, an unrestricted, royalty-free, fully-paid, perpetual, irrevocable, world-wide, non-exclusive, assignable right and license to use, disclose, reproduce, modify, prepare derivative works, publicly perform and display, transmit, sublicense, sell, offer for sale and distribute (including the right to sublicense, sell, offer for sale and distribute through multiple tiers), practice, make, have made, import and otherwise make use of such Pre-Existing Materials in connection with the Drug Substance, Improvements and Developments. Such rights shall extend to Zogenix’s present and future Affiliates, successors and assigns.

9.REPRESENTATIONS AND WARRANTIES

9.1.Supplier represents and warrants:

9.1.1.that it has the experience, capability and resources to efficiently and expeditiously provide the Manufacturing Services under this Agreement, and that the Manufacturing Services shall be performed in a workmanlike manner with professional diligence and skill and in conformance with the Specifications

and the other applicable specifications or requirements as set forth in this Agreement, the Quality/Technical Agreement, and the Scope of Work;

9.1.2.that the Drug Substance, at the time of delivery to Zogenix, shall (a) be of merchantable quality, fit for the purposes intended by Zogenix and be free from defects in material and workmanship; (b) conform to the Specifications, as then in effect, (c) have been Manufactured in compliance with all Applicable Laws, including cGMPs; (d) not be (i) adulterated or misbranded by Supplier within the meaning of the FD&C Act or (ii) an article that may not be introduced into interstate commerce under the provisions of Section 404 or 505 of the FD&C Act; (e) meet all standards and requirements under Applicable Laws to be lawfully shipped and sold;

9.1.3.that it is not a party to any agreement that would prevent it from fulfilling its obligations under this Agreement, and that it shall not enter into an agreement to provide services that would restrict its ability to perform under this Agreement during its term;

9.1.4.that to the best of its knowledge as of the Effective Date of this Agreement there is no pending or likely governmental enforcement action or private claim against Supplier, or any environmental conditions, events or circumstances that are reasonably likely to limit, impede or otherwise jeopardize the Supplier’s ability to meet its obligations under this Agreement;

9.1.5.that Supplier is not now nor has in the past been suspended, proposed for debarment or debarred by the United States Food and Drug Administration or any other government or regulatory authority, Supplier has never been convicted of a felony under federal law for conduct relating to the development or approval of a drug product and/or relating to a drug product, Supplier is not currently suspended or otherwise excluded by any governmental entity from receiving federal contracts, and Supplier’s employees, agents, representatives and subcontractors who perform Manufacturing Services under this Agreement are not suspended, proposed for debarment or debarred by the federal government;

9.1.6.that it and its employees, subcontractors, agents, representatives, and invitees shall comply with all Applicable Laws in the performance of this Agreement, and that Supplier’s actions in establishing and performing this Agreement have been and will be consistent with ethical business practices and without the influence of any association with an Zogenix employee, officer or director that would amount to a conflict of interest; and

9.1.7.that if it learns of any violation of Applicable Law by an employee or permitted Affiliate or subcontractor that performs any function under this Agreement (a “Compliance Event”), it will immediately notify Zogenix in writing of such Compliance Event and the measures it has taken and intends to take to remedy such Compliance Event and to prevent its recurrence.

9.2.Supplier and Zogenix represent and warrant to the other that the execution, delivery and performance of this Agreement have been authorized by all necessary corporate action, do not conflict with or result in a material breach of the articles of incorporation or by-laws of such Party or any material agreement by which such Party is bound, or any law, regulation or decree of any governmental entity or court that has jurisdiction over such Party.

9.3.Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON- INFRINGEMENT.

10.TERM; TERMINATION

10.1.Term. The term of this Agreement shall commence on the Effective Date and shall continue for five (5) years unless terminated earlier pursuant to this Section (the “Initial Term”). After the expiration of the Initial Term, this Agreement shall automatically renew for successive terms of two (2) years each (each a “Successive Term” and together with the Initial Term, the “Term”), unless terminated as set out below.

10.2.At Will Termination. This Agreement may be terminated at any time during the Term for any reason by: (i) Zogenix with twelve (12) months prior written notice to the Supplier or (ii) Supplier with twenty-four (24) months prior written notice to Zogenix. In the event of any termination of this Agreement, Zogenix shall be responsible for any portion of the compensation owed to Supplier for any Manufacturing Services rendered for any firm Purchase Orders prior to the effective date of such termination to the extent such fees and expenses are not cancelable.

10.3.Breach. This Agreement may be terminated by either Party in the event of a material breach by the other Party of the terms and conditions hereof; provided that the other Party shall first give to the defaulting Party written notice of the proposed termination or cancellation of this Agreement, specifying the grounds therefor. Upon receipt of such notice, the defaulting Party shall have sixty (60) days to respond by curing such default; or by delivering to the other Party a certificate that such breach is not capable of being cured within such sixty (60) days and that the breaching Party is working diligently to cure such breach; but in no event shall the time period for curing such breach exceed an additional sixty (60) days. If the breaching Party does not so respond or fails to work diligently and to cure such breach within the additional time set forth above, then the other Party may either suspend the Agreement indefinitely or terminate the Agreement. Termination of this Agreement pursuant to this Section 10.3 shall not affect any other rights or remedies which may be available to the non- defaulting Party.

10.4.Product Withdrawal. A Scope of Work covering a Drug Substance will automatically terminate without any further action by either Party if the drug product containing such Drug Substance is withdrawn as a result of FDA, EMA or other Regulatory

Agency actions or voluntarily withdrawn by Zogenix or if Zogenix decides to cease development activities for such drug product containing such Drug Substance.

Zogenix shall be responsible for the payment of all Drug Substance Manufactured under a confirmed Purchase Order to the date of termination.

10.5.Violation of Applicable Law. If Supplier in its discretion determines that its continued performance of Manufacturing Services will constitute a potential or actual violation of Applicable Law, then Supplier may terminate this Agreement by giving notice stating the effective date of such termination.

10.6.Inability to Supply. At Zogenix’s sole discretion, Zogenix may terminate this Agreement immediately by written notice to Supplier upon the occurrence of an Inability to Supply.

10.7.Bankruptcy; Insolvency. This Agreement may be terminated at any time during the Term by either Party upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other Party; provided, however, that in the event of any involuntary bankruptcy or receivership proceeding, such right to terminate shall only become effective if the Party consents to the involuntary bankruptcy or receivership, or such proceeding is not dismissed within ninety (90) days after the filing thereof.

10.8.Termination by Mutual Agreement. This Agreement may be terminated at any time upon mutual written agreement between the Parties.

10.9.Duties Upon Termination. In the event of termination of this Agreement or any Scope of Work hereunder, both Parties shall promptly meet to finalize a plan to conclude and wind-down Supplier’s activities. Supplier shall cease all work and collect and deliver to Zogenix any work product then in its possession in a manner prescribed by Zogenix. Except for any Drug Substance Manufactured by Supplier in conjunction with a Zogenix Purchase Order before the effective date of termination, Zogenix shall not be responsible for any payments and or to make any reimbursements to the Supplier. Any advance payments or other funds held by Supplier that are unearned shall be returned to Zogenix within thirty (30) days of the effective date of termination. In the event that only a certain Scope of Work is terminated, then the foregoing provisions of this Section 10.9 shall only apply to such Scope of Work and the Drug Substance thereunder.

10.10.Technology Transfer. Following the expiration or termination of this Agreement for any reason, or at Zogenix’s request during a period of twelve (12) months before the end of the Term of this Agreement, Supplier shall provide and as applicable cause to be provided assistance to transfer part or all of the Manufacturing Services, know- how and analytical testing methodology related to the Services to Zogenix or Zogenix’s designee (“Technology Transfer”) to enable Zogenix or its designee to manufacture the Drug Substance. For the purposes of such transfer, Supplier shall, upon request of Zogenix, prepare a written proposal to implement the Technology

Transfer, including reasonable fees therefore. Zogenix shall pay the agreed fees for any of such Technology Transfer provided by Supplier.

10.11.Outstanding Orders in the Event of Termination. In the event that this Agreement or any Scope of Work hereunder is terminated, Supplier shall have the obligation to fill all outstanding Purchase Orders if, and only if, so requested by Zogenix, and in such case, all such Purchase Orders shall be completed by Supplier in accordance with the terms of this Agreement and Zogenix shall pay the Price for the quantities of Drug Substance supplied thereunder (provided that such Drug Substance complies with and is Manufactured in accordance with all the requirements of this Agreement and the Quality/Technical Agreement).

10.12.Survival. The following Sections of this Agreement shall survive any expiration or termination of this Agreement for any reason: Section 1 (to the extent necessary to give effect to the Sections enumerated in this Section 9.12), Section 6, Section 7, Section 8, Section 9.9, Section 9.11, Section 9.12, Section 10, Section 11, Section 13, Section 14, and Section 15.

11.INDEMNIFICATION AND INSURANCE

11.1.Indemnification by Zogenix. Zogenix shall indemnify, defend and hold Supplier, its Affiliates and their respective directors, officers, employees, and agents (“Supplier Indemnified Parties”), harmless from and against any damages, judgments, claims, suits, actions liabilities, costs and expenses including, but not limited to, reasonable attorneys’ fees, actually incurred (collectively, “Losses”) resulting from any Third Party claims arising out of (a) Zogenix’s breach of this Agreement, any Scope of Work, the Quality/Technical Agreement or of any representation or warranty made by Zogenix to Supplier under this his Agreement, any Scope of Work, or the Quality/Technical Agreement; (b) any negligent or reckless act or omission or misconduct on the part of any Zogenix Indemnified Party in the course of its or their performance under this Agreement; (c) Zogenix’s infringement of Third Party intellectual property rights during or associated with the performance of the Services, or (d) Zogenix’s sale, marketing, use or distribution of Zogenix’s drug product containing the Drug Substance resulting from the Services. Notwithstanding the foregoing, Zogenix shall not be liable for Losses for which Supplier is obligated to indemnify Zogenix hereunder.

11.2.Indemnification by Supplier. Supplier shall indemnify, defend and hold Zogenix, its Affiliates and their respective directors, officers, employees, and agents (“Zogenix Indemnified Parties”), harmless from and against any Losses resulting from any Third Party claims arising out of (a) Supplier’s breach of this Agreement, any Scope of Work, the Quality/Technical Agreement or of any representation or warranty made by Supplier to Zogenix under this his Agreement, any Scope of Work, or the Quality/Technical Agreement; (b) Supplier’s infringement of Third Party intellectual property rights based solely on the methods or processes used by Supplier, which are not methods or processes provided by Zogenix to Supplier, in the performance of the Services; or (c) any negligent or reckless act or omission or misconduct on the part of any Supplier Indemnified Party in the course of its or their performance under this

Agreement. Notwithstanding the foregoing, Supplier shall not be liable for Losses for which Zogenix is obligated to indemnify Supplier hereunder.

11.3.Indemnification Procedure. If a Supplier Indemnified Party or a Zogenix Indemnified Party (in each case an "Indemnified Party"), receives any written claim which such Indemnified Party believes is the subject of indemnity hereunder by Zogenix or Supplier as the case may be (the "Indemnifying Party"), the Indemnified Party shall, as soon as reasonably practicable after forming such belief, give notice thereof to the Indemnifying Party, provided that the failure to give timely notice to the Indemnifying Party as contemplated hereby shall not release the Indemnifying Party from any liability to the Indemnified Party unless the Indemnifying Party demonstrates that the defense of such claim is prejudiced by such failure. The Indemnifying Party shall have the right, by prompt notice to the Indemnified Party to assume the defense of such claim at its cost, with counsel reasonably satisfactory to the Indemnified Party. If the Indemnifying Party does not so assume the defense of such claim or, having done so, does not diligently pursue such defense, the Indemnified Party may assume the defense, with counsel of its choice, but at the cost of the Indemnifying Party. If the Indemnifying Party assumes and diligently pursues the defense, it shall have absolute control of the litigation; the Indemnified Party may, nevertheless, participate therein through counsel of its choice and at its cost. The Party not assuming the defense of any such claim shall render all reasonable assistance to the Party assuming such defense, out-of-pocket costs of such assistance shall be for the account of the Indemnifying Party. No claim hereunder shall be settled other than by the Party defending the same, and then only with the consent of the other Party, which consent shall not be unreasonably withheld; provided that the Indemnified Party shall have no obligation to consent to any settlement of any such claim which imposes on the Indemnified Party any liability or obligation which cannot be assumed or performed in full by the Indemnifying Party.

11.4.LIMITATION OF LIABILITY AND CLAIMS.

(A) EXCEPT FOR EACH PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTIONS 11.1 OR 11.2 ABOVE, AND EXCEPT IN CASES OF GROSS NEGLIGENCE, FRAUD OR WILLFUL MISCONDUCT BY A PARTY OR ITS AFFILIATES OR BREACH OF ARTICLE 12, IN NO EVENT SHALL A PARTY’S AND ITS AFFILIATES’ TOTAL LIABILITY PER RELATED CLAIM UNDER THIS AGREEMENT EXCEED THE FEES PAID BY ZOGENIX TO SUPPLIER OR INVOICED BY SUPPLIER AND ITS AFFILIATES FOR THE SERVICES PERFORMED UNDER THE AGREEMENT AND RELEVANT SCOPE OF WORK.

(B) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING, BUT NOT LIMITED TO, ANY CLAIM FOR DAMAGES BASED UPON LOST PROFITS OR LOST BUSINESS OPPORTUNITY, EXCEPT TO THE EXTENT THAT SUCH DAMAGES ARE AWARDED TO A THIRD PARTY IN A FINALLY ADJUDICATED CLAIM THAT IS SUBJECT

TO SECTIONS 10.1 OR 10.2 AGAINST AN INDEMNITEE FOR WHICH AN INDEMNITOR IS RESPONSIBLE FOR INDEMNIFICATION HEREUNDER.

(C) NOTHING CONTAINED HEREIN IS INTENDED TO EXCLUDE OR LIMIT ANY LIABILITY FOR (a) DEATH OR PERSONAL INJURY CAUSED BY A PARTY’S NEGLIGENCE OR (b) FRAUD.

11.5.Insurance. Each Party shall maintain during the Term of this Agreement and for a period of three (3) years thereafter the following insurance or self-insurance in amounts no less than that specified for each type:

11.5.1.General liability insurance with combined limits of [***] per occurrence and [***] per accident for bodily injury, including death, and property damage;

11.5.2.Product liability insurance with limits not less than [***].

11.6.Evidence of Insurance. Each Party shall provide the other with evidence of its insurance upon written request. Each Party shall provide to the other thirty (30) days, prior written notice of any cancellation.

12.CONFIDENTIALITY

12.1.A Party receiving Confidential Information (the "Receiving Party") from the other Party (the "Disclosing Party") shall not to publish, disclose or use for any purpose other than its performance hereunder any of the Disclosing Party’s Confidential Information and shall use at least the same standard of care as it uses to protect its own Confidential Information, but in no event less than a reasonable level of care, to ensure that it and its Affiliates and their respective employees, agents, or consultants do not disclose or make any unauthorized use of Confidential Information provided by the Disclosing Party. The Receiving Party shall notify the Disclosing Party promptly upon discovery of any unauthorized use or disclosure of the Disclosing Party's Confidential Information.

12.2.Each Party shall limit disclosure of Confidential Information received hereunder to only those of its (or its Affiliates’) officers and employees who are directly concerned with the performance of this Agreement. Each Party shall advise such officers or employees upon disclosure of any Confidential Information to them of the confidential nature of the Confidential Information and the terms and conditions of this Article, and shall use all reasonable safeguards to prevent unauthorized disclosure of the Confidential Information by such officers and employees.

12.3.Both Parties agree that the following shall not be considered Confidential Information subject to this Agreement:

12.3.1.information that is in the public domain by publication or otherwise, provided that such publication is not in violation of this Agreement or any other confidentiality agreement;

12.3.2.information that the receiving Party can establish in writing was in the receiving Party’s possession prior to the time of disclosure by the disclosing Party and was not acquired, directly or indirectly, from the disclosing Party;

12.3.3.information that the receiving Party lawfully receives from a Third Party; provided that such Third Party was not obligated to hold such information in confidence;

12.3.4.information that, prior to the disclosing Party’s disclosure thereof, was independently developed by the receiving Party without reference to any Confidential Information as established by appropriate documentation; and

12.3.5.information that the receiving Party is compelled to disclose by a court, administrative agency, or other tribunal; provided that in such case the receiving Party shall immediately give as much advance notice as feasible to the disclosing Party to enable the disclosing Party to exercise its legal rights to prevent and/or limit such disclosure. In any event, the receiving Party shall disclose only that portion of the Confidential Information that, in the opinion of the receiving Party’s legal counsel, is legally required to be disclosed and will exercise reasonable best efforts to ensure that any such information so disclosed will be accorded confidential treatment by said court, administrative agency or tribunal.

12.4.All Confidential Information shall remain the property of the Disclosing Party. At the termination of this Agreement upon the request of Zogenix, Supplier shall immediately return or destroy any Zogenix Confidential Information in Supplier’s possession, custody or control, except that Supplier may keep one (1) copy for archival purposes.

12.5.Each Party acknowledges and expressly agrees that the remedy at law for any breach by it of the terms of this Section 11 shall be inadequate and that the full amount of damages which would result from such breach are not readily susceptible to being measured in monetary terms. Accordingly, in the event of a breach or threatened breach by either Party of this Section 11, the other Party shall be entitled to immediate injunctive relief prohibiting any such breach and requiring the immediate return of all Confidential Information. The remedies set forth in this Section 11 shall be in addition to any other remedies available for any such breach or threatened breach, including the recovery of damages from the breaching Party.

12.6.The terms and conditions of this Agreement, but not the fact of its existence, shall constitute Confidential Information of Zogenix, except that Supplier may disclose such terms and conditions to its Affiliates in accordance with Section 16.2 hereof.

13.FORCE MAJEURE

13.1.Effects of Force Majeure. Neither Party shall be held liable or responsible for failure or delay in fulfilling or performing any of its obligations under this Agreement in case such failure or delay is due to any condition beyond the reasonable control of the affected Party including, without limitation, Acts of God, Government Agency

actions or guidance, war, riot, earthquake, tornado, hurricane, fire, civil disorder, explosion, accident, flood, sabotage, or national defense requirements (a “ForceMajeure Event”). Such excuse shall continue as long as the Force Majeure Event continues, provided that Zogenix may cancel without penalty any and all Purchase Orders in the event Supplier is unable to fulfill an outstanding Purchase Order within ninety (90) days of its scheduled Purchase Order Delivery Date due to a Force Majeure Event. Upon cessation of such Force Majeure Event, Supplier shall promptly resume performance on all Purchase Orders which have not been terminated.

13.2.Notice of Force Majeure Event. In the event either Party is delayed or rendered unable to perform due to a Force Majeure Event, the affected Party shall give notice thereof and its expected duration to the other Party promptly after the occurrence of the Force Majeure Event; and thereafter, the obligations of the affected Party will be suspended during the continuance of the Force Majeure Event, provided that the affected Party shall take commercially reasonable steps to remedy the Force Majeure Event with all reasonable dispatch.

14.PRESS RELEASES; USE OF NAMES

14.1.Use of Names. Except as expressly provided or contemplated hereunder and except as otherwise required by Applicable Law, no right is granted pursuant to this Agreement to either Party to use in any manner the trademarks or name of the other Party, or any other trade name, service mark, or trademark owned by or licensed to the other Party in connection with the performance of this Agreement. Notwithstanding the above, as may be required by Applicable Law, Zogenix, Supplier and their respective Affiliates shall be permitted to use the other Party’s name and to disclose the existence of this Agreement in connection with securities or other required public filings.

15.DISPUTE RESOLUTION; VENUE

15.1.Dispute Resolution. The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the Term that relate to a Party’s rights or obligations hereunder (a “Dispute”). In the event of the occurrence of any Dispute, the Parties shall first try to settle their differences amicably via the Supply Committee. If the Supply Committee cannot achieve resolution, then either Party may, by written notice to the other, have such Dispute referred to its highest ranking officer for attempted resolution by good faith negotiations within [***] after such notice is received. If either Party desires to pursue arbitration under Section 15.2 below to resolve any such Dispute, unless expressly provided for otherwise herein, a referral to such executives under this Section 15.1 shall be a mandatory condition precedent. Said designated executive as of the Effective Date are as follows.

For Zogenix: Chief Financial Officer For Supplier: Chief Operating Officer

In the event that they shall be unable to resolve the Dispute by consensus within such [***] period, then the Dispute shall be finally settled by binding arbitration as provided below.

15.2.Arbitration. Except as expressly otherwise provided in this Agreement, in the event of any dispute arising out of or relating to the interpretation of any provisions of this Agreement or the failure of either Party to perform or comply with any obligation of such Party pursuant to this Agreement or the breach, termination or validity hereof (a “Dispute”), such Dispute shall be finally settled by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association (“AAA”), then in force and the Federal Arbitration Act, 9 U.S.C. § 1 et seq., by three (3) arbitrators (the “Arbitrators”) appointed in accordance with said rules, provided that the appointed arbitrators shall have appropriate experience in the biopharmaceutical industry. The place of arbitration shall be New York, New York, and the Arbitrators shall decide the dispute in accordance with the substantive law of the State of New York. The Arbitrators, by accepting their appointment, undertake to conduct the process such that the award shall be rendered within [***] of their appointment and shall be final and binding upon all Parties participating in such arbitration. The judgment rendered by the Arbitrators may, at the Arbitrator’s discretion, include costs of arbitration, reasonable attorneys’ fees and reasonable costs for any expert and other witnesses. Judgment upon the award may be entered in any court having jurisdiction, or application may be made to such court for judicial acceptance of the award and/or an order of enforcement as the case may be. Notwithstanding the foregoing, any Disputes regarding the scope, validity, enforceability or inventorship of any patents or patent applications shall be submitted for final resolution by a court of competent jurisdiction. This Section 15.2 shall not prohibit a Party from seeking preliminary injunctive relief in aid of arbitration from a court of competent jurisdiction.

15.3.The Parties consent to the exclusive jurisdiction of the Federal courts and the State courts of the State of New York, in each case, located in the borough of Manhattan, City of New York (the “New York Courts”) for any action in aid of arbitration, for provisional relief of the status quo, or to prevent irreparable harm prior to the appointment of the Arbitrators in Section 15.2 above, and to the exclusive jurisdiction of the New York Courts for any action to enter or enforce any arbitral award entered in connection with this Agreement. THE PARTIES HEREBY IRREVOCABLY WAIVE, AND AGREE TO CAUSE THEIR RESPECTIVE AFFILIATES TO WAIVE, THE RIGHT TO TRIAL BY JURY IN SUCH ACTIONS.

15.4.The Parties agree that irreparable damage may occur if any provision of this Agreement is not performed in accordance with the terms hereof and that the Parties may be entitled to an injunction to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the New York Courts or by an arbitral tribunal specified in Section 15.2, in addition to any other remedy to which they are entitled at law or in equity.

16.MISCELLANEOUS

16.1.Independent Contractors. The relationship between Zogenix and Supplier is that of independent contractors and nothing herein shall be deemed to constitute the relationship of partners, joint venturers, nor of principal and agent between Zogenix and Supplier. Neither Party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking with any Third Party.

16.2.Assignment. This Agreement may not be assigned or otherwise transferred by either Party without the prior written consent of the other Party; provided that either Party may, without such consent, assign this entire Agreement (a) in connection with the transfer or sale of all or substantially all of the assets of such Party or the line of business of which this Agreement forms a part, (b) in the event of the merger or consolidation of a Party hereto with another; or (c) to any Affiliate of the assigning Party. Any purported assignment in violation of the preceding sentence shall be void. Any permitted assignee shall assume all obligations of its assignor under this Agreement.

16.3.Continuing Obligations. Termination, assignment or expiration of this Agreement shall not relieve either Party from full performance of any obligations incurred prior thereto.

16.4.Waiver. Neither Party’s waiver of any breach or failure to enforce any of the terms and conditions of this Agreement, at any time, shall in any way affect, limit or waive such Party’s right thereafter to enforce and compel strict compliance with every term and condition of this Agreement.

16.5.Severability. Each Party hereby expressly agrees that it has no intention to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries, and that if any word, sentence, paragraph, clause or combination thereof in this Agreement is found by a court or executive body with judicial powers having jurisdiction over this Agreement or either Party hereto, in a final unappealed order, to be in violation of any such provisions in any country or community or association of countries, such words, sentences, paragraphs, clauses or combination shall be inoperative in such country or community or association of countries and the remainder of this Agreement shall remain binding upon the Parties, so long as enforcement of the remainder does not violate the Parties’ overall intentions in this transaction.

16.6.Exhibits, Schedules and Attachments. Any and all exhibits, schedules and attachments referred to herein form an integral part of this Agreement and are incorporated into this Agreement by such reference.

16.7.Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered personally or sent by

(a)registered or certified mail, return receipt requested, (b) a nationally-recognized

courier service guaranteeing next-day delivery, charges prepaid or (c) facsimile or electronic mail (with the original promptly sent by any of the foregoing manners), and shall be deemed to have been given upon mailing or upon transmission by facsimile or electronic mail, as the case may be. Any such notices shall be addressed to the receiving Party at such Party’s address set forth below, or at such other address as may from time to time be furnished by similar notice by either Party.

If to Supplier:

Aptuit (Oxford) Limited

111 Innovation Drive, Milton Park, Abingdon Oxfordshire

OX14 4RZ Oxford

England

Attn: Contract Negotiations Department

With copy to:Evotec AG

Essener Bogen 7

22419 Hamburg

Germany

Attn: General Counsel

If to Zogenix:Zogenix International Limited

Siena Court, Broadway

Maidenhead, Berkshire SL6 1NJ, United Kingdom

Attention: Vice President, Technical Operations/Product Supply

With copy to:Zogenix, Inc.

5858 Horton Street, Suite 455 Emeryville, CA 94608 US

Attention: Legal

16.8.Counterparts. This Agreement and any amendment or supplement hereto may be executed in any number of counterparts and any Party hereto may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. The execution of this Agreement and any such amendment or supplement by any Party hereto will not become effective until counterparts hereof have been executed by both Parties hereto.

16.9.Governing Law; Entire Agreement. The validity, interpretation and performance of this Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to the conflicts of laws provisions thereof. This Agreement constitutes the full understanding of the Parties and a complete and exclusive statement of the terms of their agreement for the purpose of this Agreement. No terms, conditions, understanding, or agreement purporting to modify or vary the terms of this Agreement shall be binding unless hereafter made in writing and signed by both Parties. No modification to this Agreement shall be effected by the

acknowledgement or acceptance of any Purchase Order or shipping instruction forms or similar documents containing terms or conditions at variance with or in addition to those set forth herein.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representative as of the Effective Date.

ZOGENIX INTERNATIONAL LIMITED, A WHOLLY OWNED SUBSIDIARY OF ZOGENIX, INC.			APTUIT (OXFORD) LIMITED
By:	/s/ Michael P. Smith	By:	/s/ Petra Dieterich
Name:	Michael P. Smith	Name:	Petra Dieterich
Title:	Chief Financial Officer	Title:	Senior Vice President
		By:	/s/ Kamran Bashir
		Name:	Kamran Bashir
		Title:	Finance Director

EX-10.2

Exhibit 10.2

CERTAIN INFORMATION (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

Zogenix Inc.

and

Nippon Shinyaku Company Ltd.

