Company: PCRX
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001396814-25-000041
Chunk: 289

Company: Pacira BioSciences, Inc.
Filing Date: 2025-02-27
Form: 10-K
Item: Item 8
Chunk 289
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. In particular, the fair value measurement was sensitive to management’s forecasts of revenues, volatility, and discount rates. In addition, the audit effort associated with the evaluation of the Company’s volatility and discount rates involved the use of valuation professionals with specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s fair value measurement process for the contingent consideration liability related to achieving commercial milestones. This included controls related to the development of the assumptions for forecasted revenues, volatility, and discount rates. We evaluated the forecasted revenues and certain commercial milestone assumptions used in the Company’s models by comparing them to historical data, industry benchmarks and other third-party market data that were assessed to be relevant and reliable. We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independent estimate of the discount rates and volatility assumptions using inputs from publicly available market data and comparing the results to the Company’s discount rates and volatility assumptions.

Impairment of Goodwill

As discussed in Notes 2 and 8 to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis or upon the occurrence of a triggering event that could indicate a potential impairment. During the three months ended September 30, 2024, the Company determined that certain triggering events, combined with a subsequent decrease in common stock price, indicated that it was more likely than not that the fair value of goodwill may be less than its carrying value, which required the Company to perform a quantitative impairment test. The fair value of the Company’s reporting unit was calculated through a discounted cash flow model (or income approach), based on the present value of estimated future cash flows including assumptions around forecasted revenue growth rates and estimated discount rate. As a result of the quantitative impairment test, the goodwill balance of $163.2 million was fully impaired during the three months ended September 30, 2024.

We identified the evaluation of the fair value of the Company’s reporting unit as a critical audit matter. Evaluating the fair value of the reporting unit was complex and required significant auditor judgment due to the high degree of subjectivity in evaluating certain assumptions used to estimate the fair value of the reporting unit. In particular, the fair value measurement was sensitive to management’s forecast of revenue growth rates and the discount rate assumptions. Changes in these assumptions could have a significant impact on the fair value of the reporting unit. In addition, the audit effort associated with the evaluation of the Company’s