Distributorship Agreement

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Table of Contents

Article 1. Definitions
Article 2. Grant of Rights
2.1	Grant of Rights to Distributor
2.2	Sub-distribution by Distributor
2.3	Supply of Product for Distributorship
2.4	No Other Rights; Other Limitations
2.5	Non-Compete Covenant
2.6	No Activities Outside the Territory or Field
Article 3. Governance
3.1	Joint Steering Committee
3.2	Expenses
3.3	Alliance Managers
3.4	Scope of Governance
Article 4. Development and Regulatory Activities
4.1	Nonclinical and Clinical Studies and CMC Requirements
4.2	Regulatory Activities
4.3	Distributor’s Right to Use and Reference
4.4	Zogenix’s Right to Use and Reference
4.5	Adverse Event Reporting
4.6	Drug Safety and Pharmacovigilance System including Global Safety Database
4.7	Regulatory Audit
4.8	Use of Subcontractors
4.9	Recalls
4.1	Development Expenses
Article 5. Commercialization; Supply: Trademarks
5.1	Commercialization of the Product.
5.2	Supply
5.3	Trademark Rights
5.4	Commercial Expenses
Article 6. Payments
6.1	Upfront Payment
6.2	Funding to Support Development of The Product
6.3	Regulatory Milestones
6.4	Sales Milestones
6.5	Supply Payments
Article 7. Payments, Books and Records
7.1	Payment Method

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7.2	Currency Conversion
7.3	Taxes
7.4	Records
7.5	Audits
7.6	Late Payments
Article 8. Confidentiality
8.1	Confidential Information
8.2	Exceptions
8.3	Permitted Disclosures
8.4	Confidentiality of this Agreement and its Terms
8.5	Public Announcements
8.6	Publication
8.7	Prior Non-Disclosure Agreements
8.8	Equitable Relief
Article 9. Intellectual Property Ownership and Enforcement
9.1	Ownership of Intellectual Property
9.2	Zogenix Patent Prosecution and Maintenance
9.3	Infringement by Third Parties
9.4	Third Party Intellectual Property Rights
9.5	Patent Term Restoration
9.6	Patent Marking
9.7	Zogenix Trademarks
9.8	Product Trademarks
Article 10. Representations, Warranties and Covenants; Limitation of Liability
10.1	Mutual Representations, Warranties and Covenants
10.2	Representations, Warranties and Covenants of Distributor
10.3	Representations and Warranties of Zogenix
10.4	Disclaimer
10.5	Limitation of Liability
Article 11. Indemnification
11.1	Indemnification of Zogenix
11.2	Indemnification of Distributor
11.3	Procedure
11.4	Insurance
Article 12. Term and Termination
12.1	Term
12.2	Termination
12.3	Rights on Termination
12.4	Exercise of Right to Terminate
12.5	Damages; Relief
12.6	Accrued Obligations; Survival

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Article 13. Dispute Resolution
13.1	Objective
13.2	Resolution by Executives
13.3	Arbitration
Article 14. General Provisions
14.1	Governing Law
14.2	Force Majeure
14.3	Assignment
14.4	Severability
14.5	Notices
14.6	Entire Agreement; Amendments
14.7	Headings
14.8	Independent Contractors
14.9	Waiver
14.1	Cumulative Remedies
14.11	Waiver of Rule of Construction
14.12	Interpretation
14.13	No Third Party Beneficiaries
14.14	English Language
14.15	Counterparts
14.16	Further Actions

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List of Exhibits

Exhibit 1.70Unlabeled Drug Product

Exhibit 1.74Zogenix ZX008 Patents as of the Effective Date

Exhibit 2.3Material Terms of Supply Agreement

Exhibit 4.2(a)The initial version of the Regulatory Plan

Exhibit 8.5(a)Press Release

Exhibit 9.7Zogenix Trademarks

Exhibit 9.8Product Trademarks

Exhibit 10.2(b)Form of Compliance Certification

US-DOCS\105216871.19

DISTRIBUTORSHIP AGREEMENT

This DISTRIBUTORSHIP AGREEMENT (“Agreement”) is entered into as of March 18, 2019 (the “Effective Date”) by and between ZOGENIX, INC., having a place of business at 5959 Horton Street, Suite 500, Emeryville, California 94608( “Zogenix”) and Nippon Shinyaku Company, Ltd., having a place of business at 14, Nishinosho-Monguchi-cho, Kisshoin, Minami-ku, Kyoto 601-8550, Japan (“Distributor”). Zogenix and Distributor may be referred to individually as a “Party” and collectively as the “Parties”.

RECITALS

WHEREAS, Zogenix is developing its proprietary fenfluramine product, known as Fintepla^®.

WHEREAS, Zogenix wishes to commercialize such product through a distributor that will promote, market, sell and distribute such product within the Territory;

WHEREAS, Distributor has the ability to promote, market, sell and distribute such product within the Territory for the treatment of Dravet syndrome and Lennox-Gastaut syndrome and any additional indications approved in the Territory, and wishes to be Zogenix’s exclusive distributor of such product for such indications within the Territory, and Zogenix is willing to grant to Distributor such exclusive distribution rights on the terms and conditions set forth in this Agreement; and

WHEREAS, Zogenix agrees to manufacture (or have manufactured) and sell to Distributor such product for such commercialization activities in the Territory, on the terms and conditions set forth in this Agreement and in a separate supply agreement to be entered into by the Parties.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Zogenix and Distributor hereby agree as follows:

ARTICLE 1.

DEFINITIONS

1.1“Affiliate” of a Party means any entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Party, as the case may be, but for only so long as such control exists. As used in this Section 1.1, “control” means (a) to possess, directly or indirectly, the power to direct the management or policies of an entity, whether through ownership of voting securities, or by contract relating to voting rights or corporate governance; or (b) direct or indirect beneficial ownership of more than fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of the voting share capital or other equity interest in such entity.

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1.2“Alliance Manager” has the meaning set forth in Section 3.3.

1.3“Annual Report” has the meaning set forth in Section 6.5(c).

1.4“Applicable Laws” means the applicable provisions of any and all national, supranational, regional, state and local laws, treaties, statutes, rules, regulations, administrative codes, industry codes, guidance, ordinances, judgments, decrees, directives, injunctions, orders or permits (including Regulatory Approvals) of or from any court, arbitrator, Regulatory Authority or governmental agency or authority having jurisdiction over or related to the subject item, including the FCPA, export control, embargo, trade sanction and data privacy laws, regulations, rules and licenses, and other laws and regulations pertaining to domestic or international corruption, commercial bribery, fraud, embezzlement or money laundering.

1.5“Business Day” means a day other than a Saturday, Sunday, any public holiday, or any bank holiday in the United States or Japan.

1.6“Change of Control” means any (a) direct or indirect acquisition of assets of a Party (i) equal to fifty percent (50%) or more of the fair market value of a Party’s consolidated assets, or (ii) to which fifty percent (50%) or more of a Party’s net revenues or net income on a consolidated basis are attributable, or (iii) representing substantially all of the properties or assets related to a Party’s obligations under this Agreement, (b) direct or indirect acquisition by a Person, or group of Persons acting in concert, of fifty percent (50%) or more of the voting equity interests of a Party, (c) tender offer or exchange offer that if consummated would result in any Person, or group of Persons acting in concert, beneficially owning fifty percent (50%) or more of the voting equity interests of a Party, (d) merger, consolidation, other business combination or similar transaction involving a Party, pursuant to which any Person would own fifty percent (50%) or more of the consolidated assets, net revenues or net income of a Party, taken as a whole, or which results in the holders of the voting equity interests of a Party immediately prior to such merger, consolidation, business combination or similar transaction ceasing to hold fifty percent (50%) or more of the combined voting power of the surviving, purchasing or continuing entity immediately after such merger, consolidation, business combination or similar transaction, (e) liquidation or dissolution (or the adoption of a plan of liquidation or dissolution) of a Party, or (f) declaration or payment of an extraordinary dividend (whether in cash or other property) by a Party, where the amount of the dividend or the in specie property which is the subject of the dividend would otherwise come within the application of any of clauses (a)-(e) above, in all cases where such transaction is to be entered into with any Person other than the other Party.

1.7“CMC” means chemistry, manufacturing and controls.

1.8“Commercialization” means all activities directed to marketing, promoting, advertising, exhibiting, distributing (including storage for distribution or inventory), detailing, selling, (and offering for sale or contracting to sell), or otherwise commercially exploiting the Product in the Field in the Territory.

1.9“Commercialization Plan” has the meaning set forth in Section 5.1(b).

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1.10“Commercially Reasonable Efforts” means, with respect to a Party’s specific obligations under this Agreement, that level of efforts and resources, [***]. Commercially Reasonable Efforts requires that the applicable Party: (i) [***], (ii) [***], and (iii) [***].

1.11“Confidential Information” has the meaning set forth in Section 8.1.

1.12“Confidentiality Agreement” means that certain Mutual Confidential Disclosure Agreement, dated June 21, 2018, between Zogenix and Distributor.

1.13“Control” (including any variations such as “Controlled” and “Controlling”) means, with respect to any Information, Data, Patent or other intellectual property rights, possession by a Party of the ability (whether by ownership or grant of rights, other than pursuant to this Agreement) to grant to the other Party the applicable access or other right under this Agreement without violating the terms of an agreement with a Third Party.

1.14“Data” means any and all scientific, technical or test data pertaining to the Product in the Field that is generated by or under the authority of Distributor or its Affiliates, Sub-distributors or other subcontractors or by or under the authority of Zogenix or Zogenix ex-Territory Distributors before or during the Term, including research data, clinical pharmacology data, CMC data (including analytical and quality control data and stability data), preclinical data, clinical data and all submissions made in association with an IND or MAA filed in or outside the Territory with respect to the Product in the Field, in each case to the extent such data either (a) is Controlled by Zogenix on the Effective Date or (b) comes within a Party’s Control during the Term.

1.15“Development” means all activities directed to research, non-clinical and preclinical studies and trials, CMC Data collection, clinical studies and trials, Investigator Initiated Studies, toxicology studies, publication and presentation of study results, preparation and submission to Regulatory Authorities of an MAA concerning the Product, interacting with Regulatory Authorities prior to and following Regulatory Approval of the Product, and Product pricing negotiations and decisions concerning the Product.

1.16“Disclosing Party” has the meaning set forth in Section 8.1.

1.17“Distribution Term” means the period commencing on the first Regulatory Approval of the Product in the Territory and continuing until [***], or if this Agreement is terminated earlier pursuant to Article 12, the effective date of such termination.

1.18“Distributor Invention” has the meaning set forth in Section 9.1(b)(i).

1.19“Executives” has the meaning set forth in Section 3.1(d).

1.20“FCPA” means the U.S. Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1 et seq.), as amended.

1.21“FDA” means the Food and Drug Administration, or any successor agency thereto

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having the administrative authority to regulate the marketing of human pharmaceutical products in the United States.

1.22“Field” means the Indications of treatment for the Product in the Territory.

1.23“First Commercial Sale” means the first bona fide, arm’s-length sale of the Product in the Field in the Territory following Regulatory Approval of the Product in the Field in the Territory.

1.24“Fiscal Quarter” means a period of three (3) consecutive months during a Fiscal Year beginning on and including April 1^st, July 1^st or October 1^st or January 1^st.

1.25“Fiscal Year” means a year that starts from April 1^st and ends on March 31^st.

1.26“Fully-BurdenedManufacturing Cost” means the costs incurred by Zogenix that are directly attributable to and reasonably allocated to the manufacture and delivery of the Product to Distributor. Fully-Burdened Manufacturing Costs shall include the following: [***].

1.27“Generic Product” means a pharmaceutical product that (a) [***]; (b) [***]; (c) [***]; and (d) [***].

1.28“IFRS” means international financial reporting standards, as may be amended from time to time.

1.29“IND” means any Investigational New Drug application, as defined in Title 21 of the Code of Federal Regulations, on file with the FDA before the commencement of clinical trials of the Product in humans, or any comparable filing with any Regulatory Authority.

1.30“Indemnitee” has the meaning set forth in Section 11.3.

1.31“Indemnitor” has the meaning set forth in Section 11.3.

1.32“Indication” means the treatment of Dravet syndrome, Lennox-Gastaut syndrome, [***] during the Distribution Term.

1.33“Indirect Losses” means any damages or other losses involving, but only to the extent of, any loss of profits, diminution in value, or incidental, indirect, consequential, special or punitive damages.

1.34“Information” means information, ideas, inventions, discoveries, concepts, formulas, practices, procedures, processes, methods, knowledge, know-how, trade secrets, technology, inventories, machines, techniques, development, designs, drawings, computer programs, skill, experience, documents, apparatus, results, clinical and regulatory strategies, documentation, information and submissions pertaining to, or made in association with, filings with any Regulatory Authority, data, including pharmacological, toxicological and clinical data, analytical and quality control data, manufacturing data and descriptions, patent and legal data,

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market data, financial data or descriptions, specifications and the like, in written, electronic or other form, now known or hereafter developed, whether or not patentable.

1.35“Invention” means any new and useful process, article of manufacture, composition of matter, formulation or apparatus, or any improvement thereof, discovery or finding, whether or not patentable, as determined in accordance with the patent laws of the United States of America.

1.36“Japan GAAP” means Japan generally accepted accounting principles, as may be amended from time to time.

1.37“Joint Steering Committee” or “JSC” has the meaning set forth in Section 3.1.

1.38“Losses” has the meaning set forth in Section 11.1.

1.39“MAA” means a marketing authorization application or equivalent application, and all amendments and supplements thereto, filed with a Regulatory Authority.

1.40“MAH” means a marketing authorization holder of the Product in the Field in the Territory.

1.41“MHLW” means the Japanese Ministry of Health, Labor and Welfare.

1.42“Net Price” means, for any Fiscal Year, the unit price of the Product in the Territory in the Field calculated by dividing the aggregate Net Sales for the Product in the Territory in such Fiscal Year by the total number of units of the Product sold by or on behalf of Distributor or its Affiliate or Sub-distributor in the Territory in such Fiscal Year.

1.43“Net Sales” means, with respect to any period of time, the gross amounts invoiced for sales or other dispositions of the Product in the Territory by or on behalf of Distributor or its Affiliates or Sub-distributors to Third Parties (other than Sub-distributors) during such period, less the value added taxes levied on or measured by the billing amount for the Product to the extent included in the gross invoiced sales price for the Product or otherwise directly paid or incurred by Distributor or its Affiliates or Sub-distributors, as applicable, with respect to the sale or other disposition of the Product, less the following deductions to the extent actually allowed, paid, incurred or accrued during the applicable period, calculated in accordance with Japan GAAP or IFRS (consistently applied):

[***]

Net Sales shall be calculated in accordance with Japan GAAP or IFRS, consistently applied in the Territory and shall be consistent with net sales reported in Distributor’s audited financial statements. If net sales reported in Distributor’s audited financial statements include discounts for products sold in combination or bundled with other products, these discounts will not be included in the calculation of Net Sales of the Product.

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Sales of a Product for use in conducting clinical trials of the Product in the Territory in order to obtain Regulatory Approval of the Product in the Territory shall be excluded from Net Sales calculations for all purposes.

Upon any sale or other disposition of the Product for any consideration other than exclusively monetary consideration on bona fide arm’s-length terms, for purposes of calculating Net Sales under this Agreement, the Product shall be deemed to be sold exclusively for money at the average sales price during the applicable reporting period generally achieved for the Product in the Field in the Territory when the Product is sold alone and not with other products.

Distributor and its Affiliates and Sub-distributors shall not sell the Product in combination with or as part of a bundle with other products, or offer packaged arrangements to customers that include the Product, in such a manner as to disproportionately discount the selling price of the Product as compared with the weighted-average discount applied to the other products, as a percent of the respective list prices (or if not available, a good faith estimate thereof) of such products and the Product prior to applying the discount.

1.44“NHI” means the Japanese national health insurance system, or its successor system.

1.45“NHI Price” means the reimbursement price of the maximum daily dose of Product for purposes of the NHI.

1.46“NHI Price Listing” means the listing of the NHI Price by Central Social Insurance Medical Council (Chuikyo) of the MHLW.

1.47“Out-of-Pocket Costs and Expenses” means the costs and expenses incurred by one or both Parties (as applicable) that are directly attributable to and reasonably allocated to a specified project, program or task. Out-of-Pocket Costs and Expenses shall include payments made to third parties such as contract research organizations and investigators and the fully burdened cost of drug product. Out-of-Pocket Costs and Expenses shall not include a Party’s employee costs.

1.48“Patent” means (a) any patent, certificate of invention, application for certificate of invention, priority patent filing and patent application, and (b) any renewal, division, continuation (in whole or in part) or request for continued examination of any of such patent, certificate of invention and patent application, and any patent or certificate of invention issuing thereon, and any reissue, reexamination, extension, restoration by any existing or future extension or restoration mechanism, division, renewal, substitution, confirmation, registration, revalidation, revision and addition of or to any of the foregoing.

1.49“Person” means any individual, corporation, partnership, limited liability company, trust or other entity.

1.50“Pharmacovigilance Agreement” has the meaning set forth in Section 4.5.

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1.51“PMDA” means the Japanese Pharmaceuticals and Medical Devices Agency, and local counterparts thereto, and any successor agency(ies) or authority thereto having substantially the same function.

1.52“Product” means Zogenix’s proprietary fenfluramine product, known as Fintepla®, or any drug product containing a salt, enantiomer, or polymorph of fenfluramine.

1.53“Product Invention” has the meaning set forth in Section 9.1(b)(i).

1.54“Product Trademark” has the meaning set forth in Section 9.8(a).

1.55“Public Official or Entity” means (a) any officer, employee (including physicians, hospital administrators or other healthcare professionals), agent, representative, department, agency, de facto official, representative, corporate entity, instrumentality or subdivision of any government, military or international organization, including any ministry or department of health or any state-owned or affiliated company or hospital, or (b) any candidate for political office, any political party or any official of a political party.

1.56“Transfer Price” has the meaning set forth in Section 6.5(a).

1.57“Receiving Party” has the meaning set forth in Section 8.1.

1.58“Regulatory Approval” means any and all approvals (except NHI Price Listing), licenses, registrations, or authorizations of Regulatory Authorities in the applicable regulatory jurisdiction that are necessary for the manufacture, use, storage, import, transport and/or sale of a pharmaceutical product in such regulatory jurisdiction.

1.59“Regulatory Authority” means any national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity whose review and/or approval is necessary for the manufacture, packaging, use, storage, import, export, distribution or promotion of a pharmaceutical product in the applicable regulatory jurisdiction, including the PMDA in the Territory. If governmental approval is required for pricing or reimbursement by national health insurance (or its local equivalent), “Regulatory Authority” shall also include any national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity whose review and/or approval of pricing or reimbursement is required.

1.60“Regulatory Filings” means all applications, approvals, licenses, notifications, registrations, submissions and authorizations made to or received from a Regulatory Authority in connection with the development, manufacture or commercialization of a pharmaceutical product, including any INDs, MAAs and Regulatory Approvals.

1.61“Regulatory Plan” has the meaning set forth in Section 4.2(a).

1.62“SEC” means the U.S. Securities and Exchange Commission or any successor agency.

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1.63“Sub-distributor” means any Person other than Distributor or its Affiliates that Distributor appoints to market, promote, offer for sale, sell, import or distribute the Product in the Field in the Territory, beyond the mere right to purchase the Product from Distributor or its Affiliates for end use.

1.64“Supply Agreement” has the meaning set forth in Section 5.2.

1.65“Territory” means Japan.

1.66“Third Party” means any governmental authority or Person other than Zogenix, Distributor and their respective Affiliates.

1.67“Third Party Claims” has the meaning set forth in Section 11.1.

1.68“Trademark” means any word, name, symbol, color, designation or device or any combination thereof, including any trademark, trade dress, brand mark, service mark, trade name, brand name, logo or business symbol, whether or not registered, as determined in accordance with the trademark laws of the Unites States of America.

1.69“United States” or “U.S.” means the United States of America, including its territories and possessions and the District of Columbia.

1.70“Unlabeled Drug Product” means [***].

1.71“Zogenix ex-Territory Distributor” means a licensee, collaborator or distributor engaged by Zogenix or any of its Affiliates to market, promote or sell the Product outside the Territory.

1.72“Zogenix Indemnitees” has the meaning set forth in Section 11.1.

1.73“Zogenix Know-How” means all Information and Data that Zogenix Controls as of the Effective Date or during the Term, which Information is necessary or reasonably useful to file for, obtain or maintain Regulatory Approval or to market, promote, sell, offer for sale or import the Product in the Field in the Territory.

1.74“Zogenix Patents” means all Patents that Zogenix Controls as of the Effective Date or during the Term, which Patents would be infringed, absent a license, by the use, sale, offer for sale or import of the Product in the Field in the Territory, including any Patents issuing from the applications listed in Exhibit 1.74.

1.75“Zogenix Technology” means the Zogenix Know-How and Zogenix Patents.

1.76“Zogenix Trademark” has the meaning set forth in Section 9.7.

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ARTICLE 2.

GRANT OF RIGHTS

2.1Grant of Rights to Distributor. Subject to the terms and conditions of this Agreement, Zogenix hereby appoints Distributor, and Distributor accepts appointment, as the exclusive distributor (even as to Zogenix) of the Product in the Field in the Territory during the Term, and grants to Distributor the exclusive rights to maintain Regulatory Approval of (while Distributor is the MAH Party), package, promote, market, offer for sale, sell, import and distribute the Product in the Field in the Territory during the Term. The Parties agree that the rights granted in this Section 2.1 do not grant any right or license to, and Distributor shall not, supply, sell, offer for sale or otherwise dispose of or provide access to the Product in the Territory unless and until the Product obtains Regulatory Approval in the Field in the Territory.

2.2Sub-distribution by Distributor. Distributor shall not have the right to (a) appoint any Sub-distributors for the Product in the Field in the Territory or (b) otherwise subcontract any sales, marketing, distribution or promotional activities with respect to the Product in the Field in the Territory, including to any contract sales organization, in each case, except with the prior written approval of Zogenix. If Zogenix grants such approval, in accordance with this Section 2.2 and Section 4.8, any Sub-distributor agreement shall be in writing and, with the exception of the financial terms, on substantially the same terms as this Agreement, to the extent applicable to the Sub-distributor’s activity, and shall provide for the assignment of all Data generated by such Sub-distributors to Distributor, and the right for Distributor to terminate such agreement immediately in the event of any violation by such Sub-distributor of the FCPA or other Applicable Laws. Distributor shall be responsible for the acts or omissions of its Sub-distributors under any Sub-distributors agreement, including any such act or omission that would constitute a breach hereunder. In the event of any such breach by a Sub-distributor of its obligations to comply with the FCPA or other Applicable Laws, Distributor shall immediately terminate the applicable Sub-distributor agreement(s), unless otherwise agreed to by Zogenix in writing. Within [***] after execution thereof, Distributor shall provide Zogenix with a full and complete copy of each Sub-distributor agreement (provided that Distributor may redact any confidential information contained therein that is not relevant to compliance with this Agreement).

2.3Supply of Product for Distributorship. Zogenix shall supply (or have supplied) to Distributor, in accordance with the terms set forth on Exhibit 2.3, and Distributor shall purchase exclusively from Zogenix, Distributor’s and its Affiliates’ and Sub-distributors’ Unlabeled Drug Product requirements of the Product for sale by Distributor or its Affiliates or Sub-distributors in the Territory in the Field, subject to and under the provisions of Section 5.2 and the Supply Agreement. Distributor shall purchase all such amounts of Unlabeled Drug Product of the Product for sale by Distributor supplied by Zogenix under the payment provisions of Section 6.5 and Article 7. Notwithstanding the foregoing, upon the reasonable request of Distributor, Zogenix will provide Product free of charge to Distributor to the extent necessary for Distributor to meet its analytical testing obligations hereunder.

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2.4No Other Rights; Other Limitations. Except for the rights expressly granted in this Agreement, Zogenix retains all rights under the Zogenix Technology and with respect to the Product, including the exclusive right to manufacture and sell the Product to Distributor, to develop the Product, and to promote, market and sell the Product outside the Territory, and all rights with respect to the Product outside the Field in the Territory. No rights shall be deemed granted by one Party to the other Party under this Agreement by implication, estoppel or otherwise. Distributor agrees not to use any Zogenix Technology except as necessary to file for and maintain Regulatory Approval of, promote, market, sell, offer for sale, distribute and import the Product in the Field in the Territory during the Term in accordance with the terms of this Agreement and the Supply Agreement. Without limiting the foregoing, Distributor agrees that in no event shall Distributor or its Affiliates manufacture or have manufactured the Product, or purchase the Product from any party other than Zogenix pursuant to the Supply Agreement. Without limiting the foregoing, Distributor further acknowledges that it has no right to and agrees that it will not perform any studies of the Product or allow its Affiliate or any Third Party to perform any studies of the Product (including any investigator-initiated studies) except with the prior written approval of Zogenix, which Zogenix may withhold in its sole discretion.

2.5Non-Compete Covenant. During the Term, without the prior written approval of Zogenix, Distributor shall not, and shall cause its Affiliates not to, either directly or indirectly, file for Regulatory Approval of, promote, market, offer for sale, sell, import or distribute in the Territory any product containing fenfluramine or any salt, enantiomer, or polymorph of fenfluramine, or any product for[***].

2.6No Activities Outside the Territory or Field. Distributor shall not, and shall cause its Affiliates and Sub-distributors not to, (a) actively seek customers for the Product outside the Territory or the Field, (b) establish or maintain a branch office, warehouse, or distribution facility for the Product outside the Territory, (c) engage in any advertising or promotional activities relating to the Product directed to customers outside the Territory or directed to any use outside the Field, or (d) solicit orders from any prospective purchaser with its principal place of business located outside the Territory. If Distributor receives any order from a prospective purchaser outside the Territory, Distributor shall not accept any such order but shall immediately refer that order to Zogenix.

ARTICLE 3.

GOVERNANCE

3.1Joint Steering Committee. The Parties shall establish a joint steering committee (the “Joint Steering Committee” or “JSC”) to oversee the activities of the Parties pursuant to this Agreement.

(a)Composition. The JSC will be comprised of [***] members appointed by Distributor and [***] members appointed by Zogenix, which members shall be senior level employees or representatives of each Party with decision-making authority. Each Party will

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notify the other Party of its initial JSC members within[***] after the Effective Date. The Parties, through the JSC, may change the number of JSC members as long as an equal number of members from each of Distributor and Zogenix is maintained. Each Party may change its JSC members at any time by written notice to the other Party, which may be delivered at a scheduled meeting of the JSC. Any member of the JSC may designate a substitute to attend and perform the functions of that member at any meeting of the JSC. Zogenix shall appoint one (1) of its members as chair, whose role shall be to convene and preside at meetings of the JSC, but the chair shall not be entitled to prevent items from being discussed or to cast any tie-breaking vote. Each Party may, with the consent of the other Party, such consent not to be unreasonably withheld or delayed, invite non-member, non-voting representatives of such Party to attend meetings of the JSC.

(b)Responsibilities. The JSC shall be responsible for oversight of the Parties’ activities under this Agreement with respect to filing for, obtaining and maintaining Regulatory Approval and commercializing (including commercial supply to Distributor and marketing and sales) the Product in the Field in the Territory. Without limiting the foregoing, the JSC shall:

(i)review, discuss and approve the Regulatory Plan, including all amendments thereto;

(ii)review, discuss and approve the Commercialization Plan, including all amendments thereto;

(iii)periodically review, discuss and assess the progress and results of the Parties under the Regulatory Plan and Commercialization Plan to ensure, to the extent reasonably practical, compliance with obligations under this Agreement;

(iv)periodically discuss the status of the development and commercialization of the Product in the Field outside the Territory;

(v)review Distributor’s binding and non-binding forecasts for the Product and monitor the production capacity of Zogenix and its Third Party manufacturers;

(vi)periodically review Distributor’s and Zogenix’s pharmacovigilance policies and procedures;

(vii)facilitate the exchange of Data between the Parties; and

(viii)perform such other duties as are specifically assigned by the Parties to the JSC in this Agreement.

(c)Meetings. The JSC will hold meetings at such frequency as determined by the JSC members, but no less than twice every calendar year. Such meetings may be in person, via videoconference, or via teleconference; provided, that no fewer than two (2) JSC

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meetings each calendar year prior to First Commercial Sale shall be in-person unless the Parties otherwise agree. The location of in-person JSC meetings will alternate between Zogenix’s offices and Distributor’s offices, unless the Parties otherwise agree. At least [***] prior to each JSC meeting, each Party shall provide written notice to the other Party of agenda items proposed by such Party for discussion or decision at such meeting, together with appropriate information related thereto. Reasonably detailed written minutes will be kept of all JSC meetings and will reflect material decisions made at such meetings. Meeting minutes will be prepared by each Party on an alternating basis and sent to each member of the JSC for review and approval within [***] after a meeting. Minutes will be deemed approved unless a member of the JSC objects to the accuracy of such minutes within [***] of receipt.

(d)Decisions. The JSC may make decisions with respect to any subject matter that is within the JSC’s responsibilities. Subject to this Section 3.1(d), all decisions of the JSC shall be made by unanimous vote, with Zogenix and Distributor each having, collectively, among its respective members, one (1) vote in all such decisions. If the JSC cannot reach consensus with regard to any matter to be decided by the JSC within [***] after such matter has been brought to the JSC’s attention, then such matter shall be referred to the Chief Executive Officer of Zogenix and the Director, Member of the Board of Distributor (the “Executives”) for resolution. If the Executives cannot resolve the issue within [***] after the matter has been brought to their attention then:

(i)Subject to good faith consideration of the views of Distributor, Zogenix shall have the tie-breaking vote on all matters to be decided by the JSC relating to [***]; provided, however, [***]; and

(ii)Subject to good faith consideration of the views of Zogenix and to Section 3.1(d)(iii), Distributor shall have the tie-breaking vote on all matters to be decided by the JSC relating to [***]; provided, however, [***]; and

(iii)Subject to good faith consideration of the views of Zogenix and Section 12.2(g), Distributor shall have the tie-breaking vote on the decision of [***], unless otherwise mutually agreed between the Parties; and

(iv)Subject to good faith consideration of the views of Distributor, Zogenix shall have the tie-breaking vote on all matters other than the decisions set forth in Section 3.1(d)(ii) and (iii) to be decided by the JSC that may affect commercialization outside the Territory; provided, however, that Zogenix shall not have power to amend or waive compliance with this Agreement or the Commercialization Plan.

(e)Discontinuation of JSC Participation. The activities to be performed by the JSC relate solely to governance under this Agreement, and are not intended to be or involve the delivery of services. The JSC will continue to exist until the Parties mutually agreeing to disband the JSC. Once the Parties mutually agree to disband the JSC, the JSC shall have no further obligations under this Agreement and, thereafter, each Party shall designate a contact person for the exchange of information under this Agreement, and decisions of the JSC shall be

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decisions as between the Parties, subject to the decision-making authority under Section 3.1(d) and other terms and conditions of this Agreement.

3.2Expenses. Each Party shall bear all its own costs, including expenses incurred by the members nominated by it, in connection with its members’ JSC representation and meetings.

3.3Alliance Managers. Promptly after the Effective Date, each Party shall appoint an individual to act as the alliance manager for such Party (the “Alliance Manager”). Each Alliance Manager will be permitted to attend meetings of the JSC as non-voting participants. The Alliance Managers will be the primary contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate all such activities hereunder. Each Party may replace its Alliance Manager with an alternative representative at any time with prior written notice to the other Party. Any Alliance Manager may designate a substitute to temporarily perform the functions of that Alliance Manager.

3.4Scope of Governance. Notwithstanding the creation of the JSC, each Party shall retain the rights, powers and discretion granted to it hereunder, and the JSC shall not be delegated or vested with rights, powers or discretion unless such delegation or vesting is expressly provided herein or the Parties expressly so agree in writing. The JSC shall not have the power to amend or modify this Agreement, and no decision of the JSC shall be in contravention of any terms and conditions of this Agreement. It is understood and agreed that issues to be formally decided by the JSC are only those specific issues that are expressly provided in this Agreement to be decided by the JSC. In no event shall the JSC have any decision-making authority with respect to matters relating to the Product outside the Territory or outside the Field. For clarity, any decision of an Executive made in resolution of a dispute of the JSC pursuant to Section 3.1(d) shall be treated as decisions of the JSC for purposes of this Agreement. It is understood between the Parties that under no circumstances are the activities to be performed by the JSC intended or allowed to violate any Applicable Laws (including but not limited to any competition and/or antitrust law).

ARTICLE 4.

DEVELOPMENT AND REGULATORY ACTIVITIES

4.1Nonclinical and Clinical Studies and CMC Requirements. Promptly after the Effective Date, the JSC will discuss what nonclinical or clinical Development studies or CMC requirements are required to obtain Regulatory Approval of the Product for the treatment of Dravet syndrome and Lennox-Gastaut syndrome or would otherwise be useful for the Commercialization of the Product in the Field in the Territory, and if Zogenix agrees that such Development activities should be conducted, Zogenix will be responsible for conducting or having conducted all such Development activities. All non-clinical and clinical studies and CMC requirements completed or initiated by Zogenix as of the Effective Date or any such non-clinical and clinical studies and CMC requirements that are described in the initial version of Regulatory Plan, shall be conducted at Zogenix’s own cost and expense, except for Distributor’s payment

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obligations under Section 6.2 and as otherwise expressly set forth herein. Any additional Territory-specific Development activities not set forth in the initial version of the Regulatory Plan, including those conducted at the suggestion or requirement of the MHLW or at [***] incurred by the Parties while conducting such Territory-specific Development activities. For clarity, Distributor shall have no right to conduct any Development activities for the Product unless otherwise agreed by Zogenix, and Zogenix shall have and retain all rights, in its sole discretion, to conduct any Development activities for the Product in the Territory outside the Field or any Development activities outside the Territory.

4.2Regulatory Activities.

(a)Regulatory Plan. All regulatory Development activities with respect to the Product in the Field in the Territory will be conducted in accordance with a comprehensive regulatory plan (as amended in accordance with this Agreement, the “Regulatory Plan”) which sets forth [***]. The initial version of the Regulatory Plan prepared by Zogenix and agreed to by Distributor will be attached to this Agreement as Exhibit 4.2(a) [***]. Any changes and updates to the Regulatory Plan must be approved by the JSC, subject to the decision-making procedures set forth in Section 3.1(d). As between the Parties, Zogenix will have the sole right and obligation to conduct (itself or through an Affiliate or Third Party) nonclinical and clinical studies concerning the Product in the Field in or for the Territory. Zogenix shall provide updates to the JSC concerning its progress under the Regulatory Plan and copies of final nonclinical and clinical study reports following completion of such Development studies. The JSC shall discuss such activities, including any updates on the progress and results thereof provided by Zogenix. During the Term, Zogenix shall use Commercially Reasonable Efforts to Develop the Product in the Field in the Territory in accordance with the Regulatory Plan and the terms of this Agreement.

(b)Global Clinical Studies for New Indications. In the event that Zogenix intends to conduct a global (including the Territory) clinical trial of the Product for indications other than Dravet syndrome and Lennox-Gastaut syndrome (a “Global Study”), Zogenix will provide a summary of such Global Study to Distributor for review. In the event Distributor agrees to participate in a Global Study, Zogenix (or its designee) will be responsible for conducting such Global Study, including in the Territory, [***].

(c)Conduct of Regulatory Activities. Subject to Section 4.2(d), Zogenix shall be the marketing authorization holder for the Product in the Territory, and Zogenix shall be deemed the MAH Party and Distributor deemed the Non-MAH Party for purposes of this Agreement. Zogenix shall use Commercially Reasonable Efforts to [***]. In addition, Zogenix shall use Commercially Reasonable Effort to ensure [***] shall have the capabilities and obtain the necessary licenses for filing an MAA for the Product in the Territory in advance of the planned MAA submission date in the initial version of Regulatory Plan.

(i)Regulatory Approval Activities. Zogenix will be responsible for filing for and obtaining Regulatory Approval of the Product in the Field in the Territory. In connection with such activities, Zogenix shall be responsible for preparing and filing INDs and

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other necessary Regulatory Filings and for communicating with Regulatory Authorities in the Territory, except as otherwise mutually agreed to by the Parties in writing. Zogenix shall be responsible for preparing, filing and obtaining Regulatory Approval of the Product in the Field in the Territory, all in accordance with the Regulatory Plan. Zogenix shall ensure that the Distributor is involved in the planning and conduct of all such activities and the decisions with respect thereto, including discussions with any Regulatory Authority and any decisions regarding the labeling of the Product in the Field in the Territory. Zogenix shall consider in good faith all input provided by the Distributor with respect to such regulatory approval activities. In connection with such activities, Zogenix shall: (i) timely inform the Distributor of any scheduled meetings with Regulatory Authorities in the Territory with respect to the Product in the Field as soon as practicable in order to allow the Distributor time to convey its opinion on the matter and (ii) use all reasonable efforts to ensure that the Distributor is afforded the opportunity to participate in such meetings. Zogenix shall keep the Distributor regularly and fully informed of the preparation, Regulatory Authority review and approval of submissions and communications with Regulatory Authorities with respect to the Product in the Field in the Territory. In particular, Zogenix shall promptly provide the Distributor with copies of all material documents, information and correspondence received from or provided to a Regulatory Authority with respect to the Product in the Field in the Territory and, upon reasonable request, with copies of any other documents, reports and communications from or to any Regulatory Authority relating to the Product in the Field in the Territory, as well as written summaries of all material oral communications with a Regulatory Authority with respect to the Product in the Field in the Territory.

(ii)Post-Approval Regulatory Activities. Following the filing of the MAA for the Product in the Territory, Zogenix and Distributor shall collaborate in good faith concerning a pricing negotiation strategy for the Product. Following Regulatory Approval of the Product in the Field in the Territory, Zogenix will be responsible for negotiating and obtaining initial pricing approval for the Product with the applicable Regulatory Authority in accordance with such strategy. The MAH Party shall use Commercially Reasonable Efforts to maintain Regulatory Approval for the Product in the Field in the Territory. The MAH Party shall be responsible for all interactions with Regulatory Authorities with respect to the Product in the Field in the Territory during the Term and maintaining Regulatory Approval of the Product in the Field in the Territory. In connection with such activities, the MAH Party shall: (i) timely inform the Non-MAH Party of any scheduled meetings with Regulatory Authorities in the Territory with respect to the Product in the Field as soon as practicable in order to allow the Non-MAH Party time to convey its opinion on the matter and (ii) use all reasonable efforts to ensure that the Non-MAH Party is afforded the opportunity to participate in such meetings. The MAH Party shall keep the Non-MAH Party regularly and fully informed of the preparation of submissions and communications with Regulatory Authorities with respect to the Product in the Field in the Territory. In particular, the MAH Party shall promptly provide the Non-MAH Party with copies of all material documents, information and correspondence received from or provided to a Regulatory Authority with respect to the Product in the Field in the Territory and, upon reasonable request, with copies of any other documents, reports and communications from or to any Regulatory Authority relating to the Product in the Field in the Territory, as well as written

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summaries of all material oral communications with a Regulatory Authority with respect to the Product in the Field in the Territory.

(A)Post-Marketing Surveillance Studies. The MAH Party shall be responsible for conducting any post-marketing surveillance studies, including those required by the MHLW or Applicable Law, that are required to maintain the MAA. The MAH Party shall ensure that Non-MAH Party is involved in the planning and conduct of all such post-approval activities and the decisions with respect thereto, including discussions with any Regulatory Authority and any decisions regarding any post-marketing surveillance studies with respect to, the Product in Field in the Territory. The MAH Party shall consider in good faith all input provided by Zogenix with respect to such regulatory activities. The MAH Party shall be responsible for filing any post-marketing surveillance studies with the MHLW.

(B)Post-Approval Clinical Studies. Zogenix shall be responsible for conducting any post-approval clinical study that is requested upon or after approval or otherwise required by the MHLW as a condition of or to maintain the MAA approval. [***] shall bear [***]the total Out-of-Pocket Costs and Expenses incurred by the Parties while conducting any such post-approval clinical study that is for the Territory. Zogenix shall ensure that Distributor is involved in the planning and conduct of all such post-approval clinical studies and the decisions with respect thereto, including discussions with any Regulatory Authority and any decisions regarding any post-approval clinical study with respect to, the Product in Field in the Territory. Zogenix shall consider in good faith all input provided by the Distributor with respect to such post-approval clinical study. The MAH Party shall be responsible for filing any post-approval clinical studies with the MHLW.

(C)Risk Management Plan. Zogenix shall be responsible for filing the initial risk management plan, if any, and approving any subsequent changes thereto. The MAH Party shall be responsible for conducting or having conducted any risk management plan requested or required by the MHLW. The Distributor shall support and implement the risk management plan and cooperate with Zogenix, and the Parties shall share and discuss the results and data generated from any risk management plan required by MHLW. The Distributor shall collaborate with Zogenix to ensure global alignment and consistency with the safety specifications, pharmacovigilance planning and risk management commitments and activities.

(d)Transfer of Marketing Authorization. Zogenix shall be the marketing authorization holder of the Product in the Territory for the[***] following Regulatory Approval of the Product in the Territory. Thereafter, Zogenix shall transfer the marketing authorization for the Product in the Territory to Distributor within [***] following [***], unless delayed or prohibited by a Regulatory Authority or Applicable Law or otherwise agreed by the Parties. Upon the transfer of the marketing authorization of the Product in the Territory to Distributor, then Distributor shall be deemed the MAH Party for purposes of this Agreement and Zogenix shall be deemed the Non-MAH Party.

(e)Ownership of Regulatory Information. The Parties acknowledge and agree that Zogenix shall retain the full unfettered ownership of the Data and drug dossier

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submitted to the PMDA for the Regulatory Approval (including but not limited to safety & efficacy data, clinical data package, drug formulation and method of administration). Notwithstanding the foregoing, if Zogenix asks Distributor to solely conduct any additional Territory-specific Development activities which are urgently required by the MHLW for the MAA in the Territory, Distributor shall retain co-ownership with Zogenix of any Data generated solely by Distributor. Distributor hereby grants Zogenix an irrevocable, perpetual, royalty-free, fully paid-up, exclusive license with the right to grant sublicenses to use such Data solely generated and co-owned by Distributor outside of the Territory and a co-exclusive license in the Territory upon expiration or termination of the Agreement.

(f)Regulatory Cooperation. Each Party shall cooperate in good faith with any reasonable requests for assistance from the other Party with respect to obtaining or maintaining Regulatory Approval of the Product in and outside the Territory, including by providing to the other Party all Information in its possession and Control that is requested by, or needed to respond to inquiries of, a Regulatory Authority with respect to the Product.

4.3Distributor’s Right to Use and Reference. Distributor shall have the right to reference and use all Data and Regulatory Filings (including all Regulatory Approvals) for the purpose of fulfilling Distributor’s obligations set forth in this Agreement. For clarity, in accordance with Section 4.2(b), [***].

4.4Zogenix’s Right to Use and Reference. In the event that Distributor is responsible for filing for and obtaining Regulatory Approval of the Product in the Field in the Territory or Distributor otherwise is the holder of the Regulatory Approval for the Product in the Territory, Zogenix and its Affiliates and Zogenix ex-Territory Distributors shall have the royalty-free right to reference and use all Data and Regulatory Filings (including all Regulatory Approvals), including all data contained or referenced therein, provided by or to Distributor under this Article 4, such reference and use in connection with filing for, obtaining and maintaining Regulatory Approval and commercializing the Product outside the Territory and in the Territory outside the Field. Distributor shall, on written request by Zogenix, provide, or shall cause its applicable Affiliate to provide, to Zogenix and to any specified Regulatory Authority a letter, in the form reasonably required by Zogenix, acknowledging and confirming that Zogenix and its Affiliates and/or Zogenix ex-Territory Distributors, as applicable, have the rights of reference to any such Regulatory Filing (including any such Regulatory Approval) for all purposes consistent with the Development, Regulatory Approval and commercialization of the Product outside the Territory and in the Territory outside the Field. Distributor shall not, and shall cause its Affiliates not to, transfer or disclose any Regulatory Filings (including any Regulatory Approval) relating to the Product in the Territory to any Third Party without the prior written consent of Zogenix, and in any such permitted transfer Distributor shall require the transferee to acknowledge in writing to Zogenix, Zogenix’s (and its Affiliates’ and Zogenix ex-Territory Distributors’) rights of reference to and right to use all such Regulatory Filings (including Regulatory Approvals) as provided in this Section 4.3.

4.5Adverse Event Reporting. The MAH Party shall be responsible for the timely

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reporting of all relevant adverse drug reactions/experiences, Product quality, Product complaints and safety data relating to the Product in the Field to the appropriate Regulatory Authorities in the Territory, all in accordance with Applicable Laws and requirements of Regulatory Authorities in the Territory. Zogenix (or its Affiliate, or Zogenix ex-Territory Distributors) shall be responsible for the timely reporting of all relevant adverse drug reactions/experiences, Product quality, Product complaints and safety data relating to the Product to the appropriate Regulatory Authorities outside the Territory. The details of such reporting shall be set forth in a pharmacovigilance agreement (as may be amended, the “Pharmacovigilance Agreement”), which will be agreed to by the Parties prior to the First Commercial Sale in the Territory. The Pharmacovigilance Agreement shall include, without limitation, governance provisions that set forth a process for communication and escalation, where necessary, of safety issues, label changes, and the like. Zogenix shall have the right to share any and all information received from Distributor under this Section 4.5, or the Pharmacovigilance Agreement, with Zogenix’s Affiliates and Zogenix ex-Territory Distributors. The Pharmacovigilance Agreement shall identify the responsibilities of each Party regarding the information to be exchanged and the timeframes for such exchange, regulatory reporting, literature review, risk management, and labeling. Prior to executing the Pharmacovigilance Agreement, the Parties agree to work together in good faith to coordinate regarding pharmacovigilance activities with respect to the Product in the Field, including by exchanging Distributor’s standard operating procedures and other Information relevant to such pharmacovigilance activities.

4.6Drug Safety and Pharmacovigilance System including Global Safety Database. Zogenix shall maintain a global system for monitoring and management of the risks associated with the Product. This system will provide signal management as well as the collection, identification, evaluation, and management of individual case safety reports and cumulative reports. As part of this pharmacovigilance system, Zogenix shall maintain the global safety database with respect to the Product, which shall serve as the reference database for all responses to safety queries and aggregate safety reports and be the main source for individual case safety report processing. Each Party shall cooperate, and shall cause its Affiliates, Sub-distributors and Zogenix ex-Territory Distributors, as applicable, to cooperate, in implementing and adhering to a pharmacovigilance mutual alert process with respect to the Product to comply with Applicable Laws, as set forth in the Pharmacovigilance Agreement. Notwithstanding anything to the contrary in this Agreement, Zogenix shall have final decision making authority over all issues that implicate global safety.

4.7Regulatory Audit. Each Party shall notify the other Party within [***] of receipt of any notice of a MHLW audit of any of such Party or its Affiliate or subcontractor with respect to the Product in the Territory. Notwithstanding the foregoing, if a Party is subject to an unannounced audit from the MHLW or receives a notice of an imminent audit from the MHLW, in each case with respect to the Product in the Territory, such Party shall notify the other Party promptly, but in any event within [***]. Such other Party shall have the right to have its or its Affiliates’ or its subcontractors’ employees or consultants participate in any audits or other inspections to the extent permitted by Applicable Law. To the extent permitted by Applicable Law, the audited Party shall provide the other Party with the copies of any resulting document or

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action pertaining to the Product in the Territory that results from such audit within [***] of their receipt.

4.8Use of Subcontractors. To the extent that Distributor performs any of its regulatory or commercial activities under this Agreement through one or more subcontractors (including a Sub-distributor), if and as permitted under the terms of this Agreement, Distributor shall ensure that (a) none of Zogenix’s rights hereunder are diminished or otherwise adversely affected as a result of such subcontracting, (b) the subcontractor assigns to Distributor all Distributor Inventions and all data generated by such subcontractor that, if Controlled by Distributor, would be included in the definition of Data, (c) the subcontractor undertakes in writing obligations of confidentiality and non-use regarding Confidential Information and compliance with the FCPA and other Applicable Laws that are substantially the same as those undertaken by the Parties pursuant to Article 8 and Section 10.2, (d) the subcontractor does not have an adverse history or reputation, (e) the use of the subcontractor will not cause the Zogenix Indemnitees to be in violation of the FCPA or any other Applicable Laws, and (f) the use of the subcontractor will not cause reputational harm to the Zogenix Indemnitees. In the event that Distributor performs any of its regulatory activities hereunder through a subcontractor, Distributor will at all times be fully responsible for the performance and payment of such subcontractor.

4.9Recalls.

(a)In the event that the MHLW issues a request or orders a recall or takes similar action in connection with the Product in the Territory, or in the event either Party determines that an event, incident, or circumstance has occurred that may result in the need for a voluntary withdrawal of the Product in the Territory, the Party notified of such recall or desiring such voluntary withdrawal shall, within [***], advise the other Party thereof by telephone (and confirm by electronic mail or facsimile). Regarding any recall order or request from the MHLW, the Parties shall, to the extent practicable, discuss and endeavor to agree upon a plan for recalling the affected Product. Regarding any request for a voluntary withdrawal, the Parties shall discuss and endeavor to agree upon whether to voluntarily withdraw the Product in the Territory, and each Party shall review and consider in good faith all information provided by the other Party in connection with such discussion, including any assessment of safety and whether to withdraw the Product.

(b)For all recalls requested or ordered by the MHLW, the MAH Party shall have the sole authority and responsibility to make all decisions with respect to such recall, subject to good faith consideration of the views of the non-MAH Party. For all voluntary withdrawals concerning quality defects, such as compliance, foreign substances, tampering and labeling defects, the MAH Party shall have the sole authority and responsibility to make all decisions with respect to such withdrawal, subject to good faith consideration of the views of non-MAH party. For all voluntary withdrawals concerning efficacy or safety, Zogenix shall have the sole authority and responsibility to make all decisions with respect to such withdrawal, subject to good faith consideration of the views of the Distributor.

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(c)Distributor shall be responsible for conducting any such recall or withdrawal, shall use Commercially Reasonable Efforts to minimize the expenses of any such recall or withdrawal and shall keep Zogenix fully informed of all actions taken in conducting such recall or withdrawal. If a recall or withdrawal is due to Zogenix’s negligence, willful misconduct or breach of this Agreement, Zogenix shall reimburse Distributor for all of the reasonable costs and expenses actually incurred by Distributor in connection with such recall or withdrawal, including, but not limited to, costs of personnel expenses of Distributor’s sales representatives, fees for consultation with the Regulatory Authority in the Territory and travel expenses for consultation, and its actual reasonable Out-of-Pocket Costs and Expenses incurred while retrieving Product already delivered to customers, costs and expenses Distributor is required to pay for notification, shipping and handling charges, and such other costs as may be reasonably related to the recall or withdrawal. If a recall or withdrawal is due to Distributor’s negligence, willful misconduct or breach of this Agreement, Distributor shall reimburse Zogenix for all the reasonable costs and expenses described above actually incurred by Zogenix in connection with such recall or withdrawal, including administration of the recall and such other actual costs as may be reasonably related to the recall or withdrawal in the Territory. If a recall or withdrawal results from a cause other than the negligence in the Territory, willful misconduct or breach of this Agreement of or by Distributor or Zogenix, the parties hereto [***]. Prior to any reimbursements pursuant to this Section, the party claiming any reimbursement shall provide the other party with reasonably acceptable documentation of all reimbursable costs and expenses. Neither Party will be liable to the other for Indirect Losses in connection with any recall or withdrawal pursuant to this Section.

4.10Development Expenses. Unless expressly stated otherwise, each Party shall bear its own Out-of-Pocket Costs and Expenses and any employee and overhead expenses incurred while performing its obligations under this Article 4.

ARTICLE 5.

COMMERCIALIZATION; SUPPLY: TRADEMARKS

5.1Commercialization of the Product.

(a)Distributor Responsibilities. Distributor shall have the exclusive right to market, promote, sell, offer for sale, import, package and otherwise Commercialize the Product in the Field in the Territory, at its sole cost and expense, in accordance with Applicable Laws and the Commercialization Plan and subject to the terms and conditions of this Agreement. Without limiting the foregoing, Distributor will have the exclusive right and responsibility in the Field in the Territory for the following:

(i)designing the Commercialization strategy and tactics for the Product, subject to JSC approval of the Commercialization Plan;

(ii)undertaking all promotional activities for the Product;

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(iii)establishing and implementing post-marketing surveillance studies for the Product in the Territory as required or recommended by a Regulatory Authority;

(iv)receiving, accepting and filling orders for the Product from customers;

(v)warehousing and distributing the Product to customers;

(vi)controlling invoicing, order processing and collection of accounts receivable for sales of the Product;

(vii)recording sales of the Product in the Territory in its books of account for sales; and

(viii)providing results of sales of the Product in the Territory for purposes of periodic safety reports and exposure estimates.

Distributor shall provide updates regularly to the JSC relating to Commercialization activities for the Product in the Field in the Territory.

(b)Commercialization Plan. Distributor shall be responsible for the creation and implementation of an annual plan for the Commercialization of the Product in the Field in the Territory, which shall identify proposed plans to address potential challenges with respect to Commercialization of the Product in the Field in the Territory (the “Commercialization Plan”). The Commercialization Plan shall set forth in reasonable detail the major Commercialization activities planned for the Product in the Territory for the applicable period, including [***]. Distributor shall prepare and submit to the JSC the initial Commercialization Plan no later than [***] after MAA filing for the Product in the Field in the Territory for review and approval by the JSC in accordance with the decision-making procedures set forth in Section 3.1(d). Distributor shall submit subsequent updated Commercialization Plans to the JSC on an annual basis on or before the end of each Fiscal Year for review and approval by the JSC. Through the JSC, Distributor shall regularly consult with and provide updates to Zogenix regarding the Commercialization strategy for and the Commercialization of the Product in the Field in the Territory.

(c)Diligence. During the Term, Distributor shall use Commercially Reasonable Efforts to market, promote, sell, offer for sale, import, package, distribute and otherwise commercialize the Product in the Field in the Territory in accordance with the Commercialization Plan and the terms of this Agreement. Without limiting the foregoing, Distributor shall Submit the first purchase order of the Product in the Field in the Territory to Zogenix within [***], achieve First Commercial Sale of the Product in the Field in the Territory as soon as reasonably practicable after the Product is first available for delivery to Distributor in the Territory, and use Commercially Reasonable Efforts to timely accomplish all the activities set forth in the Commercialization Plan.

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(d)Distributor’s Diligence Failure.

(i)After [***] of the First Commercial Sale of the Product in the Territory, if Zogenix reasonably believes that Distributor has failed to achieve or maintain the diligence obligations set forth in Section 5.1(c), Zogenix shall provide written notice thereof to Distributor requesting a detailed written response concerning such failure and Distributor shall provide such detailed written response to Zogenix within [***] of the date of Zogenix’s request. Zogenix’s notice shall specify in reasonable detail the facts and circumstances constituting Zogenix’s reasons for reaching such a determination. Following Zogenix’s receipt of Distributor’s response, the Parties shall promptly, and in any event within [***], discuss in good faith Distributor’s obligations and its proposed actions to cure its failure to achieve its diligence obligations. Where remedy is possible and reasonably acceptable to Zogenix, Distributor shall use its Commercially Reasonable Efforts to start substantive steps within [***]of the date of Zogenix’s notice to Distributor. If Distributor (A) fails to provide a detailed written response to Zogenix within[***] of the date of Zogenix’s notice to Distributor, or (B) fails to use its Commercially Reasonable Efforts to start substantive steps to remedy such failure [***] of the date of Zogenix’s notice to Distributor, Zogenix shall have the right, [***]effective upon written notice thereof by Zogenix to Distributor, to (1) [***] or (2) [***].

(ii)Any failure of Distributor to achieve the diligence obligations set forth in Section 5.1(c) shall not be considered Distributor’s diligence failure as described in Section 5.1(d)(i) or a breach of this Agreement to the extent such failure was caused by (A) Zogenix’s inability or failure to supply Product in accordance with the terms of the Supply Agreement, (B) any changes to the Regulatory Plan approved by the JSC in accordance with Section 4.2(a), or (C) any changes to the Commercialization Plan approved by the JSC in accordance with Section 5.1(b).

(iii)This Section 5.1(d) shall not limit any other remedies or damages that Zogenix may have or seek under this Agreement or Applicable Laws.

5.2Supply. The Parties acknowledge and agree that Zogenix shall retain all rights to make and have made the Product in and for the Territory. Promptly after the Effective Date, the Parties shall commence negotiating a supply agreement containing reasonable and customary terms for an agreement of such type, governing Zogenix’s supply of the Product to Distributor for sale in the Field in the Territory in accordance with the terms of this Agreement (as may be amended, the “Supply Agreement”), and shall use reasonable efforts to enter into the Supply Agreement within [***] after the Effective Date. Zogenix shall supply, or cause to be supplied, Product to Distributor in accordance with the Supply Agreement, and Distributor shall purchase all of its and its Affiliates’ and Sub-distributors’ requirements for the Product under the Supply Agreement. Distributor shall pay to Zogenix the Transfer Price for Product supplied under the Supply Agreement in accordance with Section 6.5.

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5.3Trademark Rights.

(a)Product Trademarks. Subject to the terms and conditions of this Agreement, Zogenix hereby grants to Distributor an co-exclusive, royalty-free, limited right under the Product Trademarks solely to promote, market, sell, offer for sale, import, package and distribute the Product in Field in the Territory in accordance with the terms of this Agreement.

(b)Zogenix Trademarks. Subject to the terms and conditions of this Agreement, Zogenix hereby grants to Distributor a non-exclusive, royalty-free, limited right under the Zogenix Trademarks solely to promote, market, sell, offer for sale, import, package and distribute the Product in Field in the Territory in accordance with the terms of this Agreement.

5.4Commercial Expenses. Unless expressly stated otherwise, each Party shall bear its own Out-of-Pocket Costs and Expenses and all employee and overhead expenses incurred while performing its obligations under this Article 5.

ARTICLE 6.

PAYMENTS

6.1Upfront Payment. Distributor shall pay to Zogenix, upon the receipt of the invoice from Zogenix after the Effective Date, a non-refundable, non-creditable upfront payment of Seven Million Five Hundred Thousand U.S. Dollars (US $7,500,000), which upfront payment shall consist of [***] in consideration for the exclusive right to distribute Product in the Territory for the treatment of Dravet syndrome and [***]in consideration for the exclusive right to distribute Product in the Territory for the treatment of Lennox-Gastaut syndrome. Distributor shall pay such payment to Zogenix within [***] of receipt of the invoice.

6.2Funding to Support Development of The Product. Distributor shall pay to Zogenix Twelve Million Five Hundred Thousand U.S. Dollars (US $12,500,000) for support of Zogenix’s global nonclinical and clinical Development studies concerning the Product for Dravet syndrome and Lennox-Gastaut syndrome as it relates to Regulatory Approval of the Product in the Territory. For clarity, the Six Million Five Hundred Thousand U.S. Dollar (US $6,500,000) payment is intended to support studies previously conducted by Zogenix and that will be included in the MAA for the Territory. The remaining Six Million U.S. Dollars (US 6,000,000) in payments are intended to support those studies conducted by Zogenix and indicated as being paid for by Zogenix under the initial Regulatory Plan during [***] after the Effective Date, and such payments will be made [***]. The five (5) Development payments pursuant to this Section 6.2 will be made according to the following schedule:

(a)Within [***] after the Effective Date, a non-refundable, non-creditable one-time payment of [***];

(b)Within [***] after the Effective Date, a non-refundable, non-creditable

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one-time payment of[***];

(c)On the [***] of the Effective Date, a non-refundable, non-creditable one-time payment of [***];

(d)On the [***] of the Effective Date, a non-refundable, non-creditable one-time payment of [***]; and

(e)On the [***] of the Effective Date, a non-refundable, non-creditable one-time payment of [***].

For clarity, each of the foregoing payments to be made by Distributor to Zogenix shall be payable within [***] of receipt of the invoice therefor from Zogenix. In the event that Zogenix terminates the Development the Product in the Territory for both Dravet syndrome and Lennox-Gastaut syndrome prior to the due date for any of the foregoing payments any such payment whose due date is after such termination shall no longer be due and payable to Zogenix.

6.3Regulatory Milestones. Distributor shall pay to Zogenix the non-refundable, non-creditable milestone payments as set forth in this Section 6.3. Upon the occurrence of each milestone event in this Section 6.3 Zogenix shall issue an invoice to Distributor for the amount of the milestone payment corresponding to such achieved milestone event, and Distributor shall pay to Zogenix such invoiced amount within[***] of its receipt from Zogenix.

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Regulatory Milestone Event	Milestone Payment
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]
[***]	[***]

Each milestone payment set forth above shall be payable only once for the Product. For clarity, the total regulatory milestone payments set forth in this Section shall not exceed: (a) [***] if [***]; (b) [***] if [***]; and (c) [***].

6.4Sales Milestones. For each Fiscal Quarter in which aggregate annual Net Sales first reach a threshold indicated in the table below, Distributor shall inform Zogenix within [***] that the aggregated annual Net Sales first reached such threshold. Zogenix shall issue an invoice to Distributor for the applicable milestone payment, and Distributor shall pay such invoice within [***] of its receipt from Zogenix:

Annual Net Sales Level	Milestone Payment
First Fiscal Year in which aggregate annual Net Sales of the Product in the Field in the Territory exceed [***]	[***]
First Fiscal Year in which aggregate annual Net Sales of the Product in the Field in the Territory exceed [***]	[***]
First Fiscal Year in which aggregate annual Net Sales of the Products in the Field in the Territory exceed [***]	[***]

The milestone payments set forth in this Section 6.4 shall be additive, such that if all three (3)

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milestone events are achieved in the same Fiscal Year, Distributor shall pay to Zogenix all three (3) milestone payments.

6.5Supply Payments.

(a)Transfer Price. During the Distribution Term, and in addition to the consideration provided pursuant to Sections 6.1, 6.2, 6.3, and 6.4, for all Product supplied by Zogenix to Distributor under purchase orders submitted pursuant to the Supply Agreement in a particular Fiscal Year, Distributor shall pay to Zogenix a transfer price per unit of Product supplied (the “Transfer Price”) equal to the sum of (i) [***] of the Fully-Burdened Manufacturing Cost per unit of Product for such Fiscal Year, (ii) [***] of aggregate annual Net Sales for such Fiscal Year, and (iii) the applicable markup percent of the applicable aggregate Net Price for such Fiscal Year, which markup percent is determined based on the incremental amount of Product ordered in such Fiscal Year as set forth below, as may be adjusted pursuant to Section 6.5(b):

Amount of Product Supplied per Fiscal Year	Net Price Markup
For the portion of Product supplied less than or equal to the equivalent of [***] in Net Sales in such Fiscal Year	[***]
For the portion of Product supplied in excess of the equivalent of [***] in Net Sales and less than or equal to the equivalent of [***] in Net Sales in such Fiscal Year	[***]
For the portion of Product supplied in excess of the equivalent of [***] in Net Sales and less than or equal to the equivalent of [***] in Net Sales in such Fiscal Year	[***]
For the portion of Product supplied in excess of the equivalent of [***] in Net Sales in such Fiscal Year	[***]

The Net Sales equivalent described in the left column of the table above is calculated by determining the total number of units ordered in the applicable Fiscal Year and multiplying such number by the Net Price for such Fiscal Year.

Following the expiration of the Distribution Term and during the remaining Term of this Agreement, for all Product supplied by Zogenix to Distributor under purchase orders submitted pursuant to the Supply Agreement in a particular Fiscal Year, Distributor shall pay to Zogenix the Transfer Price per unit of Product supplied shall be equal to the sum of (i) [***] of the Fully-Burdened Manufacturing Cost per unit of Product for such Fiscal Year, and (ii) [***] of aggregate annual Net Sales for such Fiscal Year.

(b)Estimates. No later than [***] before the beginning of each Fiscal Year, starting with the Fiscal Year in which the First Commercial Sale is anticipated to occur, the Parties shall discuss in good faith and agree on a reasonable estimate of the Net Price for the Product for such Fiscal Year, which estimate will be based on a reasonable approximation of the aggregate Net Sales of Product to be recognized by Distributor and its Affiliates during such Fiscal Year. The agreed Net Price will be used to calculate the Transfer Price initially invoiced by Zogenix and payable by Distributor for the total number of units of the Product ordered by

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and delivered to Distributor under the Supply Agreement during such Fiscal Year.

(c)Reports. Within [***] after the end of each of the first three Fiscal Quarters in a Fiscal Year, starting with the Fiscal Quarter in which the First Commercial Sale occurs, Distributor shall deliver to Zogenix a report setting forth: (i) the total Net Sales of the Product in the Territory during such Fiscal Quarter, (ii) the detailed and total deductions from gross amounts invoiced to arrive at such Net Sales, (iii) the number of units of the Product sold in the Territory during such Fiscal Quarter and (iv) gross amounts invoiced for such sales. Within[***] after the end of each Fiscal Year, starting with the Fiscal Year in which the First Commercial Sale occurs, Distributor shall deliver to Zogenix a report setting forth: (A) the total Net Sales of the Product in the Territory during such Fiscal Year, (B) the detailed and total deductions from gross amounts invoiced to arrive at such Net Sales, (C) the number of units of the Product sold in the Territory during such Fiscal Year, (D) the gross amounts invoiced for such sales, (E) the calculation of actual Net Price for such Fiscal Year, (F) the total amount invoiced by Zogenix and paid by Distributor to Zogenix under the Supply Agreement for the total number of units of the Product ordered by and delivered to Distributor during such Fiscal Year, based on the estimated Net Price for such Fiscal Year, (G) the total amount actually owed to Zogenix for the total number of units of the Product ordered by and delivered to Distributor during such Fiscal Year based on the actual Net Price and (H) the difference between the amounts in clauses (F) and (G) (each such report, an “Annual Report”).

(d)True-Up. For each Annual Report, if the amount in clause (G) of such Annual Report exceeds the amount in clause (F), then Distributor shall pay the amount in clause (H) to Zogenix concurrently with its delivery of such Annual Report to Zogenix. Otherwise, if the amount in clause (G) is less than the amount in clause (F), the amount in clause (H) will be credited against the subsequent payment(s) due from Distributor to Zogenix (or if no further payments will be due, paid by Zogenix to Distributor within [***] after Zogenix’s receipt of such Annual Report from Distributor). In no event shall the effective Transfer Price for the Product in a Fiscal Year exceed [***]of the aggregate annual Net Sales of the Product in the Field in the Territory for such Fiscal Year.

ARTICLE 7.

PAYMENTS, BOOKS AND RECORDS

7.1Payment Method. All amounts specified to be payable under this Agreement are in United States dollars and shall be paid in United States dollars. All payments under this Agreement shall be made by bank wire transfer in immediately available funds to an account designated in writing by the payee Party or by such other means as directed by such Party in writing. Payments hereunder will be considered to be made as of the day on which they are received by the payee Party’s designated bank.

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7.2Currency Conversion. For the purpose of calculating any sums due under this Agreement and determining the annual Net Sales levels in Section 6.5, conversion shall be made to U.S. dollars by using the arithmetic mean of the exchange rates for the purchase of United States dollars as published in The Wall Street Journal, Eastern Edition, for each Business Day in the Fiscal Quarter to which such calculations relate.

7.3Taxes. Any taxes imposed on Distributor or with respect to Distributor’s business operations or activities hereunder, including any value added taxes, consumption, transfer, sales, use or other such taxes relating to the transactions contemplated herein, shall be borne by Distributor, and Distributor shall timely pay, and indemnify and hold harmless, Zogenix from and against all such taxes, including any penalties or interest associated therewith. If Distributor is required by Applicable Law to deduct and withhold taxes from a payment due and payable to Zogenix hereunder (excluding national, state or local taxes based on income to Zogenix), Distributor shall: (a) promptly notify Zogenix of such requirement; (b) make such required deduction and withholding from the corresponding payment; (c) pay to the relevant Governmental Authority the full amount required to be so deducted and withheld; and (d) promptly forward to Zogenix an official receipt or other documentation reasonably acceptable to Zogenix evidencing such payment to such Governmental Authority(ies). The Parties acknowledge and agree that it is their mutual objective and intent to minimize, to the extent feasible under the Applicable Laws, any taxes payable in connection with this Agreement, and shall reasonably cooperate each other in good faith in accordance with Applicable Laws to minimize any Taxes in connection with this Agreement, including provision of any tax forms and other information that may be reasonably necessary in order for the paying Party not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty.

7.4Records. Distributor shall keep, and require its Affiliate and Sub-distributors to keep, complete, fair and true books of accounts and records for the purpose of (a) determining the amounts payable to Zogenix pursuant to this Agreement and the Supply Agreement and (b) ensuring that Distributor and its Affiliates and Sub-distributors do not otherwise cause any Zogenix Indemnitees to be in violation of the FCPA or other Applicable Laws. Such books and records shall be kept for such period of time required by Applicable Laws, but no less than three (3) years following the end of the Fiscal Year to which they pertain. Such records shall be subject to inspection in accordance with Section 7.5.

7.5Audits. Upon reasonable prior written notice, Distributor shall permit an independent, certified public accountant selected by Zogenix and reasonably acceptable to Distributor, which acceptance will not be unreasonably withheld or delayed, to audit or inspect those books or records of Distributor and its Affiliates and Sub-distributors that relate to Net Sales for the sole purpose of verifying: (a) the payments due hereunder and payments due under the Supply Agreement; (b) the withholding taxes, if any, required by Applicable Laws to be withheld; and (c) Distributor’s compliance with Sections 10.1 and 10.2. Such accountant will disclose to Zogenix only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement or the Supply Agreement, and will send a copy of the report to Distributor at the same time it is sent to Zogenix. Prompt adjustments (including

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interest under Section 7.6 for underpaid amounts) shall be made by the Parties to reflect the results of such audit. Such inspections may be made no more than once each Fiscal Year (unless an audit or inspection reveals a material inaccuracy in reports made under this Agreement, in which case it may be repeated within such Fiscal Year), and during normal business hours, with reasonable efforts to minimize disruption of Distributor’s normal business activities. Inspections conducted under this Section 7.5 shall be at the expense of Zogenix, unless a variation or error producing an underpayment in amounts payable exceeding [***] of the amount paid for a period covered by the inspection is established, in which case all reasonable costs relating to the inspection for such period shall be paid by Distributor. Absent manifest error, the accountant’s report will be final and binding on the Parties.

7.6Late Payments. In the event that any payment due under this Agreement or the Supply Agreement is not made when due, the payment shall accrue interest from the date due at a rate per annum equal to [***] above the U.S. Prime Rate (as set forth in TheWall Street Journal, Eastern U.S. Edition) for the date on which payment was due, calculated daily on the basis of a 365-day year, or similar reputable data source; provided that in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit a Party from exercising any other rights it may have as a consequence of the lateness of any payment.

ARTICLE 8.

CONFIDENTIALITY

8.1Confidential Information. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, the Parties agree that during the Term and for [***] thereafter, the receiving Party (the “Receiving Party”) shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement or the Supply Agreement any Information or materials furnished to it or its Affiliates by or on behalf of the other Party (the “Disclosing Party”) or its Affiliates pursuant to this Agreement, the Supply Agreement, the Confidentiality Agreement or any other written agreement between the Parties or their Affiliates, in any form (written, oral, photographic, electronic, magnetic, or otherwise), including all information concerning the Product and any other technical or business information of whatever nature (collectively, “Confidential Information” of the Disclosing Party). All Zogenix Technology (including, without limitation, all Product Inventions and Data) shall be deemed the Confidential Information of Zogenix. Distributor Inventions shall be deemed the Confidential Information of Distributor. Joint Inventions shall be deemed the Confidential Information of each of Zogenix and Distributor. Each Party may use the Confidential Information of the other Party only to the extent required to accomplish the purposes of this Agreement or the Supply Agreement (including to exercise its rights or fulfill its obligations under this Agreement or the Supply Agreement). Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own (but in no event less than reasonable care) to ensure that its employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the

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Confidential Information of the other Party. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information of the other Party.

8.2Exceptions. Notwithstanding Section 8.1 above, the obligations of confidentiality and non‑use shall not apply to information that the Receiving Party can prove by competent written evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party or any of its Affiliates, generally known or available; (b) is known by the Receiving Party or any of its Affiliates, other than under an obligation of confidentiality to the Disclosing Party, at the time of receiving such information; (c) is hereafter lawfully furnished to the Receiving Party or any of its Affiliates by a Third Party, which Third Party did not receive such information directly or indirectly from the Disclosing Party under an obligation of confidence; (d) is independently discovered or developed by the Receiving Party or any of its Affiliates without the use of Confidential Information belonging to the Disclosing Party; or (e) is the subject of a written permission to disclose provided by the Disclosing Party.

8.3Permitted Disclosures. Notwithstanding the provisions of Section 8.1, the Receiving Party may disclose Confidential Information of the Disclosing Party as expressly permitted by this Agreement or if and to the extent such disclosure is reasonably necessary in the following instances:

(a)filing or prosecuting Patents as permitted by this Agreement;

(b)prosecuting or defending litigation as permitted by this Agreement;

(c)complying with applicable court orders, governmental regulations, applicable subpoenas or reasonable requests issued by governmental authorities in relation to compliance with the FCPA and other Applicable Laws;

(d)in the case of Zogenix, disclosure under terms of confidentiality no less stringent than under this Agreement to potential or actual Zogenix ex-Territory Distributors;

(e)disclosure to its and its Affiliates’ contractors, employees and consultants, in each case who need to know such information for filing for, obtaining and maintaining Regulatory Approvals and Commercialization of Product in the Territory in accordance with this Agreement and manufacturing and supplying of Product in accordance with the Supply Agreement (or, in the case of disclosures by Zogenix, who need to know such information for the Development, manufacture and commercialization of the Product outside the Field or Territory), on the condition that any such Third Parties agree to be bound by confidentiality and non-use obligations that are no less stringent than those confidentiality and non-use provisions contained in this Agreement; and

(f)disclosure to Third Parties in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors in confidential financing documents, provided, in each case, that any such Third Party agrees to be

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bound by confidentiality and non-use obligations that are no less stringent than those confidentiality and non-use provisions contained in this Agreement.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 8.3(b) or (c), it will, except where impracticable, give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the Parties agree to take all reasonable action to avoid disclosure of Confidential Information hereunder.

8.4Confidentiality of this Agreement and its Terms. Except as otherwise provided in this Article 8, each Party agrees not to disclose to any Third Party the existence of this Agreement or the terms of this Agreement without the prior written consent of the other Party, except that each Party may disclose the terms of this Agreement that are not otherwise made public as contemplated by Section 8.5 as permitted under Section 8.3.

8.5Public Announcements.

(a)As soon as practicable following the Effective Date, the Parties may each issue a press release in English and/or Japanese, in the form attached hereto as Exhibit 8.5(a), announcing the existence of this Agreement. Except as required by Applicable Laws (including disclosure requirements of the SEC or any stock exchange on which securities issued by a Party or its Affiliates are traded), neither Party shall make any other public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld or delayed; provided that each Party may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, or issue press releases, so long as any such public statement or press release is not inconsistent with prior public disclosures or public statements approved by the other Party pursuant to this Section 8.5 and does not reveal non‑public information about the other Party; and provided further that Zogenix may make public statements regarding the results of Development and Commercialization activities in the Territory. In the event of a public announcement required by Applicable Laws, to the extent practicable under the circumstances, the Party making such announcement shall provide the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other Party a reasonable opportunity to review and comment upon the proposed text.

(b)The Parties will coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with the SEC or any stock exchange on which securities issued by a Party or its Affiliate are traded, and each Party will use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided that each Party will ultimately retain control over what information to disclose to the SEC or other applicable government body, and provided further that the Parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies. Other than

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such obligation, neither Party (nor its Affiliates) will be obligated to consult with or obtain approval from the other Party with respect to any filings to the SEC or any other government body governing a stock exchange.

(c)Except as expressly permitted in this Agreement or as required by Applicable Laws, neither Party may use the other Party’s trademarks, service marks or trade names, or otherwise refer to or identify that other Party in marketing or promotional materials, press releases, statements to news media or other public announcements, without the other Party’s prior written consent, which that other Party may grant or withhold in its sole discretion.

8.6Publication. At least [***] prior to Distributor or its Affiliates or Sub-distributors publishing, publicly presenting, and/or submitting for written or oral publication a manuscript, presentation, abstract, marketing document or the like that includes Information relating to the Product that has not been previously published, Distributor shall provide to Zogenix’s Alliance Manager a draft copy thereof for Zogenix’s review (unless Distributor is required by Applicable Laws to publish such Information sooner, in which case Distributor shall provide such draft copy to Zogenix’s Alliance Manager as much in advance of such publication as possible). Distributor shall consider in good faith any comments provided by Zogenix during such [***] period, and in the event that Zogenix raises any concerns the matter shall be raised at the JSC; provided that Distributor shall, at Zogenix’s reasonable request, cease such proposed publication or remove therefrom any information requested by Zogenix. The contribution of each Party shall be noted in all publications or presentations by acknowledgment or co-authorship, whichever is appropriate.

8.7Prior Non-Disclosure Agreements. As of the Effective Date, the terms of this Article 8 shall supersede any prior non-disclosure, secrecy or confidentiality agreement between the Parties (or their Affiliates) dealing with the subject of this Agreement, including the Confidentiality Agreement, but excluding any terms of the Supply Agreement. Any information disclosed under such prior agreements shall be deemed disclosed under this Agreement.

8.8Equitable Relief. Given the nature and value of the Confidential Information and the competitive damage and irreparable harm that would result to a Party upon unauthorized disclosure, use or transfer of its Confidential Information to any Third Party, the Parties agree that monetary damages may not be a sufficient remedy for any breach of this Article 8. If the Receiving Party becomes aware of any breach or threatened breach of this Article 8 by the Receiving Party or a Third Party to whom the Receiving Party disclosed the Disclosing Party’s Confidential Information, the Receiving Party promptly shall notify the Disclosing Party and cooperate with the Disclosing Party to regain possession of its Confidential Information and prevent any further breach. In addition to all other remedies, a Party shall be entitled to seek specific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Article 8 without furnishing proof of actual damages or posting a bond.

ARTICLE 9.

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INTELLECTUAL PROPERTY OWNERSHIP AND ENFORCEMENT

9.1Ownership of Intellectual Property.

(a)Zogenix Technology. Zogenix shall retain all right, title and interest in and to the Zogenix Technology.

(b)Inventions and Intellectual Property Rights.

(i)Ownership. Zogenix shall own the entire right, title and interest in and to any and all Inventions discovered, developed, identified, made, conceived or reduced to practice solely by or on behalf of Zogenix under or in connection with this Agreement, including in the course of conducting regulatory activities or Commercialization of the Product in the Field in the Territory, whether or not patented or patentable, together with any and all intellectual property rights in any such Inventions, including Patents that claim or disclose any such Inventions (collectively, the “Product Invention”). Distributor shall own the entire right, title and interest in and to any and all Inventions discovered, developed, identified, made, conceived or reduced to practice solely by Distributor or its Affiliates or Sub-distributors or its other subcontractors in the Territory and under or in connection with this Agreement, including in the course of conducting regulatory activities or Commercialization of the Product in the Field in the Territory, whether or not patented or patentable, together with any and all intellectual property rights in any such Inventions, including Patents that claim or disclose any such Inventions (collectively, the “Distributor Invention”). Zogenix and Distributor shall each own an undivided right, title, and interest in and to any and all Inventions discovered, developed, identified, made, conceived or reduced to practice jointly by or on behalf of Zogenix under or in connection with this Agreement and by Distributor or its Affiliates or Sub-distributors or its other subcontractors in the Territory and under or in connection with this Agreement (“Joint Invention”). In the event that either Zogenix or Distributor intends to file a patent application containing a Joint Invention, such Party shall promptly notify the other Party of such intention and shall provide a draft of any such patent application to such other Party [***] before filing such patent application with any patent office and the Parties shall negotiate in good faith concerning the terms and conditions of a joint patent agreement.

(ii)Disclosure, License. Distributor shall, and shall cause its Affiliates and Sub-distributors and other subcontractors to, promptly disclose any Distributor Inventions to Zogenix in writing promptly following its discovery, development, identification, making, conception or reduction to practice by the Distributor, its Affiliates, Sub-distributors or other subcontractors. Distributor hereby grants Zogenix an irrevocable, perpetual, world-wide, royalty-free, fully paid-up, non-exclusive license with the right to grant sublicenses under such Distributor Inventions and any patents or patent applications claiming or disclosing such Distributor Inventions. In the event that Distributor intends to file a patent application containing Distributor Inventions, Distributor shall promptly notify Zogenix of such intention and shall provide a draft of any such patent application to Zogenix at least [***] before filing such patent application with any patent office. Distributor shall have the sole right to file for patent protection for such Distributor Inventions only if Zogenix does not provide a written objection

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within [***] of being provided with a draft of such patent application.

(c)Personnel Obligations. Prior to receiving any Confidential Information or beginning work under this Agreement, Distributor shall ensure that each employee, agent or contractor of Distributor or its Affiliates or Sub-distributors shall be bound in writing by non-disclosure and Invention assignment obligations that are consistent with the obligations of the Parties in Article 8 and this Article 9, including obligations to: (a) promptly report any invention, discovery, process or other intellectual property right; (b) assign to Distributor or Zogenix all of his, her or its right, title and interest in and to any invention, discovery, process or other intellectual property right; (c) cooperate in the preparation, filing, prosecution, maintenance and enforcement of any patent and patent application; (d) perform all acts and sign, execute, acknowledge and deliver any and all documents required for effecting the obligations and purposes of this Agreement; and (e) abide by the obligations of confidentiality and non-use set forth in Article 8. It is understood and agreed that such non-disclosure and invention assignment agreements need not reference or be specific to this Agreement.

9.2Zogenix Patent Prosecution and Maintenance. During the term of this Agreement, Zogenix shall use Commercially Reasonable Efforts to prepare, file, prosecute (including any reissues, re-examinations, post-grant proceedings, requests for patent term extensions, interferences, and defense of oppositions), at Zogenix’s sole discretion and cost. If there is any material change in Zogenix Patents specified in Exhibit 1.74, Zogenix shall provide Distributor with updated information concerning the Zogenix Patent in a timely manner.

9.3Infringement by Third Parties.

(a)Notice. In the event that either Zogenix or Distributor becomes aware of any infringement or threatened infringement by a Third Party in the Territory of any Zogenix Patents, it shall notify the other Party in writing to that effect. Any such notice shall include evidence to support an allegation of infringement or threatened infringement by such Third Party.

(b)Control of Action. Each Party shall share with the other Party all information available to it regarding such alleged or threatened infringement by a Third Party. Zogenix shall have the sole right, but not the obligation, to bring and control any action or proceeding with respect to alleged or threatened infringement by a Third Party in the Territory of any Zogenix Patent at Zogenix’s cost and expense. If Zogenix elects to commence a suit to enforce the applicable Zogenix Patent against such infringements, then Distributor shall have the right to join such enforcement action, if permitted by Applicable Law, upon notice to Zogenix and be represented by a counsel of its own choice at its own cost and expense. Zogenix shall keep Distributor reasonably informed of any such actions or proceedings and consider in good faith any comments or requests made by Distributor, and the Parties shall cooperate and consult with each other in strategizing regarding any such action or proceeding, provided that Zogenix shall control and have the right to make all final decisions (regardless of whether or not Distributor is a party to such action or proceeding) regarding all matters in the preparation and conduct of any such action or proceeding. Each Party shall cooperate fully with the other Party with respect to actions or proceedings under this Section 9.3, including being joined as a party

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plaintiff in any such action or proceeding and providing access to relevant documents and other evidence and making its employees available at reasonable business hours, with the costs of such cooperation to be included as shared costs for actions or proceedings brought hereunder.

(c)Recoveries. Any monetary recovery resulting from actions or proceedings under this Section 9.3 will be allocated as follows: each of Distributor and Zogenix first will be reimbursed, out of such recovery, for its reasonable and verifiable costs and expenses with respect to such action or proceeding (such reimbursement to be pro-rata based on the Parties’ relative costs and expenses if the recovery is not sufficient to reimburse both Parties fully) with any remainder being (i) allocated [***] if[***]or (ii) allocated [***] if [***].

9.4Third Party Intellectual Property Rights.

(a)If either Party becomes aware of a Patent in the Territory owned by a Third Party that it believes will, or may, be infringed by the manufacture, importation, Development or Commercialization of the Product in the Field in the Territory as contemplated by this Agreement, such Party shall notify the other Party of such Patent. The Parties then shall discuss the matter and seek in good faith to agree on whether the Parties should take a license under such Patent, and if so, on what terms; provided, that if the Parties are unable to agree after a reasonable period, [***], of good faith discussions, then Zogenix shall have the right to obtain such a license on such terms as it determines in its sole discretion and at its own cost and expense. Provided, however, in the event that Zogenix elects not to seek or fails to obtain a license under such Patent, Distributor shall have the right to obtain such a license with prior written notice to Zogenix.

(b)Each Party shall promptly notify the other Party in writing of any allegation by a Third Party that the activity of either Party pursuant to this Agreement or the Supply Agreement infringes or may infringe the intellectual property rights of such Third Party. Zogenix shall have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights, at Zogenix’s sole cost and expense and by counsel of its own choice; provided however that Distributor may participate in the defense, at its own expense, to be represented in any such action by counsel of its own choice. In any event, Zogenix agrees to keep Distributor reasonably informed of all material developments in connection with any such action. Zogenix agrees not to settle such infringement or make any admissions or assert any position in such action in a manner that would materially adversely affect the rights or interest of Distributor, without the prior written consent of Distributor, which shall not be unreasonably withheld, delayed or conditioned. Neither Party shall enter into any settlement or compromise of any action under this Section 9.4 which would in any manner alter, diminish, or be in derogation of the other Party’s rights under this Agreement without the prior written consent of such other Party, which shall not be unreasonably withheld, delayed or conditioned.

9.5Patent Term Restoration.At the request of Zogenix, the Parties shall cooperate with each other in obtaining patent term restoration, extensions and/or any other extensions of the Zogenix Patents as available under Applicable Laws, subject to Zogenix’s rights under Section 9.2. Zogenix shall bear the cost for such patent term restoration and/or any other

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extensions of the Zogenix Patent.

9.6Patent Marking. Distributor shall, and shall require its Affiliates and Sub-distributors to, mark all Product sold in the Territory (in a reasonable manner consistent with industry custom and practice and Applicable Law) with appropriate patent numbers or indicia to the extent permitted by Applicable Laws, if such markings impact recoveries of damages or equitable remedies available with respect to infringements of patents.

9.7Zogenix Trademarks. All packaging, promotional materials, package inserts, and labeling for the Product in the Field in the Territory shall bear, free of charge, one or more house Trademarks chosen and owned by Zogenix, including the Zogenix name and logo set forth in Exhibit 9.7 (each, a “Zogenix Trademark”). Zogenix or its Affiliates shall own all right, title, and interest in and to all Zogenix Trademarks, all corresponding trademark applications and registrations thereof, and all common law rights thereto. Zogenix shall, at Zogenix’s sole expense, have sole control over the registration, prosecution, maintenance, enforcement and defense of the Zogenix Trademarks. All goodwill of the business associated with or symbolized by the Zogenix Trademarks shall inure to the benefit of Zogenix. Distributor acknowledges Zogenix’s exclusive ownership of the Zogenix Trademarks and agrees not to take any action inconsistent with such ownership. Distributor shall provide Zogenix with samples of any advertising and promotional materials in original language that incorporate the Zogenix Trademarks prior to distributing such materials for use. Distributor shall comply with reasonable policies provided by Zogenix from time to time to maintain the goodwill and value of the Zogenix Trademarks. Distributor shall not, and shall cause its Affiliates not to, (i) use, seek to register, or otherwise claim rights in any Trademark that is confusingly similar to, misleading or deceptive with respect to, or that materially dilutes, any of the Zogenix Trademarks, or (ii) knowingly do, cause to be done, or knowingly omit to do any act, the doing, causing or omitting of which endangers, undermines, impairs, destroys or similarly affects, in any material respect, the validity or strength of any of the Zogenix Trademarks (including any registration or pending registration application relating thereto) or the value of the goodwill pertaining to any of the Zogenix Trademarks.

9.8Product Trademarks.

(a)Selection and Ownership of Product Trademarks. All packaging, promotional materials, package inserts, and labeling for the Product in the Field in the Territory shall bear one or more Trademarks that pertain specifically to the Product, including the Trademarks in existence as of the Effective Date as set forth in Exhibit 9.8 (each, a “Product Trademark”). If the Product Trademarks in existence as of the Effective Date are not eligible for trademark protection or for use in connection with the Product in the Field in the Territory or if the Parties agree that alternative or additional Trademarks may be beneficial, Distributor may investigate appropriate Trademarks for the Product in the Territory. If the Parties identify and agree on alternative or additional Trademarks for the Product in the Territory, Zogenix shall use Commercially Reasonable Efforts to register such Trademark(s) for the Product in the Field in the Territory. Zogenix or its Affiliates shall own all right, title, and interest in and to all Product

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Trademarks, all corresponding trademark applications and registrations thereof, and all common law rights thereto. All goodwill of the business associated with or symbolized by the Product Trademarks shall inure to the benefit of Zogenix. Distributor acknowledges Zogenix’s exclusive ownership of the Product Trademarks and agrees not to take any action inconsistent with such ownership.

(b)Maintenance and Prosecution of Product Trademarks. Zogenix shall, at Zogenix’s sole expense, control the registration, prosecution and maintenance of the Product Trademarks in the Territory; provided, that Zogenix shall keep Distributor reasonably informed of Zogenix’s actions with respect thereto and shall consider in good faith any reasonable comments made by Distributor with respect thereto.

(c)Use of Product Trademarks. Distributor shall promote, market, sell, offer for sale, import, distribute and otherwise commercialize the Product in the Field in the Territory only under the Product Trademarks. Distributor shall provide Zogenix with samples of any advertising and promotional materials that incorporate the Product Trademarks prior to distributing such materials for use. Distributor shall comply with reasonable policies provided by Zogenix from time to time to maintain the goodwill and value of the Product Trademarks. Distributor shall not, and shall cause its Affiliates not to, (i) use, seek to register, or otherwise claim rights in the Territory in any Trademark that is confusingly similar to, misleading or deceptive with respect to, or that materially dilutes, any of the Product Trademarks, or (ii) knowingly do, cause to be done, or knowingly omit to do any act, the doing, causing or omitting of which endangers, undermines, impairs, destroys or similarly affects, in any material respect, the validity or strength of any of the Product Trademarks (including any registration or pending registration application relating thereto) or the value of the goodwill pertaining to any of the Product Trademarks.

(d)Enforcement of Product Trademarks. Zogenix shall have the first right, but not the obligation, at Zogenix’s expense, to enforce and defend the Product Trademarks in the Territory, including (i) defending against any alleged, threatened or actual claim by a Third Party that the use of the Product Trademarks in the Territory infringes, dilutes or misappropriates any Trademark of that Third Party or constitutes unfair trade practices, or any other claims that may be brought by a Third Party against a Party in connection with the use of or relating to Product Trademarks in the Territory with respect to the Product and (ii) taking such action as Zogenix deems necessary against a Third Party based on any alleged, threatened or actual infringement, dilution or misappropriation of, or unfair trade practices or any other like offense relating to, the Product Trademarks in the Territory by a Third Party. If Zogenix elects not to enforce or defend the Product Trademarks in any such instance, then Zogenix shall promptly so notify Distributor and Distributor shall have the right, but not the obligation, at its expense, to do so. Each Party shall provide to the other Party all reasonable assistance requested by such first Party in connection with any such action, claim or suit under this Section 9.8(d), including allowing such first Party access to such other Party’s documents and to such other Party’s personnel who may have possession of relevant information.

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(e)Distributor’s Housemarks. In addition to the Product Trademarks, Distributor shall have the right to brand the Product in the Territory with those trademarks of Distributor that are associated with Distributor’s name or identity and are pre-approved in writing by Zogenix (“Distributor Housemarks”). Distributor shall own all rights in the Distributor Housemarks, and all goodwill in the Distributor Housemarks shall accrue to Distributor. Distributor and its Affiliates and Sub-distributor shall not use any trademarks, other than the Zogenix Trademarks, Product Trademarks and the approved Distributor Housemarks, in connection with the Commercialization of the Product in the Field in the Territory, without the prior written consent of Zogenix.

ARTICLE 10.

REPRESENTATIONS, WARRANTIES AND COVENANTS;

LIMITATION OF LIABILITY

10.1Mutual Representations, Warranties and Covenants. Each Party hereby represents and warrants to the other Party, as of the Effective Date, as follows:

(a)Duly Organized. Such Party is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification and failure to have such would prevent such Party from performing its obligations under this Agreement.

(b)Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement by such Party have been duly authorized by all necessary corporate action. This Agreement is a legal and valid obligation binding on such Party and enforceable in accordance with its terms and does not: (i) to such Party’s knowledge and belief, violate any law, rule, regulation, order, writ, judgment, decree, determination or award of any court, governmental body or administrative or other agency having jurisdiction over such Party; nor (ii) conflict with, or constitute a default under, any agreement, instrument or understanding, oral or written, to which such Party is a party or by which it is bound.

(c)Consents. Such Party has obtained, or is not required to obtain, the consent, approval, order or authorization of any Third Party, or has completed, or is not required to complete, any registration, qualification, designation, declaration or filing with any Regulatory Authority or governmental authority in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement.

(d)No Conflicting Grant of Rights. Such Party has the right to grant the rights contemplated under this Agreement and has not, and will not during the Term, grant any right to any Third Party that would conflict with the rights granted to the other Party hereunder.

(e)Debarment.Such Party is not debarred or disqualified under the United

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States Federal Food, Drug and Cosmetic Act or comparable Applicable Laws in the Territory and it does not, and will not during the Term, employ or use the services of any Person who is debarred or disqualified, in connection with activities relating to the Product. In the event that either Party becomes aware of the debarment or disqualification or threatened debarment or disqualification of any Person providing services to such Party, including the Party itself and its Affiliates or Sub-distributors, that directly or indirectly relate to activities under this Agreement, such Party shall immediately notify the other Party and shall cease employing, contracting with, or retaining any such person to perform any services under this Agreement.

(f)Comply with Applicable Laws. In the performance of its obligations hereunder, such Party shall comply and shall cause its and its Affiliates’ employees and contractors to comply with all Applicable Laws.

(g)Anti-Corruption. Such Party shall not, directly or indirectly through Third Parties, pay, promise or offer to pay, or authorize the payment of, any money or give any promise or offer to give, or authorize the giving of anything of value to a Public Official or Entity or other Person for purpose of obtaining or retaining business for or with, or directing business to, any Person, including, without limitation, Zogenix or Distributor. Without any limitation to the foregoing, such Party has not and shall not directly or indirectly promise, offer or provide any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift or hospitality or other illegal or unethical benefit to a Public Official or Entity or any other Person.

(h)Accuracy of Materials. All due diligence materials that such Party has provided and will provide to the other Party were and will be to the knowledge of such Party accurate, truthful, and complete at the time such materials are provided to the other Party, and such Party has not and will not intentionally omit any material facts requested by the other Party.

(i)Notification for Violation of Applicable Laws. Such Party shall immediately notify the other Party if it has any information or suspicion that there may be a violation of the FCPA or any other Applicable Law in connection with the performance of this Agreement or the sale of the Product in the Territory.

(j)No Pubic Officials. No owner, shareholder (direct or beneficial), officer, director, employee, third-party representative, agent, or other individual with any direct or indirect beneficial interest in such Party or its Affiliates or, to its knowledge, in its Sub-distributors or other contractors, or any immediate family relation of any such Person (collectively, “Interested Persons”), is a Public Official or Entity. Such Party shall notify the other Party immediately if during the Term (i) any Interested Person becomes a Public Official or Entity or (ii) any Public Official or Entity acquires a legal or beneficial interest in it or its Affiliate or, to its knowledge, in its Sub-distributors or other subcontractors.

10.2Representations, Warranties and Covenants of Distributor. Distributor represents, warrants, and covenants to Zogenix that:

(a)in the performance of its obligations hereunder, Distributor shall comply

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and shall cause its and its Affiliates’ and Sub-distributors’ employees and contractors to comply with Applicable Law and Distributor’s compliance policies, complete copies of which will be provided to Zogenix before the launch of the Product in the Territory;

(b)during the Term, Distributor agrees that:

(i)Zogenix will have the right, upon reasonable prior written notice and during Distributor’s regular business hours, to audit Distributor’s and its Affiliates’ books and records by an independent certified public accounting firm of recognized international standing, and Distributor shall ensure that Zogenix has the right to audit its Sub-distributors’ and subcontractors’ books and records, to investigation potential violations of any of the representations, warranties or covenants in this Section 10.2, the FCPA or other Applicable Laws or Distributor’s compliance policies. Such audit may be made no more than once each Fiscal Year (unless an audit reveals a violation under this Agreement, in which case an additional audit may be conducted within such Fiscal Year);

(ii)Distributor will certify to Zogenix annually in writing or otherwise upon Zogenix’s written request, under the form set forth in Exhibit 10.2(b) attached hereto, Distributor’s compliance with the representations, warranties and covenants in this Section 10.2, the FCPA and other Applicable Laws and Distributor’s compliance policies;

(iii)Distributor will inform Zogenix promptly of any changes in its business that would change any of its representations, warranties or covenants in this Section 10.2;

(iv)Zogenix shall have the right to suspend or terminate the supply of Product under the Supply Agreement and to terminate this Agreement if there is credible evidence that Distributor or its Affiliate or Sub-distributor may have violated any of the representations, warranties or covenants in this Section 10.2 the FCPA or other Applicable Laws or Distributor’s compliance policies.

10.3Representations and Warranties of Zogenix. Zogenix represents, warrants and covenants to Distributor that:

(a)Zogenix will inform Distributor promptly of any changes in its business that would change any of its representations, warranties or covenants in this Section 10.3; and

(b)as of the Effective Date, Zogenix has not received written notice of any pending or threatened claims or actions alleging that the Development or Commercialization of the Product in the Field infringes or would infringe the Patents of any Third Party in the Territory.

10.4Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE SUPPLY AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND

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EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, NON-INFRINGEMENT, VALIDITY AND ENFORCEABILITY OF PATENTS, OR THE PROSPECTS OR LIKELIHOOD OF DEVELOPMENT OR COMMERCIAL SUCCESS OF THE PRODUCT.

10.5Limitation of Liability. NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT; provided however, that this Section 10.5 shall not be construed to limit (a) either Party’s right to special, incidental or consequential damages for the other Party’s breach of Article 8 or (b) either Party’s indemnification rights or obligations under Article 11.

ARTICLE 11.

INDEMNIFICATION

11.1Indemnification of Zogenix. Distributor shall indemnify, defend and hold harmless Zogenix and its Affiliates and their respective directors, officers, employees and agents (the “Zogenix Indemnitees”), from and against any and all losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys’ fees and other expenses of litigation) (“Losses”) incurred by any Zogenix Indemnitee resulting from any claims, actions, suits or proceedings brought by a Third Party (“Third Party Claims”) to the extent arising from, or occurring as a result of: (a) the registration, use, handling, storage, import, offer for sale, sale or other disposition of the Product in the Territory by or on behalf of Distributor or its Affiliates; (b) the negligence or willful misconduct of any Distributor Indemnitees in connection with Distributor’s performance of its obligations or exercise of its rights under this Agreement; or (c) any breach of any representations, warranties or covenants of Distributor in this Agreement, except to the extent such Third Party Claims fall within the scope of the indemnification obligations of Zogenix set forth in Section 11.2 or arise out of the breach by Zogenix of any of the terms of the Supply Agreement.

11.2Indemnification of Distributor. Zogenix shall indemnify, defend and hold harmless Distributor and its Affiliates and their respective directors, officers, employees and agents (the “Distributor Indemnitees”), from and against any and all Losses incurred by any Distributor Indemnitee resulting from any Third Party Claims to the extent arising from, or occurring as a result of: (a) the manufacture, use, handling, storage, import, offer for sale, sale or other disposition of the Product outside the Territory by or on behalf of Zogenix or its Affiliates; (b) the negligence or willful misconduct of any Zogenix Indemnitees in connection with Zogenix’s performance of its obligations or exercise of its rights under this Agreement; or (c) any breach of any representations, warranties or covenants of Zogenix in this Agreement, except to the extent such Third Party Claims fall within the scope of the indemnification obligations of Distributor set forth in Section 11.1 or arise out of the breach by Distributor of any of the terms of the Supply Agreement.

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11.3Procedure. A Party that intends to claim indemnification under this Article 11 (the “Indemnitee”) shall promptly notify the indemnifying Party (the “Indemnitor”) in writing of any Third Party Claim, in respect of which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have sole control of the defense and/or settlement thereof. The Indemnitee may participate at its expense in the Indemnitor’s defense of and settlement negotiations for any Third Party Claim with counsel of the Indemnitee’s own selection. The indemnity arrangement in this Article 11 shall not apply to amounts paid in settlement of any action with respect to a Third Party Claim, if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any action with respect to a Third Party Claim shall only relieve the Indemnitor of its indemnification obligations under this Article 11 if and to the extent the Indemnitor is actually prejudiced thereby. The Indemnitee shall cooperate fully with the Indemnitor and its legal representatives in the investigation of any action with respect to a Third Party Claim covered by this indemnification.

11.4Insurance. Each Party, at its own expense, shall maintain product liability and other appropriate insurance (or self-insure) in an amount consistent with industry standards during the Term. Each Party shall provide a certificate of insurance (or evidence of self-insurance) evidencing such coverage to the other Party upon written request.

ARTICLE 12.

TERM AND TERMINATION

12.1Term. This Agreement shall commence on the Effective Date and shall remain in effect until September 1, 2045, unless earlier terminated by either Party pursuant to this Article 12 (the “Term”).

12.2Termination.

(a)Mutual Agreement. The Parties may terminate this Agreement by mutual written agreement.

(b)Distributor Convenience. At any time following the expiration of the Distribution Term (as defined in Section 1.17), the Distributor may terminate this Agreement at will upon [***] prior written notice to Zogenix.

(c)Zogenix Convenience. At any time following the expiration of the Distribution Term, Zogenix may terminate this Agreement at will upon [***] prior written notice to Distributor.

(d)Material Breach. If either Party believes in good faith that the other is in material breach of its obligations hereunder, then the non-breaching Party may deliver written

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notice of such breach to the other Party, and the allegedly breaching Party shall have [***] from receipt of such notice to dispute the validity of such breach. For all breaches of this Agreement, the allegedly breaching Party shall have [***]from the receipt of the initial notice to cure such breach. If the Party receiving notice of breach fails to cure the breach within such [***] period, then the non-breaching Party may terminate this Agreement in its entirety effective on written notice of termination to the other Party. Notwithstanding the foregoing, (a) if such material breach (other than a payment breach), by its nature, is curable, but is not reasonably curable within the [***] period, then such period shall be extended if the breaching Party provides a written plan for curing such breach to the non-breaching Party and uses Commercially Reasonable Efforts to cure such breach in accordance with such written plan; provided, that no such extension shall exceed [***] without the consent of the non-breaching Party.

(e)Diligence. Zogenix shall have the right to terminate this Agreement pursuant to Section 5.1(d).

(f)Bankruptcy. A Party shall have the right to terminate this Agreement upon written notice to the other Party upon the bankruptcy, dissolution or winding up of such other Party, or the making or seeking to make or arrange an assignment for the benefit of creditors of such other Party, or the initiation of proceedings in voluntary or involuntary bankruptcy, or the appointment of a receiver or trustee of such other Party’s property, that is not discharged within [***].

(g)Commercial Viability. In the event that prior to launch of the Product in the Field in the Territory (i) either Party has a good faith concern that the launch of the Product in the Field in the Territory is not likely to be possible with Commercially Reasonable Efforts, based upon credible evidence, such as any decision by a Regulatory Authority to require significant additional information before granting or as a condition to granting Regulatory Approval, or (ii) Distributor has a good faith concern that the Commercialization of the Product in the Territory will not be commercially viable, such Party may raise such concern for discussion by the JSC. If, within the time periods set forth in Section 3.1(d) or such longer time period as the Parties may mutually agree upon in writing, neither the JSC nor the Executives agree whether to launch or commercialize Product in the Territory, then, notwithstanding anything to the contrary in Section 3.1(d) or Article 13, either Party shall have the right to terminate this Agreement upon at least [***] written notice to the other Party.

(h)Third Party Patent.

(i)Distributor shall have the right to terminate this Agreement upon written notice to Zogenix if (A) the Parties have discussed an issued Patent under Section 9.4(a), (B) either (1) both Zogenix and Distributor agree not to seek a license under such issued Patent or (2) the applicable Party as determined pursuant to Section 9.4(a) failed to obtain a license under such issued Patent, after good faith efforts to do so, within [***]after the Parties’ agreement as to which Party would seek such license, and (C) Distributor reasonably and in good faith believes that the sale, offer for sale or import of the Product in the Territory in the Field infringes such issued Patent in the Territory, such that Distributor is not able to sell the Product in

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the Territory in the Field without infringing such issued Patent.

(ii)Zogenix shall have the right to terminate this Agreement upon written notice to Distributor if (A) the Parties have discussed an issued Patent under Section 9.4(a), (B) either (1) both Zogenix and Distributor agree not to seek a license under such issued Patent or (2) the applicable Party as determined pursuant to Section 9.4(a) failed to obtain a license under such issued Patent, after good faith efforts to do so, within [***] after the Parties’ agreement as to which Party would seek such license, and (C) Zogenix reasonably and in good faith believes that the manufacture for and sale to Distributor of the Product infringes such issued Patent, such that Zogenix will not be able to conduct (or have conducted on its behalf) such manufacturing for and sale of the Product to Distributor without infringing (or its contract manufacturers infringing) such issued Patent.

(i)Change of Control. This Agreement may be terminated by either Party upon [***] written notice to the other Party in the event that the other Party undergoes a Change of Control; provided, however, that such termination notice shall only be effective if delivered within [***] after the later of the occurrence of such Change of Control or the date the Party undergoing the Change of Control delivers written notice thereof to the other Party.

(j)Other Zogenix Termination Rights. Zogenix shall have the right to terminate this Agreement immediately upon written notice to Distributor (i) if Distributor or any of its Affiliates or Sub-distributors, directly or indirectly through any Third Party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of or the grant of a supplementary protection certificate with respect to, any Zogenix Patent (or any related Patent owned or controlled by Zogenix outside the Territory); (ii) if Zogenix determines that Distributor or its Affiliates or Sub-distributors are, or have caused or shall cause any Zogenix Indemnitee to be, in violation of the FCPA or any other Applicable Laws; or (iii) if Zogenix decides to withdraw the Product from the market in the Territory or otherwise believes that the promotion of the Product in the Field in the Territory presents a substantial risk of harm or injury to consumers which risk is unacceptable according to established principles of medical ethics.

(k)Termination of Supply Agreement. Following the execution of the Supply Agreement pursuant to Section 5.2, the Parties agree that this Agreement shall automatically terminate upon termination of the Supply Agreement for any reason.

(l)Distributor Safety Concern. This Agreement may be terminated by Distributor upon written notice to Zogenix, in the event that Distributor has a reasonable belief after due inquiry that the promotion of the Product in the Field in the Territory presents a substantial risk of harm or injury to consumers which risk is unacceptable according to established principles of medical ethics. Prior to terminating this Agreement in accordance with this Section 12.2(l), Distributor shall present evidence supporting the basis for such termination to Zogenix and shall consider in good faith all comments provided by Zogenix prior to terminating this Agreement.

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12.3Rights on Termination. The following will apply upon any termination of this Agreement:

(a)Termination of Rights and Obligations.Upon termination of this Agreement, all rights and obligations of the Parties under this Agreement will terminate, except as provided in this Section 12.3 and Sections 12.4, 12.5 and 12.6. Within [***]after the effective date of termination of this Agreement, each Party shall deliver to the other Party any and all Confidential Information of such other Party then in its possession, except to the extent a Party retains the right to use such Confidential Information pursuant to any rights granted under this Agreement that survive termination of this Agreement, and except for one (1) copy which may be kept in such Party’s (or its counsel’s) office for archival purposes subject to a continuing obligation of confidentiality and non-use under Article 8 for the duration set forth in Section 8.1. Neither Party shall be required to destroy Confidential Information contained in any electronic back-up tapes or other electronic back-up files that have been created solely by its automatic or routine archiving and back-up procedures, to the extent created and retained in a manner consistent with its standard archiving and back-up.

(b)Technology and Trademark License, Including Right to Reference and Technology Transfer. In the event that Zogenix terminates this Agreement pursuant to Section 12.2(c) or Distributor terminates this Agreement pursuant to Section 12.2(d), or after the expiration of this Agreement in accordance with Section 12.1, Zogenix shall negotiate in good faith with Distributor a license agreement for Distributor to make, use and sell the Product in the Field in the Territory under the Zogenix Technology, Zogenix Trademarks and the Product Trademarks. Any such license would include a royalty rate for the net sales of Product in the Field in the Territory of [***] if this Agreement is terminated by Distributor pursuant to Section 12.2(d) or of [***] if this Agreement is terminated by Zogenix pursuant to Section 12.2(c) or if the Agreement expires in accordance with Section 12.1. For clarity, the royalty rates, as applicable, set forth in this Section would be the total royalty due to Zogenix on Net Sales of the Product in the Territory under any such license agreement. In the event that Zogenix is the holder of the Regulatory Approval for the Product in the Territory at the time of termination pursuant to Section 12.2(c) by Zogenix or Section 12.2(d) by Distributor or expiration pursuant to Section 12.1, such license agreement shall also include a grant by Zogenix to Distributor of the right to reference and use all Data and Regulatory Filings (including all Regulatory Approvals), such reference and use solely for maintaining Regulatory Approval and commercializing the Product in the Territory in the Field. Such license shall also include Zogenix’s agreement to use Commercially Reasonable Efforts to enable Distributor to establish manufacturing capability for the Product in or for the Territory at Distributor’s cost. Such support and assistance would include: (i) amending agreements with Zogenix’s contract manufacturers of Product for the Territory to permit such contract manufacturers to enter into manufacturing agreements with Distributor to manufacture the Product in or for the Territory and introducing Distributor to such contract manufacturers, (ii) provision of reasonable access to and consultation with Persons knowledgeable of the manufacture of such Products and (iii) providing such technical assistance as may be reasonably requested by Distributor relating to methods and manufacturing know-how transfer to Distributor’s manufacturing facility. Such license

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agreement would include such other standard terms and conditions for license agreements of this type as are mutually agreed to by the Parties.

(c)Commercialization Transition. Unless this Agreement is terminated by Zogenix under Sections 12.2(f), (g)(i), (h)(ii), (j)(ii), or (j)(iii), or by Distributor under Sections 12.2(d), (g), or (l), or terminated automatically under Section 12.2(k), Distributor shall continue, to the extent that Distributor continues to have Product inventory, to fulfill orders received from customers for Product in the Territory until up to [***]after the date on which Zogenix notifies Distributor in writing that Zogenix has secured an alternative distributor for the Product in the Territory, but in no event for more for than [***]after the effective date of termination. All Product sold by or on behalf of Distributor or its Affiliates or Sub-distributors after the effective date of termination will be included in calculations under Article 6. Notwithstanding the foregoing, Distributor shall cease such activities upon [***] written notice from Zogenix at any time after the effective date of termination requesting that such activities cease. Within [***] after receipt of such cessation request, Distributor shall provide Zogenix an estimate of the quantity and shelf life of all Product remaining in Distributor’s or its Affiliates’ or Sub-distributors’ inventory, and Zogenix shall have the right to purchase any such quantities of Product from Distributor at a price mutually agreed by the Parties.

(d)Assignment of Regulatory Filings and Regulatory Approvals. Unless this Agreement is terminated by Zogenix under Section 12.2(c), at Zogenix’s option, which shall be exercised by written notice to Distributor, to the extent permitted under Applicable Laws, Distributor shall assign or cause to be assigned to Zogenix or its designee (or to the extent not so assignable, Distributor shall take all reasonable actions to make available to Zogenix or its designee the benefits of), at Zogenix’s cost, all Regulatory Filings and Regulatory Approvals for the Product in the Field in the Territory.

(e)Transition. Unless this Agreement is terminated by Zogenix under Section 12.2(c), Distributor shall use Commercially Reasonable Efforts to cooperate with Zogenix and/or its designee to effect a smooth and orderly transition in the registration and Commercialization of the Product in the Field in the Territory during the applicable notice period under Section 12.2 and following the effective date of termination. Without limiting the foregoing, Distributor shall use Commercially Reasonable Efforts to conduct, in an expeditious manner, any activities to be conducted under this Section 12.3.

(f)Third Party Agreements. Unless this Agreement is terminated by Zogenix under Section 12.2(c), at the written request of Zogenix, Distributor shall assign to Zogenix any Product-specific Third Party agreements, to the furthest extent possible, provided that such assignment is permitted under the Product-specific agreement or is otherwise agreed by the applicable Third Party. In the event such assignment is not requested by Zogenix or is not permitted or agreed by such Third Party, then the rights of such Third Party with respect to the Product will terminate upon termination of Distributor’s rights. Distributor shall ensure that each such Third Party (if its contract is not assigned to Zogenix pursuant to this Section 12.3) will transition any remaining Product back to Zogenix in the manner set forth in this Section 12.3 as

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if such Third Party were named herein. Distributor shall include provisions requiring compliance with these provisions in all applicable agreements with Third Parties.

12.4Exercise of Right to Terminate. The use by either Party hereto of a termination right provided for under this Agreement shall not give rise, on its own, to the payment of damages or any other form of compensation or relief to the other Party with respect thereto.

12.5Damages; Relief. Subject to Section 12.4 above, termination of this Agreement shall not preclude either Party from claiming any other damages, compensation or relief that it may be entitled to upon such termination.

12.6Accrued Obligations; Survival. The expiration or termination of this Agreement for any reason shall not release either Party from any liability that, at the time of such expiration or termination, has already accrued to such Party or that is attributable to a period prior to such termination, nor will any termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement. The following Articles and Sections will survive any expiration or termination of this Agreement: Sections 4.2(e) (Ownership of Regulatory Information), 4.9 (Recalls) (to the extent Product remains on the market that was distributed under this Agreement), 7.4 (Records), 9.1 (Ownership of Intellectual Property), 9.7 (Zogenix Trademarks) (to the extent applicable to any post-termination distribution provided under Section 12.3(c)), 9.8 (Product Trademarks) (to the extent applicable to any post-termination distribution provided under Section 12.3(c)), 10.5 (Limitation of Liability), 12.3 (Rights on Termination), 12.4 (Exercise of Right to Terminate), 12.5 (Damages; Relief) and 12.6 (Accrued Obligations; Survival) and Articles 1 (Definitions) (to the extent necessary to give effect to other surviving provisions), 7 (Payments, Books and Records) (only with respect to periods prior to termination and, if applicable, any post-termination distribution provided under Section 12.3(c)), 8 (Confidentiality), 11 (Indemnification), 13 (Dispute Resolution) and 14 (General Provisions).

ARTICLE 13.

DISPUTE RESOLUTION

13.1Objective. The Parties recognize that disputes as to matters arising under or relating to this Agreement or either Party’s rights or obligations hereunder may arise from time to time. It is the objective of the Parties to establish procedures to facilitate the resolution of such disputes in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 13 to resolve any such dispute if and when it arises.

13.2Resolution by Executives. Except as otherwise provided in Article 3, if an unresolved dispute as to matters arising under or relating to this Agreement or either Party’s rights or obligations hereunder arises, either Party may refer such dispute to the Executives, who shall meet in person or by telephone within [***] after such referral to attempt in good faith to

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resolve such dispute. If such matter cannot be resolved by discussion of such officers within such[***] (as may be extended by mutual written agreement), such dispute shall be resolved in accordance with Section 13.3. The Parties acknowledge that discussions between the Parties to resolve disputes are settlement discussions under applicable rules of evidence and without prejudice to either Party’s legal position.

13.3Arbitration.

(a)Any and all disputes that are not resolved pursuant to Section 13.2 shall be finally settled by binding arbitration administered under the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with said Rules. The arbitration will be conducted in New York, New York. The language to be used in the arbitral proceedings will be English. Judgment on the award may be entered in any court having jurisdiction.

(b)The award shall be rendered within[***] of the constitution of the arbitral tribunal, unless the arbitral tribunal determines that the interest of justice requires that such limit be extended.

(c)The arbitrators shall award to the prevailing party, if any, as determined by the arbitrators, its reasonable attorneys’ fees and costs.

(d)The arbitration proceeding will be confidential and the arbitrators shall issue appropriate protective orders to safeguard each Party’s Confidential Information. Except as required by Applicable Laws, no Party shall make (or instruct the arbitrators to make) any public announcement with respect to the proceedings or decision of the arbitrators without prior written consent of the other Party. The existence of any dispute submitted to arbitration, and the award, shall be kept in confidence by the Parties and the arbitrators, except as required in connection with the enforcement of such award or as otherwise required by Applicable Laws.

ARTICLE 14.

GENERAL PROVISIONS

14.1Governing Law.This Agreement and all questions regarding its existence, validity, interpretation, breach or performance and any dispute or claim arising out of or in connection with it (whether contractual or non-contractual in nature such as claims in tort, from breach of statute or regulation or otherwise) shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, United States, without reference to its conflicts of law principles to the extent those principles would require applying another jurisdiction’s laws. The United Nations Conventions on Contracts for the International Sale of Goods shall not be applicable to this Agreement or the Supply Agreement.

14.2Force Majeure. Neither Party shall be held liable to the other Party nor be

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deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement (other than failure to make payment when due) when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, including embargoes, war, acts of war (whether war be declared or not), insurrections, riots, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority or the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practicable, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur.

14.3Assignment. Except as expressly provided in this Section 14.3, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, that either Party may assign this Agreement and its rights and obligations hereunder without the other Party’s consent:

(a)in connection with the transfer or sale of all or substantially all of the business of the assigning Party to a Third Party, whether by merger, sale of stock, sale of assets or otherwise; provided that in the event of a transaction (whether this Agreement is actually assigned or is assumed by the acquiring party by operation of law (e.g., in the context of a reverse triangular merger)), unless otherwise agreed with the acquiring party in writing, intellectual property of the acquiring party shall not be included in the intellectual property to which the other Party has access under this Agreement; or

(b)to an Affiliate, provided that the assigning Party shall remain liable and responsible to the non‑assigning Party hereto for the performance and observance of all such duties and obligations by such Affiliate.

For the avoidance of doubt, in the event that either Party assigns this Agreement pursuant to this Section 14.3(a), the other Party shall have the right to terminate this Agreement pursuant to Section 12.2(i). This Agreement shall be binding upon successors and permitted assigns of the Parties. Any assignment not in accordance with this Section 14.3 will be null and void.

14.4Severability.If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.

14.5Notices. All notices required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by internationally-recognized

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overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

If to Zogenix, addressed to:

Zogenix, Inc.

5959 Horton Street, Suite 500

Emeryville, CA 94608, U.S.A

Attention: Chief Executive Officer

Facsimile Number: +1 (510) 550-8340

With a copy to (which shall not constitute notice):

Latham & Watkins, LLP

12670 High Bluff Drive

San Diego, CA 92130, U.S.A

Attention: Cheston Larson, Esq.

Facsimile Number: +1 (858) 523-5450

If to Distributor, addressed to:

Nippon Shinyaku Co., Ltd.

14, Nishinosho-monguchi-cho

Kisshoin, Minami-ku

Kyoto 601-8550, JAPAN

Attention: Alliance Department

Facsimile Number: +81-75-321-9019

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day; and (b) on the second Business Day after dispatch if sent by internationally-recognized overnight courier.

14.6Entire Agreement; Amendments. This Agreement and the Supply Agreement, together with the exhibits hereto and thereto, contain the entire understanding of the Parties with respect to the subject matter hereof and thereof and supersede and cancel all previous express or implied agreements and understandings, negotiations, writings and commitments, either oral or written, in respect to the subject matter hereof and thereof, including the Confidentiality Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of both Parties, but “written instrument” does not include the text of e-mails or similar electronic transmissions.

14.7Headings. The captions to the several Articles and Sections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several

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Sections hereof.

14.8Independent Contractors. It is expressly agreed that Zogenix and Distributor shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Zogenix nor Distributor shall have the authority to make any statements, representations or commitments of any kind or to take any action that shall be binding on the other Party, without the prior written consent of the other Party.

14.9Waiver. The waiver by either Party hereto of any right hereunder, or the failure of the other Party to perform, or a breach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.

14.10Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.

14.11Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply.

14.12Interpretation. All references in this Agreement to an Article or Section shall refer to an Article or Section in or to this Agreement, unless otherwise stated. Any reference to any federal, national, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” and similar words means including without limitation. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision. All references to days, months, quarters or years are references to calendar days, calendar months, calendar quarters, or calendar years, unless stated otherwise. References to the singular include the plural.

14.13No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly made for the benefit of any Party other than Zogenix and Distributor, except as otherwise provided in this Agreement with respect to Zogenix Indemnitees under Section 11.1 and Distributor Indemnitees under Section 11.2. This Agreement may be terminated, varied or amended in accordance with its terms or with the agreement of Distributor and Zogenix without the consent of the Zogenix Indemnitees or Distributor Indemnitees.

14.14English Language. This Agreement is in the English language, and the English language shall control its interpretation. In addition, unless otherwise explicitly stipulated in this Agreement, all notices required or permitted to be given under this Agreement, and all written, electronic, oral or other communications between the Parties regarding this Agreement, shall be in the English language.

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14.15Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, all of which together shall constitute but one and the same instrument.

14.16Further Actions. Each Party will execute, acknowledge and deliver such further instruments, and to do all such other ministerial, administrative or similar acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have executed this Distributorship Agreement as of the Effective Date.

ZOGENIX, INC.		NIPPON SHINYAKU COMPANY, LTD.
By:	/s/ Stephen J. Farr	By:	/s/Shigenobu Maekawa
Name:	Stephen J. Farr	Name:	Shigenobu Maekawa
Title:	President and Chief Executive Officer	Title:	President

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Exhibit 1.70

UNLABELED DRUG PRODUCT

[***]

[***] 

[***] 

[***] 

[***] 

[***] 

[***] 

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Exhibit 1.74

ZOGENIX ZX008 PATENTS AS OF THE EFFECTIVE DATE

Patents claiming ZX008 or its use in Japan
Docket No	Appln. No	Filing Date	Publn. No	Patent No	Issue Date
[***]
ZGNX-135JP	[***]	[***]	[***]	[***]	11/30/18
ZGNX-135JP DIV	[***]	[***]
[***]
ZGNX-143JP	[***]	[***]	[***]

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Exhibit 2.3

MATERIAL TERMS OF SUPPLY AGREEMENT

The Supply Agreement will include the following terms and conditions:

1.Appointment as Exclusive Supplier. During the Term, Zogenix shall retain and have the sole and exclusive right to supply or have supplied all of Distributors’ and its Affiliates’ and Sub-distributors’ requirements of the Product for sale in the Field in the Territory.

2.Transfer Price. The price at which Zogenix supplies the Product (as Unlabeled Drug Product) to Distributor equals the consideration and Transfer Price set forth in the Agreement in Section 6.5. Distributor shall make payment in accordance with Sections 6.1, 6.3, and 6.4, and shall also pay Zogenix’s invoice for the estimated Transfer Price within [***] of the date on which the applicable units of Product are delivered by Zogenix in accordance Section 6.5 and the terms of the Supply Agreement. The Parties will true-up the Fully-Burdened Manufacturing Cost on an annual basis when truing-up the Transfer Price. For any Product that is supplied to Distributor under this Agreement and damaged by Distributor during labeling or packaging, the transfer price for any such Product shall be [***] per unit of Product for the applicable Fiscal Year. The Supply Agreement shall also include terms permitting Distributor to audit Zogenix’s Fully-Burdened Manufacturing Costs that are similar to Zogenix’s audit rights in Section 7.5 of the Agreement.

3.Third Party Manufacturer Agreements. The terms of the Supply Agreement shall (a) establish the procedures, terms and conditions for manufacture, quality control, forecasting, ordering, delivery price, payment and appropriate other activities relating to the supply of the Product in the Territory so as to reasonably enable Zogenix to meet its obligations under its agreements with Third Party manufacturers and (b) provide Distributor no remedies for Zogenix’s failure to supply the Product in accordance with the Supply Agreement that are in addition to those set forth herein or that are available to Zogenix in its existing agreements with Third Party manufacturers, and (c) set forth such terms and conditions so that the Supply Agreement is otherwise consistent in all material respects with such agreements with Third Party manufacturers.

4.Forecasts and Orders. [***] prior to the anticipated First Commercial Sale, Distributor shall provide Zogenix with a good faith, [***] rolling forecast of its anticipated requirements of the Product, the first [***] of which shall be on a monthly basis and the last [***] of which shall be on a quarterly basis. The first [***] of such forecast shall be binding. Distributor shall submit binding purchase orders consistent with the binding portion of its forecasts. Each purchase order shall have a requested delivery date that is at least [***] after the date of the purchase order. The terms of the Supply Agreement shall also provide for the order and delivery of launch stock for the Product prior to Regulatory Approval to ensure timely launch of the product following Regulatory Approval.

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Purchase orders shall be placed in full batch increments as defined in the Supply Agreement.

5.Delivery. All Products shall be shipped Ex Works manufacturing site (Incoterms 2010) to the destination requested by Distributor. Distributor shall be responsible for labeling and packaging Product.

6.Safety Stock. Distributor shall use Commercially Reasonable Efforts to build promptly following Regulatory Approval and thereafter to maintain an inventory of Product (itself and/or with wholesalers) which is not less than the equivalent of the immediate next [***] of anticipated demand for the Product in the Territory.

7.Change Controls. The Parties shall include in the Supply Agreement a reasonable change control procedure to deal with any reasonable changes to the Product specifications and other changes required by Applicable Laws. All Third Party costs incurred by either Party for any such changes in accordance with the agreed-upon change control procedure shall be paid by Distributor if requested by Distributor or if such changes are required by Applicable Laws in the Territory.

8.Second Source. Based on Distributor’s forecasts, including its [***] forecasts, the Parties will discuss and determine whether Zogenix will obtain additional capacity to support Distributor’s requirements for the Product in the Territory. Any decisions to build or engage additional manufacturing capacity for the Territory will be at Zogenix’s sole discretion, and in no event will Zogenix be obligated to supply Product in excess of Distributor’s binding forecasts.

9.Product Quality/Complaints. The Supply Agreement will define procedures for resolution of any disputes regarding Product quality and for notification of each Party in the event of a Product complaint or Product recall. The Supply Agreement will contain mutually acceptable provisions regarding release testing of the Product and, if applicable, the transfer of information necessary for Distributor to perform required quality testing, as applicable.

10.Regulatory Audits.Not more than once per Fiscal Year or as otherwise agreed by the Parties, and subject to the terms of the applicable agreement between Zogenix and its Third Party manufacturers, Zogenix shall, at Distributor’s request, conduct GMP audits of the Third Party manufacturers and, if applicable, exercise such other audit rights that Zogenix may have under such agreements, and shall disclose to Distributor the results of such audits. Zogenix will use commercially reasonable efforts to cause such Third Party manufacturers to promptly correct any deficiencies or other adverse findings.

11.Representations and Warranties. Zogenix shall provide standard warranties applicable in the pharmaceutical industry, including warranties that all Product manufactured for Distributor:

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a.shall be manufactured and tested in accordance with all Applicable Laws, including GMP applicable to the manufacturing, storage, and shipment of the Product,

b.shall not be adulterated or misbranded within the meaning of the United States Food, Drug and Cosmetic Act, 21 U.S.C. Section 301c et. seq., or other Applicable Laws, and

c.the time of delivery to Distributor will meet the Product specifications.

12.Quality Agreement. The Parties shall work together in good faith to enter into a mutually acceptable quality agreement with respect to the manufacture of the Product prior to shipment of any Product to Distributor.

US-DOCS\105216871.19

Exhibit 4.2(a)

THE INITIAL VERSION OF THE REGULATORY PLAN

US-DOCS\105216871.19

Exhibit 8.5(a)

PRESS RELEASE

US-DOCS\105216871.19

Exhibit 9.7

ZOGENIX TRADEMARKS

Trademark	Country	Status	Registration number	Next renewal date	Application number	Application date	Registration date	Class
(Zogenix Logo)	Japan	Pending	N/A	N/A	2019031449	2/28/2019	N/A	5, 42

US-DOCS\105216871.19

Exhibit 9.8

PRODUCT TRADEMARKS

Trademark	Country	Status	Registration number	Next renewal date	Application number	Application date	Registration date	Class
FINTEPLA	Japan	Registered	6105099	12/7/2028	2018028557	3/9/2018	12/7/2018	5
(Fintepla Logo)	Japan	Registered	6093116	10/26/2028	2018028558	3/9/2018	10/26/2018	5

US-DOCS\105216871.19

Exhibit 10.2(b)

FORM OF COMPLIANCE CERTIFICATION

Date:__________

To:Zogenix, Inc. and its Affiliates (“Zogenix”)

Re:Distributorship Agreement dated [] (“the Agreement”)

For and on behalf of [__________________] and our Affiliates (as defined in the Agreement) and employees, we confirm that in respect of our distribution of Zogenix Product within the Territory during the period [insert date] to [insert date]:-

•there was no offer, or promise to make, authorize or provide (directly or indirectly) a gift, payment or anything of value to a government official, political parties or candidates or private sector employee, in order to influence or reward any action or decision by such person in his or her official or professional capacity, for the purpose of corruptly obtaining or retaining business or securing any improper advantage;

•all payments, expenses or credits properly paid to or incurred on behalf of Zogenix, were accurately and appropriately recorded and described in accordance with acceptable accounting and recordkeeping procedures, and substantiated by supporting documents and evidence;

•there were no unauthorized and/or excessive payments of any kind to health care institutions, hospitals, hospital services or departments; and

•has performed the necessary due diligence to ensure compliance with Applicable Laws (including anti-bribery laws and the U.S. FCPA) and the terms of the Agreement.

Please be advised accordingly.

Yours faithfully,

[____________________]

Authorized Representative

Name:Title:

Signature:Date:

US-DOCS\105216871.19

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen J. Farr, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Zogenix, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Stephen J. Farr

Stephen J. Farr

President and Chief Executive Officer

(Principal Executive Officer)

Date: May 9, 2019

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael P. Smith, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Zogenix, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael P. Smith

Michael P. Smith

Executive Vice President, Chief Financial Officer, Treasurer and Secretary

(Principal Financial Officer)

Date: May 9, 2019

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

In connection with the Quarterly Report on Form 10-Q of Zogenix, Inc. (the “Company”) for the period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen J. Farr, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2019

/s/ Stephen J. Farr

Stephen J. Farr

President and Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

In connection with the Quarterly Report on Form 10-Q of Zogenix, Inc. (the “Company”) for the period ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. Smith, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 9, 2019

/s/ Michael P. Smith

Michael P. Smith

Executive Vice President, Chief Financial Officer, Treasurer and Secretary

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	Apr. 30, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Trading Symbol	ZGNX
Entity Registrant Name	ZOGENIX, INC.
Entity Central Index Key	0001375151
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		42,446,220
Entity Small Business	false
Entity Emerging Growth Company	false

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 58,288	$ 68,454
Marketable securities	422,407	445,733
Accounts receivable	15,500	0
Prepaid expenses	8,071	6,718
Other current assets	6,323	11,825
Total current assets	510,589	532,730
Property and equipment, net	10,632	2,870
Operating lease right-of-use assets	8,423	0
Intangible assets	102,500	102,500
Goodwill	6,234	6,234
Other noncurrent assets	2,154	3,997
Total assets	640,532	648,331
Current liabilities:
Accounts payable	8,167	7,989
Accrued and other current liabilities	18,594	18,086
Deferred revenue, current	5,000	0
Current portion of operating lease liabilities	1,412	0
Current portion of contingent consideration	22,800	32,300
Total current liabilities	55,973	58,375
Deferred revenue, noncurrent	10,500	0
Operating lease liabilities, net of current portion	11,355	0
Contingent consideration, net of current portion	48,400	45,900
Deferred income taxes	17,425	17,425
Other long-term liabilities	0	3,830
Total liabilities	143,653	125,530
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding	0	0
Common stock, $0.001 par value; 50,000 shares authorized; 42,446 and 41,925 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	42	42
Additional paid-in capital	1,227,620	1,218,710
Accumulated deficit	(731,156)	(695,954)
Accumulated other comprehensive income	373	3
Total stockholders’ equity	496,879	522,801
Total liabilities and stockholders’ equity	$ 640,532	$ 648,331

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock par value (usd per share)	$ 0.001	$ 0.001
Preferred stock authorized (shares)	10,000,000	10,000,000
Preferred stock issued (shares)	0	0
Preferred stock outstanding (shares)	0	0
Common stock par value (usd per share)	$ 0.001	$ 0.001
Common stock authorized (shares)	50,000,000	50,000,000
Common stock issued (shares)	42,466,000	41,925,000
Common stock outstanding (shares)	42,466,000	41,925,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating expenses:
Research and development	$ 24,352	$ 22,980
Selling, general and administrative	10,918	8,070
Change in fair value of contingent consideration	3,000	0
Total operating expenses	38,270	31,050
Loss from operations	(38,270)	(31,050)
Other income (expense):
Interest income	3,156	833
Other (expense) income, net	(88)	37
Total other income	3,068	870
Net loss	$ (35,202)	$ (30,180)
Net loss per share, basic and diluted:
Net loss per share, basic and diluted (in dollars per share)	$ (0.83)	$ (0.87)
Weighted average common shares used in the calculation of basic and diluted net loss per common share (shares)	42,236	34,841

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (35,202)	$ (30,180)
Other comprehensive income:
Change in unrealized gains on marketable securities	370	0
Comprehensive loss	$ (34,832)	$ (30,180)

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income	Accumulated Deficit
Stockholders' Equity Beginning Balance at Dec. 31, 2017	$ 301,521	$ 35	$ 873,526	$ 0	$ (572,040)
Stockholders' Equity - Beginning Balance (shares) at Dec. 31, 2017		34,808
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(30,180)				(30,180)
Issuance of common stock under employee equity plans	1,930		1,930
Issuance of common stock under employee equity plans (shares)		198
Shares repurchased for tax withholdings related to net share settlement of employee equity awards	(1,411)		(1,411)
Shares repurchased for tax withholdings related to net share settlement of employee equity awards (shares)		(33)
Stock-based compensation	1,912		1,912
Stockholders' Equity Ending Balance at Mar. 31, 2018	273,772	$ 35	875,957	0	(602,220)
Stockholders' Equity - Ending Balance (shares) at Mar. 31, 2018		34,973
Stockholders' Equity Beginning Balance at Dec. 31, 2018	522,801	$ 42	1,218,710	3	(695,954)
Stockholders' Equity - Beginning Balance (shares) at Dec. 31, 2018		42,078
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(35,202)				(35,202)
Other comprehensive income	370			370
Issuance of common stock under employee equity plans	5,293		5,293
Issuance of common stock under employee equity plans (shares)		380
Shares repurchased for tax withholdings related to net share settlement of employee equity awards	(606)		(606)
Shares repurchased for tax withholdings related to net share settlement of employee equity awards (shares)		(12)
Stock-based compensation	4,223		4,223
Stockholders' Equity Ending Balance at Mar. 31, 2019	$ 496,879	$ 42	$ 1,227,620	$ 373	$ (731,156)
Stockholders' Equity - Ending Balance (shares) at Mar. 31, 2019		42,446

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flow from operating activities:
Net loss	$ (35,202)	$ (30,180)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	4,223	1,912
Depreciation and amortization	191	23
Net accretion and amortization of investments in marketable securities	(1,703)	0
Change in fair value of common stock warrant liabilities	303	(17)
Change in fair value of contingent consideration	3,000	0
Changes in operating assets and liabilities:
Accounts receivable	(15,500)	0
Prepaid expenses and other current assets	5,270	166
Other assets	(6,580)	2,422
Accounts payable, accrued and other liabilities	(7,096)	891
Operating lease liability	12,767
Deferred revenue	15,500	0
Net cash used in operating activities	(24,827)	(24,783)
Cash flows from investing activities:
Purchases of marketable securities	(145,826)	0
Proceeds from maturities of marketable securities	171,225	0
Purchases of property and equipment	(4,535)	(65)
Net cash provided by (used in) investing activities	20,864	(65)
Cash flows from financing activities:
Payment of contingent consideration	(10,000)	0
Proceeds from issuance of common stock under equity incentive plans	4,379	3,590
Taxes paid related to net share settlement of equity awards	(582)	(292)
Net cash (used in) provided by financing activities	(6,203)	3,298
Net decrease in cash and cash equivalents	(10,166)	(21,550)
Cash and cash equivalents, beginning of the period	68,454	293,503
Cash and cash equivalents, end of the period	58,288	271,953
Noncash financing activities
Purchases of property and equipment in accounts payable and accrued liabilities	$ 5,067	$ 0

XML

Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Organization and Basis of Presentation

Zogenix, Inc. and subsidiaries (the Company, we, us or our) is a global pharmaceutical company committed to developing and commercializing transformative therapies to improve the lives of patients and their families living with rare diseases. Our primary area of therapeutic focus is rare, or “orphan” childhood-onset epilepsy disorders. Our lead product candidate, Fintepla (ZX008, fenfluramine) is currently being developed for the treatment of seizures associated with Dravet syndrome and Lennox-Gastaut syndrome. We operate in one business segment—the research, development and commercialization of pharmaceutical products and our headquarters are located in Emeryville, California.

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Zogenix, Inc. and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Certain reclassifications have been made to the prior period amounts to conform to the current year presentation. The results of operations for any interim period are not necessarily indicative of results of operations for any future period. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2019.

Certain prior period amounts within the accompanying unaudited consolidated financial statements have been reclassified to conform to current period presentation. These reclassifications did not affect our financial position, net loss, comprehensive loss, or cash flows as of and for the periods presented.

Future Funding Requirements

Excluding gains from two discrete business divestitures, we have incurred significant net losses and negative cash flows from operating activities resulting in an accumulated deficit of $731.2 million as of March 31, 2019. We expect to continue to incur significant operating losses and negative cash flows from operations as we continue to advance our product candidates through development and commercialization. Additionally, pursuant to our acquisition of Brabant Pharma Limited (Brabant) in 2014 to obtain worldwide development and commercialization rights to Fintepla, we are required to make additional payments to the former owners of Brabant in the event we achieve certain regulatory and sales milestones with Fintepla (See Note 5). Historically, we have relied primarily on the proceeds from equity offerings to finance our operations. Until such time, if ever, we can generate a sufficient amount of revenue to finance our cash requirements, we may need to continue to rely on additional financing to achieve our business objectives. However, if such financing is not available at adequate levels when needed, we may be required to significantly delay, scale back or discontinue one or more of the product development programs or commercialization efforts or other aspects of our business plans, and our operating results and financial condition would be adversely affected.

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

We analyze our collaboration agreements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, we consider whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer

relationship and, therefore, within the scope of the revenue with contracts with customer guidance. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Revenue from transactions with collaboration participants is presented apart from revenue with contracts with customers in our condensed consolidated statement of operations.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Unconditional rights to receive consideration in advance of performance are recorded as receivables and deferred revenue in the condensed consolidated balance sheets when we have a contractual right to bill and receive the payment, performance is expected to commence shortly and there is less than a year between billing and performance. Amounts recognized for satisfied performance obligations prior to the right to payment becoming unconditional are recorded as contract assets in the condensed consolidated balance sheets. If we expect to have an unconditional right to receive consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

For arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers guidance, we perform the following steps to determine the appropriate amount of revenue to be recognized as we fulfill our obligations: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

At contract inception, we assess the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

We consider the terms of the contract and our customary business practices to determine the transaction price. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative stand-alone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, we use our best estimate of the selling price for the deliverable.

Revenue is recognized when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service, is considered to be as the services are received and used. We recognize revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the good or service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.

Significant Accounting Policies

Our other significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K. As a result of entering into a collaborative arrangement in March 2019 and the adoption of the new lease accounting standard, we have updated our revenue recognition and lease accounting policies as detailed below. There were no other changes to our significant accounting policies from those disclosed in our 2018 Annual Report on Form 10-K. See Notes 3 and 7 for additional details related to our collaborative arrangement and the adoption of the new lease accounting standard, respectively.

Recently Adopted Accounting Pronouncements

ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 makes targeted improvements for collaborative arrangements by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaboration arrangement participant is a customer, (2) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer and (3) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers.

On January 1, 2019, we early adopted this new standard and its applicability has been considered in the accounting for our collaborative arrangement with Nippon Shinyaku Co., Ltd. (See Note 3).

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Topic 842 establishes a right-of-use asset model that requires all lessees to recognize ROU assets and liabilities for leases with a duration greater than one year on the balance sheet as well as provide disclosures with respect to certain qualitative and quantitative information regarding the amount, timing and uncertainty of cash flows arising from leases.

On January 1, 2019, we adopted Topic 842 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance. Consequently, prior period financial information and related disclosures have not been adjusted and will continue to be presented in accordance with the previous lease standard. In addition, we elected the package of transition provisions available for existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct lease costs for existing leases. We did not elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of our leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.

The adoption of Topic 842 did not have a material impact on our condensed consolidated statements of operations and cash flows. The impact on the accompanying condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):

	December 31, 2018		Adjustments Due to the Adoption of Topic 842		January 1, 2019
Assets
Operating lease right-of-use assets	$	—	$	8,641	$	8,641
Liabilities
Other accrued liabilities	1,845		(363)		$	1,482
Current portion of operating lease liabilities	—		1,058		1,058
Operating lease liabilities, net of current portion	—		11,776		11,776
Other long-term liabilities	3,830		(3,830)		—
Total	5,675		8,641		14,316

Upon adoption on January 1, 2019, we recorded operating lease ROU assets and lease liabilities of $8.6 million and $12.8 million, respectively, with the difference between ROU assets and lease liabilities attributed to the reclassifications of deferred rent and lease incentive obligations, a cease-use liability and initial direct leasing costs as a component of ROU assets. 

Prior to January 1, 2019, we recognized related rent expense on a straight-line basis over the term of the lease. Incentives granted under our operating lease, including allowances for leasehold improvements and rent holidays, were recognized as reductions to rent expense on a straight-line basis over the term of the lease. Deferred rent consisted of the difference between rent expense recognized on a straight-line basis and cash rent payments. Subsequent to the adoption of Accounting Standards Update (ASU) 2016-02 and related amendments (collectively, Topic 842) on January 1, 2019, we determine whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease at lease commencement. All of our leases are classified as operating leases. Leases with a term greater than one year are included in operating lease right-of-use assets (ROU asset), current portion of lease liabilities, and lease liabilities, net of current portion in our condensed consolidated balance sheet at March 31, 2019. If a lease contains an option to renew, the renewal option is included in the calculation of lease liabilities if we are reasonably certain at lease commencement the renewal option will be exercised. Lease liabilities and their corresponding ROU assets are measured at the present value of the remaining lease payments, discounted at an appropriate incremental borrowing rate at lease commencement, or as of January 1, 2019, for our existing leases. Management uses judgment to estimate the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as initial direct lease costs, lease incentives, scheduled rent escalations and impairment charges if we determine the ROU asset is impaired. Operating lease expense is recognized on a straight-line basis over the lease term.

We elected the post-transition practical expedient to not separate lease components from non-lease components for all existing lease classes. We also elected a policy of not recording leases on our condensed balance sheets when a lease has a term of one year or less.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. Additionally, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, a summary of changes in each caption of stockholders’ equity presented in the consolidated balance sheets must be provided in a note or separate statement. The final rule regarding stockholders’ equity was effective in the fourth quarter of 2018. The SEC provided relief on the effective date until the first quarter of 2019, and we have provided this disclosure beginning with this Quarterly Form 10-Q.

Recent Accounting Pronouncements Not Yet Effective

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires that certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the net receivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. This standard update is effective for us on January 1, 2020 with early adoption permitted. We expect to adopt this ASU on January 1, 2020 and are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the timing and effect that the updated standard will have on our consolidated financial statements and related disclosures.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted for any removed or modified disclosures. We are currently

evaluating the timing and effect that the updated standard will have on our consolidated financial statements and related disclosures.

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Collaborative Arrangements

3 Months Ended

Mar. 31, 2019

Disaggregation of Revenue [Abstract]

Collaborative Arrangement

Collaborative Arrangement

In March 2019, we entered into an agreement (Shinyaku Agreement) with Nippon Shinyaku Co., Ltd. (Shinyaku) for the exclusive distribution of Fintepla for the treatment of Dravet syndrome and LGS. As part of the Shinyaku Agreement, we are responsible for completing the global clinical development and all regulatory approval activities for Fintepla to support the submission of new drug applications in Japan for Dravet syndrome and LGS. Shinyaku will be responsible for the commercialization activities including the promotion, marketing, sale and distribution of Fintepla in Japan. Upon regulatory approval of Fintepla in Japan, Shinyaku will also act as our exclusive distributor for commercial shipment and distribution of Fintepla in Japan. If we pursue a global development of Fintepla for indications other than Dravet syndrome or LGS, Shinyaku has the option to participate in the development for such indications in Japan, subject to cost sharing requirements pursuant to the agreement. Activities under the Shinyaku Agreement will be governed by a joint steering committee (JSC) consisting of three representatives from each party to the agreement. All decisions of the JSC are to be made by a unanimous vote with tie-breaking rights provided to each party for certain matters related to development, regulatory approval and commercialization.

Shinyaku has agreed to support development and regulatory approval of Fintepla in Japan and obtain distribution exclusivity through the payment of $20.0 million, of which $15.5 million was due shortly after the execution of the agreement with the remainder payable over the next two years. We and Shinyaku have agreed to proportionally share the Japan specific development costs that may arise outside of the initial development plan and any post-approval clinical study costs in Japan. In addition, we can earn up to $66.0 million from Shinyaku for the achievement of certain regulatory milestones related to the treatment of Dravet syndrome and the treatment of LGS.

After regulatory approval of Fintepla in Japan has been obtained, we have agreed to supply Shinyaku with Fintepla upon receipt of purchase orders at our actual manufacturing cost plus a fixed transfer price mark-up, a fixed percentage of Shinyaku's net sales of Fintepla in Japan for such fiscal year, and a net price mark-up based on a percent of the applicable aggregate sales of Fintepla by Shinyaku for such fiscal year. The net price mark-up percentage increases with Shinyaku’s sales of Fintepla annual net sales in Japan and ranges between mid-twenties and is capped at a low thirties of the aggregate annual net sales for an applicable fiscal year.

In addition, we can earn up to an additional $42.5 million tied to the achievement of certain net sales milestones by Shinyaku through the term of the agreement.

The Shinyaku Agreement expires in September of 2045, unless earlier terminated by either party for a change in control, a material breach, bankruptcy, dissolution, or winding up of such other party. The Shinyaku Agreement may be also terminated by either party: (1) with one year prior written notice to the other party on or after the date of the first commercial sale of a competing generic version of the Fintepla in Japan, (2) if, prior to the launch of the Fintepla in Japan, a party has a good faith concern, based on credible evidence, that such launch is not likely to be possible with commercially reasonable efforts, or (3) if a party believes Fintepla poses a substantial safety concern. We may also terminate the agreement following the second anniversary of the first commercial sale of the Fintepla in Japan if Shinyaku has failed to achieve or maintain certain diligence obligations under the Shinyaku Agreement. Shinyaku may also terminate the agreement if, prior to the launch of the Fintepla in Japan, Shinyaku has a good faith concern that Fintepla will not be commercially viable in the Japan.

As of March 31, 2019, no performance for any of the units of account under this agreement had occurred. Of the $20.0 million, we have recorded our unconditional right to receive $15.5 million in advance of performance in accounts receivable with a corresponding amount in deferred revenue in the condensed consolidated balance sheet and the remaining $4.5 million will be billed in accordance with the terms of the agreement. We have classified $5.0 million of the deferred revenue as current. The remaining consideration related to this agreement was fully constrained at March 31, 2019.

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Cash, Cash Equivalents and Marketable Securities

3 Months Ended

Mar. 31, 2019

Cash and Cash Equivalents [Abstract]

Cash, Cash Equivalents, and Marketable Securities

Cash, Cash Equivalents and Marketable SecuritiesThe following table summarizes the amortized cost and the estimated fair value of our cash, cash equivalents and marketable securities as of March 31, 2019 and December 31, 2018 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2019
Current assets:
Cash	$	11,353	$	—	$	—	$	11,353
Cash equivalents:
Commercial paper	15,945		—		—		15,945
Money market funds	21,005		—		—		21,005
U.S. Treasuries	9,985		—		—		9,985
Total cash equivalents	46,935		—		—		46,935
Total cash and cash equivalents	58,288		—		—		58,288
Marketable securities:
Commercial paper	176,705		—		—		176,705
Corporate debt securities	83,904		231		(19)		84,116
Certificate of deposits	48,744		—		—		48,744
U.S. Treasuries	112,681		161		—		112,842
Total marketable securities	422,034		392		(19)		422,407
Total cash, cash equivalents and marketable securities	$	480,322	$	392	$	(19)	$	480,695

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2018
Current assets:
Cash and cash equivalents:
Cash	$	5,222	$	—	$	—	$	5,222
Money market funds	63,232		—		—		63,232
Total cash and cash equivalents	68,454		—		—		68,454
Marketable securities:
Commercial paper	152,940		—		—		152,940
Corporate debt securities	60,622		58		(75)		60,605
Certificate of deposits	128,647		—		—		128,647
U.S. Treasury securities	103,521		31		(11)		103,541
Total marketable securities	445,730		89		(86)		445,733
Total cash, cash equivalents and marketable securities	$	514,184	$	89	$	(86)	$	514,187

The following table summarizes the cost and fair value of marketable securities based on stated effective maturities as of March 31, 2019 (in thousands):

	Amortized Cost		Fair Value
Due within one year	$	356,954	$	357,120
Due between one and two years	65,080		65,287
Total	$	422,034	$	422,407

There have been no significant realized gains or losses on available-for-sale securities for the periods presented. As of March 31, 2019, available-for-sale debt securities that were in a continuous loss position but were not deemed to be other than temporarily impaired were not material.

See Note 5 for further information regarding the fair value of our financial instruments.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy has been established under GAAP for disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: 

Level 1:	Observable inputs such as quoted prices in active markets;
Level 2:	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Our financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, other current assets, accounts payable and accrued liabilities, contingent consideration liabilities and our outstanding common stock warrant liabilities. Certain cash equivalents, marketable securities, contingent consideration liabilities and common stock warrant liabilities are reported at their respective fair values on our condensed consolidated balance sheets. The remaining financial instruments are carried at cost which approximates their respective fair values because of the short-term nature of these financial instruments. 

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 (in thousands):

	Level 1		Level 2		Level 3		Total
March 31, 2019
Assets:
Cash equivalents:
Commercial paper	$	—	$	15,945	$	—	$	15,945
Money market funds	21,005		—		—		21,005
U.S. Treasury securities	—		9,985		—		9,985
Marketable securities:
Commercial paper	—		176,705		—		176,705
Corporate debt securities	—		84,116		—		84,116
Certificate of deposits	—		48,744		—		48,744
U.S. Treasury securities	—		112,842		—		112,842
Total assets(1)	$	21,005	$	448,337	$	—	$	469,342
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	646	$	646
Contingent consideration liabilities(3)	—		—		71,200		71,200
Total liabilities	$	—	$	—	$	71,846	$	71,846

	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Cash equivalents:
Money market funds	$	63,232	$	—	$	—	$	63,232
Marketable securities:
Commercial paper	—		152,940		—		152,940
Corporate debt securities	—		60,605		—		60,605
Certificate of deposits	—		128,647		—		128,647
U.S. Treasury securities	—		103,541		—		103,541
Total assets(1)	$	63,232	$	445,733	$	—	$	508,965
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	343	$	343
Contingent consideration liabilities(3)	—		—		78,200		78,200
Total liabilities	$	—	$	—	$	78,543	$	78,543

(1) Fair value is determined by taking into consideration valuations obtained from third-party pricing services. The third-party pricing services utilize industry standard valuation models, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. We estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2018 and March 31, 2019, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of our common stock at an exercise price of $72.00 per share and expires in July 2021.

(3) In connection with a prior acquisition in 2014, we may be required to pay future contingent consideration upon the achievement of specified development, regulatory approval or sales-based milestone events. We estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted interest rates. Subsequent to the acquisition date, at each reporting period prior to settlement, we revalue these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time and risk-adjusted interest rates. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on our results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The acquisition provides for aggregate contingent consideration of up to $95.0 million, of which $10.0 million was paid in March 2019. As of March 31, 2019, the estimated fair value of our contingent consideration liabilities was $71.2 million, of which $22.8 million has been classified as current liabilities. The classification was based upon our reasonable expectation as to the timing of settlement of certain specified milestones.

The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2019 and 2018 (in thousands):

	December 31, 2018		Change in Fair Value		Settlements		March 31, 2019
Contingent consideration liabilities	$	78,200	$	3,000	$	(10,000)	$	71,200
Common stock warrant liabilities	343		303		—		646

	December 31, 2017		Change in Fair Value		Settlements		March 31, 2018
Contingent consideration liabilities	$	76,900	$	—	$	—	$	76,900
Common stock warrant liabilities	512		(17)		—		495

The changes in fair value of the liabilities shown in the table above are recorded through change in fair value of contingent consideration liabilities within operating expense and the change in fair value of common stock warrant liabilities within other income (expense) in the condensed consolidated statements of operations.

There were no transfers between levels during the periods presented. See Note 4 for further information regarding the amortized cost of our financial instruments.

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Accrued and Other Current Liabilities

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

Accrued and Other Current Liabilities

Accrued and Other Current Liabilities

The following table provides details of accrued and other current liabilities (in thousands):

	March 31, 2019		December 31, 2018
Accrued clinical trial expenses	$	10,120	$	10,621
Accrued compensation	3,735		5,277
Other accrued liabilities	4,093		1,845
Common stock warrant liabilities	646		343
Total accrued and other current liabilities	$	18,594	$	18,086

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Leases

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Leases

Leases

We have two noncancellable operating leases consisting of administrative and research and development office space for our Emeryville, California headquarters and former headquarters in San Diego, California that expire in May 2027 and March 2020, respectively. Our Emeryville lease includes a renewal option for an additional five years, which were not included in our determination of the lease term under the legacy lease standard as renewal was not reasonably assured at the inception of the lease. As a result, we have not considered the optional period in determining our ROU assets and lease liabilities. Our former headquarters has been subleased to an unrelated third party for the remainder of our original lease term. As of March 31, 2019, we do not have any material finance leases or service contracts with lease arrangements. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. 

The components of lease costs, which were included in our condensed consolidated statements of operations, were as follows (in thousands): 

	Three Months Ended March 31, 2019
Lease costs
Operating lease cost	$	499
Short-term lease cost(1)	328
Sublease income	(145)
Total	$	682
(1) Short-term lease cost included $0.2 million related to a short-term lease that expired in March 2019.
Supplemental information related to operating leases
Cash paid for amounts included in the measurement of lease liabilities for operating leases	$	252
Weighted-average remaining lease term	7.6 years
Weighted-average incremental borrowing rate	6.0		%

Maturities of operating lease liabilities as of March 31, 2019 and lease commitments under noncancellable operating leases as of December 31, 2018 were as follows (in thousands):

	March 31, 2019		December 31, 2018
2019 (remaining 9 months and 12 months, respectively)	$	1,525	$	1,777
2020	1,788		1,788
2021	1,839		1,839
2022	1,894		1,894
2023	1,951		1,951
Thereafter	7,111		7,296
Total lease payments	16,108		$	16,545
Less imputed interest	(3,341)
Total operating lease liabilities	$	12,767

	As of March 31, 2019
Current portion of operating lease liabilities	$	1,412
Operating lease liabilities, net of current portion	11,355
Total lease liabilities	$	12,767

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based CompensationWe have issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K.

Under our 2010 Equity Incentive Award Plan, which was amended in June 2012 (2010 Plan), the aggregate number of shares of our common stock that may be issued as stock-based awards may not exceed 7,500,000 shares. At December 31, 2018, 1,550,351 shares were available for grant under the 2010 Plan. Pursuant to its evergreen provision, the number of shares reserved for issuance under the 2010 Plan automatically increases on January 1 of each year, commencing on January 1, 2013, and on each January 1 through and including January 1, 2020, in an amount equal to 4% of the total number of shares of common stock outstanding on December 31 of the preceding year, or a lesser number of shares as determined by our board of directors. On January 1, 2019, the increase in shares reserved for issuance pursuant to the evergreen provision was limited to 589,619 shares as the 2010 Plan’s maximum 7,500,000 shares reserved for issuance was reached. As of March 31, 2019, 1,298,107 shares were available for grant under the 2010 Plan.

In 2013, our board of directors adopted the Inducement Plan, which allows us to grant equity awards only to new employees as an inducement material to join us. Effective March 27, 2019, our board of directors approved an increase to the share reserve under the Inducement Plan by 100,000 shares resulting in the aggregate number of shares of our common stock that may be issued as stock-based awards to 737,500 shares. As of March 31, 2019, there were 124,925 shares available for grant under the Inducement Plan.

Stock Options

The following is a summary of stock option activity for the three months ended March 31, 2019 (in thousands, except per share data):

	Shares	Weighted- Average Exercise Price per Share
Outstanding at December 31, 2018	3,744	$	20.69
Granted	770	51.86
Exercised	(349)	15.17
Canceled	(10)	29.94
Outstanding at March 31, 2019	4,155	$	26.91

Restricted Stock Units

The following is a summary of restricted stock unit activity for the three months ended March 31, 2019 (in thousands, except per share data):

	Shares	Weighted- Average Fair Value per Share at Grant Date
Outstanding at December 31, 2018	289	$	25.56
Granted	167	52.66
Vested	(31)	42.65
Canceled	(7)	18.81
Outstanding at March 31, 2019	418	$	35.27

Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2019		2018
Research and development	$	1,435	$	681
Selling, general and administrative	2,788		1,231
Total	$	4,223	$	1,912

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Net Loss Per Share

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Net Loss per Share

Net Loss Per Share

Basic net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares outstanding for the period. Diluted net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period if the effect is dilutive. The Company’s potentially dilutive shares of common stock include outstanding stock options, restricted stock units and warrants to purchase common stock.

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2019		2018
Numerator:
Net loss from continuing operations	$	(35,202)	$	(30,180)
Denominator:
Shares used in per share calculation	42,236		34,841
Net loss from continuing operations per share, basic and diluted	$	(0.83)	$	(0.87)

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss from continuing operations per share for the periods presented because including them would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2019	2018
Shares subject to outstanding common stock options	3,716	3,478
Shares subject to outstanding restricted stock units	295	266
Shares subject to outstanding warrants to purchase common stock	28	38
Total	4,039	3,782

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United Kingdom (U.K.) Research and Development Incentives

3 Months Ended

Mar. 31, 2019

Other Income and Expenses [Abstract]

United Kingdom (U.K.) Research and Development Incentives

United Kingdom (U.K.) Research and Development Incentives

We carry out extensive research and development activities that benefit from the U.K.’s small and medium-sized enterprise (SME) research and development tax credit regime, whereby we may either receive an enhanced U.K. tax deduction on our eligible research and development activities or, when an SME entity is in a net operating loss position, elect to surrender net operating losses that arise from its eligible research and development activities in exchange for a cash payment from the U.K. tax authorities. These refundable cash credits, which may be received without regard to actual tax liability, are not subject to accounting for income taxes and have been recorded as a component of other income.

In December 2018, we filed a claim as an SME for a $7.1 million refundable cash credit for its 2016 tax year, which was received in February 2019.We recorded this amount as a component of other income for the year-ended December 31, 2018. As of the date hereof, we have not filed claims for any refundable cash credit for its 2017 or 2018 tax years, nor has it recorded any balances related to claims for these years or for the 2019 tax year, as collectability is deemed not probable or reasonably assured.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

Revenue Recognition

We analyze our collaboration agreements to assess whether such arrangements, or transactions between arrangement participants, involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities or are more akin to a vendor-customer relationship. In making this evaluation, we consider whether the activities of the collaboration are considered to be distinct and deemed to be within the scope of the collaboration guidance and those that are more reflective of a vendor-customer

relationship and, therefore, within the scope of the revenue with contracts with customer guidance. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement.

For elements of collaboration arrangements that are not accounted for pursuant to the revenue from contracts with customer guidance, an appropriate recognition method is determined and applied consistently, generally by analogy to the revenue from contracts with customers guidance. Revenue from transactions with collaboration participants is presented apart from revenue with contracts with customers in our condensed consolidated statement of operations.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Unconditional rights to receive consideration in advance of performance are recorded as receivables and deferred revenue in the condensed consolidated balance sheets when we have a contractual right to bill and receive the payment, performance is expected to commence shortly and there is less than a year between billing and performance. Amounts recognized for satisfied performance obligations prior to the right to payment becoming unconditional are recorded as contract assets in the condensed consolidated balance sheets. If we expect to have an unconditional right to receive consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

For arrangements or transactions between arrangement participants determined to be within the scope of the contracts with customers guidance, we perform the following steps to determine the appropriate amount of revenue to be recognized as we fulfill our obligations: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) we satisfy each performance obligation.

At contract inception, we assess the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the performance obligation does not provide the customer with a material right.

We consider the terms of the contract and our customary business practices to determine the transaction price. The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative stand-alone selling prices. The relative selling price for each deliverable is estimated using objective evidence if it is available. If objective evidence is not available, we use our best estimate of the selling price for the deliverable.

Revenue is recognized when, or as, we satisfy a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service, is considered to be as the services are received and used. We recognize revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the good or service promised to the customer.

After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception.

Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the stand-alone selling prices of identified performance obligations, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.

Collaborative Arrangements

ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 makes targeted improvements for collaborative arrangements by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaboration arrangement participant is a customer, (2) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer and (3) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers.

On January 1, 2019, we early adopted this new standard and its applicability has been considered in the accounting for our collaborative arrangement with Nippon Shinyaku Co., Ltd. (See Note 3).

Leases

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Topic 842 establishes a right-of-use asset model that requires all lessees to recognize ROU assets and liabilities for leases with a duration greater than one year on the balance sheet as well as provide disclosures with respect to certain qualitative and quantitative information regarding the amount, timing and uncertainty of cash flows arising from leases.

On January 1, 2019, we adopted Topic 842 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance. Consequently, prior period financial information and related disclosures have not been adjusted and will continue to be presented in accordance with the previous lease standard. In addition, we elected the package of transition provisions available for existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct lease costs for existing leases. We did not elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of our leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.

The adoption of Topic 842 did not have a material impact on our condensed consolidated statements of operations and cash flows. The impact on the accompanying condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):

	December 31, 2018		Adjustments Due to the Adoption of Topic 842		January 1, 2019
Assets
Operating lease right-of-use assets	$	—	$	8,641	$	8,641
Liabilities
Other accrued liabilities	1,845		(363)		$	1,482
Current portion of operating lease liabilities	—		1,058		1,058
Operating lease liabilities, net of current portion	—		11,776		11,776
Other long-term liabilities	3,830		(3,830)		—
Total	5,675		8,641		14,316

Upon adoption on January 1, 2019, we recorded operating lease ROU assets and lease liabilities of $8.6 million and $12.8 million, respectively, with the difference between ROU assets and lease liabilities attributed to the reclassifications of deferred rent and lease incentive obligations, a cease-use liability and initial direct leasing costs as a component of ROU assets. 

Prior to January 1, 2019, we recognized related rent expense on a straight-line basis over the term of the lease. Incentives granted under our operating lease, including allowances for leasehold improvements and rent holidays, were recognized as reductions to rent expense on a straight-line basis over the term of the lease. Deferred rent consisted of the difference between rent expense recognized on a straight-line basis and cash rent payments. Subsequent to the adoption of Accounting Standards Update (ASU) 2016-02 and related amendments (collectively, Topic 842) on January 1, 2019, we determine whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease at lease commencement. All of our leases are classified as operating leases. Leases with a term greater than one year are included in operating lease right-of-use assets (ROU asset), current portion of lease liabilities, and lease liabilities, net of current portion in our condensed consolidated balance sheet at March 31, 2019. If a lease contains an option to renew, the renewal option is included in the calculation of lease liabilities if we are reasonably certain at lease commencement the renewal option will be exercised. Lease liabilities and their corresponding ROU assets are measured at the present value of the remaining lease payments, discounted at an appropriate incremental borrowing rate at lease commencement, or as of January 1, 2019, for our existing leases. Management uses judgment to estimate the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as initial direct lease costs, lease incentives, scheduled rent escalations and impairment charges if we determine the ROU asset is impaired. Operating lease expense is recognized on a straight-line basis over the lease term.

We elected the post-transition practical expedient to not separate lease components from non-lease components for all existing lease classes. We also elected a policy of not recording leases on our condensed balance sheets when a lease has a term of one year or less.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. Additionally, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, a summary of changes in each caption of stockholders’ equity presented in the consolidated balance sheets must be provided in a note or separate statement. The final rule regarding stockholders’ equity was effective in the fourth quarter of 2018. The SEC provided relief on the effective date until the first quarter of 2019, and we have provided this disclosure beginning with this Quarterly Form 10-Q.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

ASU 2018-18, Collaboration Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 makes targeted improvements for collaborative arrangements by (1) clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaboration arrangement participant is a customer, (2) adding unit of account guidance to assess whether the collaboration arrangement or a part of the arrangement is with a customer and (3) precluding a company from presenting transactions with collaboration arrangement participants that are not directly related to sales to third parties together with revenue from contracts with customers.

On January 1, 2019, we early adopted this new standard and its applicability has been considered in the accounting for our collaborative arrangement with Nippon Shinyaku Co., Ltd. (See Note 3).

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Topic 842 establishes a right-of-use asset model that requires all lessees to recognize ROU assets and liabilities for leases with a duration greater than one year on the balance sheet as well as provide disclosures with respect to certain qualitative and quantitative information regarding the amount, timing and uncertainty of cash flows arising from leases.

On January 1, 2019, we adopted Topic 842 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance. Consequently, prior period financial information and related disclosures have not been adjusted and will continue to be presented in accordance with the previous lease standard. In addition, we elected the package of transition provisions available for existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct lease costs for existing leases. We did not elect the practical expedient allowing the use-of-hindsight which would require us to reassess the lease term of our leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.

The adoption of Topic 842 did not have a material impact on our condensed consolidated statements of operations and cash flows. The impact on the accompanying condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):

	December 31, 2018		Adjustments Due to the Adoption of Topic 842		January 1, 2019
Assets
Operating lease right-of-use assets	$	—	$	8,641	$	8,641
Liabilities
Other accrued liabilities	1,845		(363)		$	1,482
Current portion of operating lease liabilities	—		1,058		1,058
Operating lease liabilities, net of current portion	—		11,776		11,776
Other long-term liabilities	3,830		(3,830)		—
Total	5,675		8,641		14,316

Upon adoption on January 1, 2019, we recorded operating lease ROU assets and lease liabilities of $8.6 million and $12.8 million, respectively, with the difference between ROU assets and lease liabilities attributed to the reclassifications of deferred rent and lease incentive obligations, a cease-use liability and initial direct leasing costs as a component of ROU assets. 

Prior to January 1, 2019, we recognized related rent expense on a straight-line basis over the term of the lease. Incentives granted under our operating lease, including allowances for leasehold improvements and rent holidays, were recognized as reductions to rent expense on a straight-line basis over the term of the lease. Deferred rent consisted of the difference between rent expense recognized on a straight-line basis and cash rent payments. Subsequent to the adoption of Accounting Standards Update (ASU) 2016-02 and related amendments (collectively, Topic 842) on January 1, 2019, we determine whether the arrangement is or contains a lease at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease at lease commencement. All of our leases are classified as operating leases. Leases with a term greater than one year are included in operating lease right-of-use assets (ROU asset), current portion of lease liabilities, and lease liabilities, net of current portion in our condensed consolidated balance sheet at March 31, 2019. If a lease contains an option to renew, the renewal option is included in the calculation of lease liabilities if we are reasonably certain at lease commencement the renewal option will be exercised. Lease liabilities and their corresponding ROU assets are measured at the present value of the remaining lease payments, discounted at an appropriate incremental borrowing rate at lease commencement, or as of January 1, 2019, for our existing leases. Management uses judgment to estimate the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as initial direct lease costs, lease incentives, scheduled rent escalations and impairment charges if we determine the ROU asset is impaired. Operating lease expense is recognized on a straight-line basis over the lease term.

We elected the post-transition practical expedient to not separate lease components from non-lease components for all existing lease classes. We also elected a policy of not recording leases on our condensed balance sheets when a lease has a term of one year or less.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. Additionally, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, a summary of changes in each caption of stockholders’ equity presented in the consolidated balance sheets must be provided in a note or separate statement. The final rule regarding stockholders’ equity was effective in the fourth quarter of 2018. The SEC provided relief on the effective date until the first quarter of 2019, and we have provided this disclosure beginning with this Quarterly Form 10-Q.

Recent Accounting Pronouncements Not Yet Effective

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires that certain financial assets be measured at amortized cost net of an allowance for estimated credit losses such that the net receivable represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses must be based on all relevant information including historical information, current conditions and reasonable and supportable forecasts that affect the collectability of the amounts. This standard update is effective for us on January 1, 2020 with early adoption permitted. We expect to adopt this ASU on January 1, 2020 and are currently evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the amendments in ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The updated guidance requires a prospective adoption. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the timing and effect that the updated standard will have on our consolidated financial statements and related disclosures.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted for any removed or modified disclosures. We are currently

evaluating the timing and effect that the updated standard will have on our consolidated financial statements and related disclosures.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level valuation hierarchy has been established under GAAP for disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: 

Level 1:	Observable inputs such as quoted prices in active markets;
Level 2:	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Our financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, other current assets, accounts payable and accrued liabilities, contingent consideration liabilities and our outstanding common stock warrant liabilities. Certain cash equivalents, marketable securities, contingent consideration liabilities and common stock warrant liabilities are reported at their respective fair values on our condensed consolidated balance sheets. The remaining financial instruments are carried at cost which approximates their respective fair values because of the short-term nature of these financial instruments.

Stock-based Compensation

We have issued stock-based awards from various equity incentive and stock purchase plans, as more fully described in the consolidated financial statements and related notes included in our 2018 Annual Report on Form 10-K.

Under our 2010 Equity Incentive Award Plan, which was amended in June 2012 (2010 Plan), the aggregate number of shares of our common stock that may be issued as stock-based awards may not exceed 7,500,000 shares. At December 31, 2018, 1,550,351 shares were available for grant under the 2010 Plan. Pursuant to its evergreen provision, the number of shares reserved for issuance under the 2010 Plan automatically increases on January 1 of each year, commencing on January 1, 2013, and on each January 1 through and including January 1, 2020, in an amount equal to 4% of the total number of shares of common stock outstanding on December 31 of the preceding year, or a lesser number of shares as determined by our board of directors. On January 1, 2019, the increase in shares reserved for issuance pursuant to the evergreen provision was limited to 589,619 shares as the 2010 Plan’s maximum 7,500,000 shares reserved for issuance was reached. As of March 31, 2019, 1,298,107 shares were available for grant under the 2010 Plan.

In 2013, our board of directors adopted the Inducement Plan, which allows us to grant equity awards only to new employees as an inducement material to join us. Effective March 27, 2019, our board of directors approved an increase to the share reserve under the Inducement Plan by 100,000 shares resulting in the aggregate number of shares of our common stock that may be issued as stock-based awards to 737,500 shares. As of March 31, 2019, there were 124,925 shares available for grant under the Inducement Plan.

Net Loss per Share

Basic net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares outstanding for the period. Diluted net loss from continuing operations per share is calculated by dividing net loss from continuing operations by the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period if the effect is dilutive.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Impact of Adopting Topic 842 on Condensed Consolidated Balance Sheets

The impact on the accompanying condensed consolidated balance sheet as of January 1, 2019 was as follows (in thousands):

	December 31, 2018		Adjustments Due to the Adoption of Topic 842		January 1, 2019
Assets
Operating lease right-of-use assets	$	—	$	8,641	$	8,641
Liabilities
Other accrued liabilities	1,845		(363)		$	1,482
Current portion of operating lease liabilities	—		1,058		1,058
Operating lease liabilities, net of current portion	—		11,776		11,776
Other long-term liabilities	3,830		(3,830)		—
Total	5,675		8,641		14,316

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Cash, Cash Equivalents and Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2019

Cash and Cash Equivalents [Abstract]

Amortized Cost and Fair Value of Cash, Cash Equivalents and Marketable Securities

The following table summarizes the amortized cost and the estimated fair value of our cash, cash equivalents and marketable securities as of March 31, 2019 and December 31, 2018 (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2019
Current assets:
Cash	$	11,353	$	—	$	—	$	11,353
Cash equivalents:
Commercial paper	15,945		—		—		15,945
Money market funds	21,005		—		—		21,005
U.S. Treasuries	9,985		—		—		9,985
Total cash equivalents	46,935		—		—		46,935
Total cash and cash equivalents	58,288		—		—		58,288
Marketable securities:
Commercial paper	176,705		—		—		176,705
Corporate debt securities	83,904		231		(19)		84,116
Certificate of deposits	48,744		—		—		48,744
U.S. Treasuries	112,681		161		—		112,842
Total marketable securities	422,034		392		(19)		422,407
Total cash, cash equivalents and marketable securities	$	480,322	$	392	$	(19)	$	480,695

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2018
Current assets:
Cash and cash equivalents:
Cash	$	5,222	$	—	$	—	$	5,222
Money market funds	63,232		—		—		63,232
Total cash and cash equivalents	68,454		—		—		68,454
Marketable securities:
Commercial paper	152,940		—		—		152,940
Corporate debt securities	60,622		58		(75)		60,605
Certificate of deposits	128,647		—		—		128,647
U.S. Treasury securities	103,521		31		(11)		103,541
Total marketable securities	445,730		89		(86)		445,733
Total cash, cash equivalents and marketable securities	$	514,184	$	89	$	(86)	$	514,187

Cost and Fair Value of Marketable Securities

The following table summarizes the cost and fair value of marketable securities based on stated effective maturities as of March 31, 2019 (in thousands):

	Amortized Cost		Fair Value
Due within one year	$	356,954	$	357,120
Due between one and two years	65,080		65,287
Total	$	422,034	$	422,407

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Liabilities Measured at Fair Value on Recurring Basis

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 (in thousands):

	Level 1		Level 2		Level 3		Total
March 31, 2019
Assets:
Cash equivalents:
Commercial paper	$	—	$	15,945	$	—	$	15,945
Money market funds	21,005		—		—		21,005
U.S. Treasury securities	—		9,985		—		9,985
Marketable securities:
Commercial paper	—		176,705		—		176,705
Corporate debt securities	—		84,116		—		84,116
Certificate of deposits	—		48,744		—		48,744
U.S. Treasury securities	—		112,842		—		112,842
Total assets(1)	$	21,005	$	448,337	$	—	$	469,342
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	646	$	646
Contingent consideration liabilities(3)	—		—		71,200		71,200
Total liabilities	$	—	$	—	$	71,846	$	71,846

	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Cash equivalents:
Money market funds	$	63,232	$	—	$	—	$	63,232
Marketable securities:
Commercial paper	—		152,940		—		152,940
Corporate debt securities	—		60,605		—		60,605
Certificate of deposits	—		128,647		—		128,647
U.S. Treasury securities	—		103,541		—		103,541
Total assets(1)	$	63,232	$	445,733	$	—	$	508,965
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	343	$	343
Contingent consideration liabilities(3)	—		—		78,200		78,200
Total liabilities	$	—	$	—	$	78,543	$	78,543

(1) Fair value is determined by taking into consideration valuations obtained from third-party pricing services. The third-party pricing services utilize industry standard valuation models, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. We estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2018 and March 31, 2019, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of our common stock at an exercise price of $72.00 per share and expires in July 2021.

(3) In connection with a prior acquisition in 2014, we may be required to pay future contingent consideration upon the achievement of specified development, regulatory approval or sales-based milestone events. We estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted interest rates. Subsequent to the acquisition date, at each reporting period prior to settlement, we revalue these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time and risk-adjusted interest rates. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on our results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The acquisition provides for aggregate contingent consideration of up to $95.0 million, of which $10.0 million was paid in March 2019. As of March 31, 2019, the estimated fair value of our contingent consideration liabilities was $71.2 million, of which $22.8 million has been classified as current liabilities. The classification was based upon our reasonable expectation as to the timing of settlement of certain specified milestones

Assets Measured at Fair Value on Recurring Basis

The following tables summarize assets and liabilities recognized or disclosed at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 (in thousands):

	Level 1		Level 2		Level 3		Total
March 31, 2019
Assets:
Cash equivalents:
Commercial paper	$	—	$	15,945	$	—	$	15,945
Money market funds	21,005		—		—		21,005
U.S. Treasury securities	—		9,985		—		9,985
Marketable securities:
Commercial paper	—		176,705		—		176,705
Corporate debt securities	—		84,116		—		84,116
Certificate of deposits	—		48,744		—		48,744
U.S. Treasury securities	—		112,842		—		112,842
Total assets(1)	$	21,005	$	448,337	$	—	$	469,342
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	646	$	646
Contingent consideration liabilities(3)	—		—		71,200		71,200
Total liabilities	$	—	$	—	$	71,846	$	71,846

	Level 1		Level 2		Level 3		Total
December 31, 2018
Assets:
Cash equivalents:
Money market funds	$	63,232	$	—	$	—	$	63,232
Marketable securities:
Commercial paper	—		152,940		—		152,940
Corporate debt securities	—		60,605		—		60,605
Certificate of deposits	—		128,647		—		128,647
U.S. Treasury securities	—		103,541		—		103,541
Total assets(1)	$	63,232	$	445,733	$	—	$	508,965
Liabilities:
Common stock warrant liabilities(2)	$	—	$	—	$	343	$	343
Contingent consideration liabilities(3)	—		—		78,200		78,200
Total liabilities	$	—	$	—	$	78,543	$	78,543

(1) Fair value is determined by taking into consideration valuations obtained from third-party pricing services. The third-party pricing services utilize industry standard valuation models, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; and other observable inputs.

(2) Represents the fair value of common stock warrants outstanding that may require cash settlement under certain circumstances. We estimated the fair value of the warrant liabilities using the Black-Scholes valuation model. As of December 31, 2018 and March 31, 2019, common stock warrant liabilities relate to warrants issued in July 2011 in connection with a debt financing arrangement. The warrants entitle the holder to purchase up to 28,125 shares of our common stock at an exercise price of $72.00 per share and expires in July 2021.

(3) In connection with a prior acquisition in 2014, we may be required to pay future contingent consideration upon the achievement of specified development, regulatory approval or sales-based milestone events. We estimated the fair value of the contingent consideration liabilities on the acquisition date using a probability-weighted income approach, which reflects the probability and timing of future payments. This fair value measurement is based on significant Level 3 inputs such as the anticipated timelines and probability of achieving development, regulatory approval or sales-based milestone events and projected revenues. The resulting probability-weighted cash flows are discounted at risk-adjusted interest rates. Subsequent to the acquisition date, at each reporting period prior to settlement, we revalue these liabilities by performing a review of the assumptions listed above and record increases or decreases in the fair value of these contingent consideration liabilities. In the absence of any significant changes in key assumptions, the quarterly determination of fair values of these contingent consideration liabilities would primarily reflect the passage of time and risk-adjusted interest rates. Significant judgment is used in determining Level 3 inputs and fair value measurements as of the acquisition date and for each subsequent reporting period. Updates to assumptions could have a significant impact on our results of operations in any given period and actual results may differ from estimates. For example, significant increases in the probability of achieving a milestone or projected revenues would result in a significantly higher fair value measurement while significant decreases in the estimated probability of achieving a milestone or projected revenues would result in a significantly lower fair value measurement. Significant increases in the discount rate or in the anticipated timelines would result in a significantly lower fair value measurement while significant decreases in the discount rate or anticipated timelines would result in a significantly higher fair value measurement. The acquisition provides for aggregate contingent consideration of up to $95.0 million, of which $10.0 million was paid in March 2019. As of March 31, 2019, the estimated fair value of our contingent consideration liabilities was $71.2 million, of which $22.8 million has been classified as current liabilities. The classification was based upon our reasonable expectation as to the timing of settlement of certain specified milestones

Reconciliation of Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table provides a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2019 and 2018 (in thousands):

	December 31, 2018		Change in Fair Value		Settlements		March 31, 2019
Contingent consideration liabilities	$	78,200	$	3,000	$	(10,000)	$	71,200
Common stock warrant liabilities	343		303		—		646

	December 31, 2017		Change in Fair Value		Settlements		March 31, 2018
Contingent consideration liabilities	$	76,900	$	—	$	—	$	76,900
Common stock warrant liabilities	512		(17)		—		495

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Accrued and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

Details of Accrued and Other Current Liabilities

The following table provides details of accrued and other current liabilities (in thousands):

	March 31, 2019		December 31, 2018
Accrued clinical trial expenses	$	10,120	$	10,621
Accrued compensation	3,735		5,277
Other accrued liabilities	4,093		1,845
Common stock warrant liabilities	646		343
Total accrued and other current liabilities	$	18,594	$	18,086

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Leases (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Components of Lease Costs

The components of lease costs, which were included in our condensed consolidated statements of operations, were as follows (in thousands): 

	Three Months Ended March 31, 2019
Lease costs
Operating lease cost	$	499
Short-term lease cost(1)	328
Sublease income	(145)
Total	$	682
(1) Short-term lease cost included $0.2 million related to a short-term lease that expired in March 2019.
Supplemental information related to operating leases
Cash paid for amounts included in the measurement of lease liabilities for operating leases	$	252
Weighted-average remaining lease term	7.6 years
Weighted-average incremental borrowing rate	6.0		%

Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities as of March 31, 2019 and lease commitments under noncancellable operating leases as of December 31, 2018 were as follows (in thousands):

	March 31, 2019		December 31, 2018
2019 (remaining 9 months and 12 months, respectively)	$	1,525	$	1,777
2020	1,788		1,788
2021	1,839		1,839
2022	1,894		1,894
2023	1,951		1,951
Thereafter	7,111		7,296
Total lease payments	16,108		$	16,545
Less imputed interest	(3,341)
Total operating lease liabilities	$	12,767

	As of March 31, 2019
Current portion of operating lease liabilities	$	1,412
Operating lease liabilities, net of current portion	11,355
Total lease liabilities	$	12,767

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock Option Activity

The following is a summary of stock option activity for the three months ended March 31, 2019 (in thousands, except per share data):

	Shares	Weighted- Average Exercise Price per Share
Outstanding at December 31, 2018	3,744	$	20.69
Granted	770	51.86
Exercised	(349)	15.17
Canceled	(10)	29.94
Outstanding at March 31, 2019	4,155	$	26.91

Schedule of Restricted Stock Unit Activity

The following is a summary of restricted stock unit activity for the three months ended March 31, 2019 (in thousands, except per share data):

	Shares	Weighted- Average Fair Value per Share at Grant Date
Outstanding at December 31, 2018	289	$	25.56
Granted	167	52.66
Vested	(31)	42.65
Canceled	(7)	18.81
Outstanding at March 31, 2019	418	$	35.27

Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended March 31,
	2019		2018
Research and development	$	1,435	$	681
Selling, general and administrative	2,788		1,231
Total	$	4,223	$	1,912

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Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Basic and Diluted Net Loss Per Share

A reconciliation of the numerators and denominators used in computing net loss from continuing operations per share is as follows (in thousands, except per share amounts):

	Three Months Ended March 31,
	2019		2018
Numerator:
Net loss from continuing operations	$	(35,202)	$	(30,180)
Denominator:
Shares used in per share calculation	42,236		34,841
Net loss from continuing operations per share, basic and diluted	$	(0.83)	$	(0.87)

Schedule of Antidilutive Securities Excluded from Computation of Diluted Net Loss per Share

The following table presents the potential shares of common stock outstanding that were excluded from the computation of diluted net loss from continuing operations per share for the periods presented because including them would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2019	2018
Shares subject to outstanding common stock options	3,716	3,478
Shares subject to outstanding restricted stock units	295	266
Shares subject to outstanding warrants to purchase common stock	28	38
Total	4,039	3,782

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Organization and Basis of Presentation - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 731,156	$ 695,954

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Summary of Significant Accounting Policies - Impact of Adopting Topic 842 on Condensed Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Assets
Operating lease right-of-use assets	$ 8,423	$ 8,641	$ 0
Current liabilities:
Other accrued liabilities	4,093	1,482	1,845
Current portion of operating lease liabilities	1,412	1,058	0
Operating lease liabilities, net of current portion	11,355	11,776	0
Other long-term liabilities	$ 0	0	3,830
Total		14,316	$ 5,675
Topic 842
Assets
Operating lease right-of-use assets		8,641
Current liabilities:
Other accrued liabilities		(363)
Current portion of operating lease liabilities		1,058
Operating lease liabilities, net of current portion		11,776
Other long-term liabilities		(3,830)
Total		$ 8,641

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Summary of Significant Accounting Policies - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets	$ 8,423	$ 8,641	$ 0
Operating lease liabilities	$ 12,767
Topic 842
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease right-of-use assets		8,641
Operating lease liabilities		$ 12,800

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Collaborative Arrangement (Details) - USD ($) $ in Thousands	1 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Disaggregation of Revenue [Line Items]
Accounts receivable	$ 15,500	$ 0
Contract liability	15,500
Remaining amount to be billed in accordance with terms of agreement	4,500
Deferred revenue, current	5,000	$ 0
Fixed Consideration
Disaggregation of Revenue [Line Items]
Performance obligation at inception of arrangement	20,000
Accounts receivable	$ 15,500
Payment term	2 years
Variable Consideration | Achievement of Regulatory Milestones
Disaggregation of Revenue [Line Items]
Amount that can be earned upon achievement of milestone	$ 66,000
Variable Consideration | Achievement of Net Sales Milestones
Disaggregation of Revenue [Line Items]
Amount that can be earned upon achievement of net sales milestone	$ 42,500

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Cash, Cash Equivalents and Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Cash and Cash Equivalents [Line Items]
Cash	$ 11,353	$ 5,222
Total cash equivalents	46,935
Total cash and cash equivalents	58,288	68,454
Marketable securities, amortized cost	422,034	445,730
Marketable securities, gross unrealized gains	392	89
Marketable securities, gross unrealized losses	(19)	(86)
Marketable securities, estimated fair value	422,407	445,733
Total cash, cash equivalents and marketable securities	480,322	514,184
Total cash, cash equivalents and marketable securities	480,695	514,187
Amortized Cost
Due within one year, amortized cost	356,954
Due between one and two years, amortized cost	65,080
Marketable securities, amortized cost	422,034
Fair Value
Due within one year, estimated fair value	357,120
Due between one and two years, estimated fair value	65,287
Marketable securities, estimated fair value	422,407
Commercial paper
Cash and Cash Equivalents [Line Items]
Total cash equivalents	15,945
Marketable securities, amortized cost	176,705	152,940
Marketable securities, gross unrealized gains	0	0
Marketable securities, gross unrealized losses	0	0
Marketable securities, estimated fair value	176,705	152,940
Money market funds
Cash and Cash Equivalents [Line Items]
Total cash equivalents	21,005	63,232
Corporate debt securities
Cash and Cash Equivalents [Line Items]
Marketable securities, amortized cost	83,904	60,622
Marketable securities, gross unrealized gains	231	58
Marketable securities, gross unrealized losses	(19)	(75)
Marketable securities, estimated fair value	84,116	60,605
Certificate of deposits
Cash and Cash Equivalents [Line Items]
Marketable securities, amortized cost	48,744	128,647
Marketable securities, gross unrealized gains	0	0
Marketable securities, gross unrealized losses	0	0
Marketable securities, estimated fair value	48,744	128,647
U.S. Treasuries
Cash and Cash Equivalents [Line Items]
Total cash equivalents	9,985
Marketable securities, amortized cost	112,681	103,521
Marketable securities, gross unrealized gains	161	31
Marketable securities, gross unrealized losses	0	(11)
Marketable securities, estimated fair value	$ 112,842	$ 103,541

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities	$ 422,407	$ 422,407	$ 445,733
Total assets	469,342	469,342	508,965
Common stock warrant liabilities	646	646	343
Total liabilities	$ 71,846	$ 71,846	78,543
Shares of common stock exercisable through warrants		28,125
Warrants exercise price per share (usd per share)	$ 72.00	$ 72.00
Current portion of contingent consideration	$ 22,800	$ 22,800	32,300
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	21,005	21,005	63,232
Total liabilities	0	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	448,337	448,337	445,733
Total liabilities	0	0	0
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0	0	0
Total liabilities	71,846	71,846	78,543
Common stock warrant liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liabilities	646	646	343
Common stock warrant liabilities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liabilities	0	0	0
Common stock warrant liabilities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liabilities	0	0	0
Common stock warrant liabilities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liabilities	646	646	343
Contingent consideration liabilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liabilities	71,200	71,200	78,200
Total contingent consideration	71,200	71,200	78,200
Contingent consideration liabilities | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liabilities	0	0	0
Total contingent consideration	0	0	0
Contingent consideration liabilities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liabilities	0	0	0
Total contingent consideration	0	0	0
Contingent consideration liabilities | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liabilities	71,200	71,200	78,200
Total contingent consideration	71,200	71,200	78,200
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	21,005	21,005	63,232
Money market funds | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	21,005	21,005	63,232
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	15,945	15,945
Short-term fixed income securities	176,705	176,705	152,940
Commercial paper | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	0	0
Commercial paper | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	15,945	15,945
Short-term fixed income securities	176,705	176,705	152,940
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities	84,116	84,116	60,605
Corporate debt securities | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities	84,116	84,116	60,605
Certificate of deposits
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities	48,744	48,744	128,647
Certificate of deposits | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities	48,744	48,744	128,647
U.S. Treasuries
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	9,985	9,985
Short-term fixed income securities	112,842	112,842	103,541
U.S. Treasuries | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities			0
U.S. Treasuries | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash Equivalents	9,985	9,985
Short-term fixed income securities	112,842	112,842	103,541
U.S. Treasuries | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term fixed income securities			$ 0
ZX008
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration liabilities	71,200	71,200
Potential contingent consideration payment, maximum	95,000	95,000
Contingent consideration paid	10,000
Total contingent consideration	71,200	71,200
Current portion of contingent consideration	$ 22,800	$ 22,800

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Fair Value Measurements - Reconciliation of Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Details) - Level 3 - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Contingent consideration liabilities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	$ 78,200	$ 76,900
Change in Fair Value	3,000	0
Settlements	(10,000)	0
Ending Balance	71,200	76,900
Common stock warrant liabilities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Balance	343	512
Change in Fair Value	303	(17)
Settlements	0	0
Ending Balance	$ 646	$ 495

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Accrued and Other Current Liabilities - Details of Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accrued clinical trial expenses	$ 10,120		$ 10,621
Accrued compensation	3,735		5,277
Other accrued liabilities	4,093	$ 1,482	1,845
Common stock warrant liabilities	646		343
Total accrued and other current liabilities	$ 18,594		$ 18,086

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Leases - Narrative (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) lease
Lessee, Lease, Description [Line Items]
Number of noncancellable operating leases | lease	2
Short-term lease cost	$ 328
Short-term Lease Terminated in March 2019
Lessee, Lease, Description [Line Items]
Short-term lease cost	$ 200
Emeryville lease
Lessee, Lease, Description [Line Items]
Length of each lease renewal	5 years

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Leases - Information Related to Operating Leases (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Lease, Cost [Abstract]
Operating lease cost	$ 499
Short-term lease cost	328
Sublease income	(145)
Total	682
Cash paid for amounts included in the measurement of lease liabilities for operating leases	$ 252
Weighted-average remaining lease term	7 years 7 months 6 days
Weighted-average incremental borrowing rate (percent)	6.00%

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Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Operating Lease Liabilities, Payments Due [Abstract]
2019 (remaining 9 months and 12 months, respectively)	$ 1,525
2020	1,788
2021	1,839
2022	1,894
2023	1,951
Thereafter	7,111
Total lease payments	16,108
Less imputed interest	(3,341)
Total operating lease liabilities	12,767
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2019 (remaining 9 months and 12 months, respectively)			$ 1,777
2020			1,788
2021			1,839
2022			1,894
2023			1,951
Thereafter			7,296
Total lease payment due			16,545
Assets and Liabilities, Lessee [Abstract]
Current portion of operating lease liabilities	1,412	$ 1,058	0
Operating lease liabilities, net of current portion	11,355	$ 11,776	$ 0
Total operating lease liabilities	$ 12,767

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Stock-Based Compensation - Additional Information (Details) - shares	3 Months Ended	51 Months Ended
	Mar. 31, 2019	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018	Jun. 30, 2012
2010 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of common stock that may be issued (shares)				7,500,000	7,500,000
Shares available for grant (shares)	1,298,107	1,298,107	589,619	1,550,351
Annual increment to maximum shares authorized as percentage of shares outstanding (percent)	4.00%
Inducement Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of common stock that may be issued (shares)					737,500
Shares available for grant (shares)	124,925	124,925
Increase to share reserve approved (shares)		100,000

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Stock-Based Compensation - Options Activity (Details) shares in Thousands	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Shares (in thousands)
Options outstanding, beginning of period (in shares) | shares	3,744
Granted (in shares) | shares	770
Exercised (in shares) | shares	(349)
Canceled (in shares) | shares	(10)
Options outstanding, end of period (in shares) | shares	4,155
Weighted- Average Exercise Price per Share
Outstanding weighted average exercise price, beginning balance (in usd per share) | $ / shares	$ 20.69
Granted weighted average exercise price (in usd per share | $ / shares	51.86
Exercised weighted average exercise price (in usd per share | $ / shares	15.17
Canceled weighted average exercise price (in usd per share | $ / shares	29.94
Outstanding weighted average exercise price, ending balance (in usd per share | $ / shares	$ 26.91

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Stock-Based Compensation - Restricted Stock Unit Activity (Details) - Restricted stock units shares in Thousands	3 Months Ended
	Mar. 31, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Outstanding at beginning of period (in shares) | shares	289
Granted (in shares) | shares	167
Vested (in shares) | shares	(31)
Canceled (in shares) | shares	(7)
Outstanding at end of period (in shares) | shares	418
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]
Nonvested at beginning of period - Weighted average fair value per share at grant date (in usd per share) | $ / shares	$ 25.56
Granted - Weighted average fair value per share at grant date (in usd per share) | $ / shares	52.66
Vested - Weighted average fair value per share at grant date (in usd per share) | $ / shares	42.65
Canceled - Weighted average fair value per share at grant date (in usd per share) | $ / shares	18.81
Nonvested at end of period - Weighted average fair value per share at grant date (in usd per share) | $ / shares	$ 35.27

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Stock-Based Compensation - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 4,223	$ 1,912
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	1,435	681
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 2,788	$ 1,231

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Net Loss Per Share - Reconciliation of Numerator and Denominators in Computing Net Loss per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Net loss from continuing operations	$ (35,202)	$ (30,180)
Shares used in per share calculation (in shares)	42,236	34,841
Net loss from continuing operations per share, basic and diluted (in dollars per share)	$ (0.83)	$ (0.87)

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Net Loss Per Share - Antidilutive Securities (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	4,039	3,782
Shares subject to outstanding common stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	3,716	3,478
Shares subject to outstanding restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	295	266
Shares subject to outstanding warrants to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share amount	28	38

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United Kingdom (U.K.) Research and Development Incentives (Details) $ in Millions	Dec. 31, 2018 USD ($)
Other Income and Expenses [Abstract]
Claim for refundable cash credit	$ 7.1